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Pacific islands' bilateral trade: the role of remoteness and of transport costs

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  • Lisa Borgatti

    (United Nations Conference on Trade and Development, Division for Africa, Least Developed Countries and Special Programmes, Geneva, Switzerland)

Abstract

Bilateral trade of geographically distant countries is likely to be negatively affected by the distance separating them from their trading partners and positively affected by their remoteness, defined as the average weighted distance between two countries with weights reflecting the absorptive capacity of the partner country. In presence of competitive transport costs, the effect of remoteness and distance is diluted. An augmented gravity model applied to the Pacific islands' bilateral trade from 1980 to 2004 shows that a doubling of the elasticity of distance would decrease their average bilateral trade by 80 per cent. Remoteness positively affects the Pacific islands' bilateral trade, but does not compensate for the negative effect of distance. The opposite is found for the Caribbean islands, where the elasticity of trade with respect to remoteness is six times bigger than that for the Pacific islands. By lowering transport costs, improved infrastructure fosters trade. A cluster analysis for 30 small island developing states shows that the Pacific islands belong to the clusters with the weaker infrastructure stocks, leaving them with a large scope for improvement. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • Lisa Borgatti, 2008. "Pacific islands' bilateral trade: the role of remoteness and of transport costs," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(4), pages 486-501.
  • Handle: RePEc:wly:jintdv:v:20:y:2008:i:4:p:486-501
    DOI: 10.1002/jid.1473
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    4. M. Del Gatto & C. Mastinu, 2015. "Geography, Cultural Remoteness and Economic Development: A Regional Analysis of the Economic Consequences of Insularity," Working Paper CRENoS 201503, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    5. John S. Hill & Myung-Su Chae & Jinseo Park, 2012. "The Effects of Geography and Infrastructure on Economic Development and International Business Involvement," Journal of Infrastructure Development, India Development Foundation, vol. 4(2), pages 91-113, December.
    6. Liwen Ma & Mohsin Ali, 2024. "Bilateral trade between China and ASEAN countries before and during COVID‐19 using a comparative analysis," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(3), pages 1880-1895, April.

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