The geographical diversity and the meagre resource base inherent in Pacific Island Economies poses severe limitations on their development; in some cases self-sustained development appears inconceivable. The complexity of this development process has been further aggravated by the increasing political and social pressures observed in many of these economies.
The purpose of this study is to assess the prospects of increased trade for the Pacific Island economies. The first section reviews the economies of the Pacific Islands - their economic outlook and their international relationship with Australia and other countries, through trade and foreign aid. The later sections examine two issues confronting the development of the Pacific Island Economies: first, the importance of trade and the need for greater cooperation between the Islands and second, with other industrialized economies.
The importance of trade stems from the notable relationship between trade and economic growth. This relationship is examined empirically for six of the Pacific Island economies. A case study of the largest Pacific Island economy, Papua New Guinea, is then used to analyse the effects of trade liberalization.
Related to this idea of increased international openness is the need for the Pacific Island economies to understand the complex trading arrangements which exist within the world market. Prospects for economic cooperation between the Pacific Islands and for bilateral agreements, within the current world trading system, are analysed for the Pacific Island economies.