Trade in PNG

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Papua New Guinea is a small open economy producing a diverse range of products and is the largest island economy of the Pacific region. It is a net exporter of goods owing to the extractive sector, but its services trade balance has reflected a deficit for the last few decades. The Government has secured various trade agreements in the belief that they can cause a transformation of the economy, but this transformation is slow in coming and the vision of the founding fathers of PNG, to make it a happy and wealthy nation, continues to elude its people. Yet, the country is endowed with immense natural wealth: rich deposits of precious minerals, crude oil and liquefied natural gas. It also has an abundance of some of the world’s premium timber and fishery products. It is also strategically positioned in the northern segment of the South Pacific, making it a gateway to the Asian countries and hence
conferring significant potential for economic growth through trade.

Notwithstanding, PNG is yet to leverage all of these strengths to bring about the economic transformation and creation of wealth for its ordinary people that is so needed through trade. On the supply side, high transaction, transportation and utility costs are major problems that affect PNG’s trade competitiveness. Also, on the demand side tariffs and technical barriers to trade, as well as sanitary and phyto-sanitary measures, limit PNG’s ability to move into exportation of higher value added products. Further, weak enforcement of national standards and technical regulations, weak enforcement of intellectual property rights, unfair trade practices such as dumped products and subsidization of inefficient industries prevent the growth and diversification of PNG’s industries.

The heavy reliance on the extractive sector and limited downstream processing has been detrimental to PNG, as fluctuations in international oil, gas and commodity prices have adversely affected overall economic performance. Also, with a growing trade deficit and overall balance of payments deficit, which has been large and persistent in the services sectors there was a need to adopt measures that clearly set out which countries PNG should engage, the sectors and products of engagement and the specific interests to be pursued in various trade negotiations.

In response, PNG’s National Trade Policy has been developed to serve as a central repository of all pertinent information about PNG’s trade regime, both for internal and external purposes. Its Mission is to “promulgate and advance PNG’s vision and the policy intentions or goals of Government on international and domestic trade; to provide clear directions on all parties involved in the pursuit of such goals and; to serve as a basis for unifying and coordinating actions across all stakeholders both domestically and internationally”.