Trade Facilitation, Diversity and Intra-Regional Exportability: A Study of Small Island Economies in the Caribbean and the South Pacific

Abstract

Despite the contentious success of the trade agreements, the island countries have still been vehemently negotiating further trade deals. This study explores the element which enhances trade flows for selected Commonwealth countries in the Caribbean and Pacific regions. The results suggest that income (gross domestic product) growth as significant support for trade flows, regional trade integrations of the Pacific and Caribbean are explained in its quiet dynamism, worth strengthening and further reforming. This study, by means of a comparative investigation of selected countries from within the Pacific and the Caribbean regions, proposes that the strategy for enhancing trade integration is creating demand for diversification in the region through greater regional integration. The estimates demonstrate that the level of diversification positively impacted the regions’ bilateral export, having the Pacific region influenced almost twice as much like the Caribbean. Moreover, whilst understanding that the geographical location of the Caribbean already lets its states thrive through lower trading costs as compared to the Pacific, analysis in the study shows that the distance, remoteness and logistics difficulties inflate the price (or trade costs) limiting the success of regional trade agreements. JEL Classification: F13, F15