72738 v1 World Trade Indicators 2009/10 Papua New Guinea Trade Brief Trade Policy Guinea ranked 86th out of 148 countries on the GATS Commitment Index. Papua New Guinea took strides between the late 1990s and mid-2000s to eliminate barriers to trade and as a result is now ranked 4th out of 125 countries on External Environment the MFN Tariff Trade Restrictiveness Index (TTRI).1 The Market Access TTRI2 (including preferences) of Its MFN TTRI is a very low 1.3 percent, compared 0.6 percent for all goods shows that Papua New with the average of 4.8 percent for the East Asia and Guinea stands out as having very favorable access to Pacific region and 8.6 percent for an average lower- export markets, due to the fact that the overwhelming middle-income country. Progress has been made in majority of the country’s exports are commodities both the agricultural and non-agricultural sectors, which traditionally face lower barriers. The simple although there is a notable difference between the average of the rest of the world tariff faced by Papua import barrier the two sectors face, with TTRIs of 0.7 New Guinea’s exports is 10.2 percent. When taking and 3.6 percent, respectively. The TTRI may into account the volume of exports it is 0.4 percent, somewhat understate the country’s level of protection, with only a slight difference between agricultural and since Papua New Guinea applies excise taxes to many non-agricultural goods. Over the course of 2008 the imports and luxury goods which effectively act as real effective exchange rate of the currency of Papua barriers to imports. The simple average of the MFN New Guinea, the kina, appreciated by 12.1 percent, applied tariff rate has decreased gradually over the past making exports less competitive. decade to 5.1 percent in 2008. It is comparatively much lower than the average for both the East Asia Papua New Guinea has ratified the Pacific Island and Pacific region and lower-middle-income countries, Countries Trade Agreements (PICTA), together with which are 9.3 and 11.4 percent, respectively. The tariff 10 other countries out of 14 members of the Pacific for agricultural goods is five times the level for non- Islands Forum (the Forum Island Countries) that agricultural goods. In 2008 Papua New Guinea halved signed it in 2001.3 PICTA, an agreement for free trade its maximum tariff on all goods (excluding alcohol and in goods, and, in future, services, falls under the tobacco), which is applied to frozen chicken imports. broader Pacific Agreement on Closer Economic It is now equal to 70 percent. The trade policy space, Relations (PACER) that in addition to the Pacific as measured by the wedge between bound and applied Island Countries also includes Australia and New tariffs (the overhang), has remained virtually Zealand.4 In August 2009, leaders of the Pacific Island unchanged in the past several years and was equal to Forum have agreed to start negotiating PACER plus, a 27.3 percent in 2008, close to the averages of 30.3 free trade agreement that would include Australia and percent for its regional neighbors and 29.5 percent for New Zealand as well as the Forum Island Countries lower-middle-income countries. Regarding the extent and that would cover goods, services, and investment.5 of its trade liberalization in services, Papua New In July 2009, an interim Economic Partnership Agreement between Papua New Guinea and the EU that opened up the European market to many goods, most notably fishery products, was signed.6 Unless otherwise indicated, all data are as of August 2009 and are drawn from the World Trade Indicators 2009/10 Behind the Border Constraints Database. The database, Country Trade Briefs and Trade-at-a-Glance Tables, are available at In terms of the conduciveness of its institutional http://www.worldbank.org/wti. environment to business, Papua New Guinea ranked 102nd out of 183 countries in the Ease of Doing If using information from this brief, please provide the Business index for 2009. The Logistics Performance following source citation: World Bank. 2010. “Papua Index, a measure of the extent of trade facilitation, New Guinea Trade Brief.� World Trade Indicators 2009/10: rates the country at 2.38 on a scale from 1 to 5 with 5 Country Trade Briefs. Washington, DC: World Bank. being the highest performance. This is compared with Available at http://www.worldbank.org/wti. World Trade Indicators 2009/10 Papua New Guinea Trade Brief 2.58 for the East Asia and Pacific region and 2.47 for Notes countries in the lower-middle-income group. It ranked 95th in the world and 8th in the East Asia and Pacific 1. TTRI calculates the equivalent uniform tariff that region (with Malaysia leading the regional group). The would keep domestic welfare constant. It is weighted by area in which it performed the best was domestic import shares and import demand elasticity. logistics costs and its weakest performance was in 2. MA-TTRI calculates the equivalent uniform tariff of increasing the efficiency and effectiveness of customs trading partners that would keep their level of imports procedures and the quality of transport and IT constant. It is weighted by import values and import infrastructure. demand elasticities of trading partners. 3. Bilaterals.org, April 2009. 4. Pacific Islands Forum Secretariat and Jane Kelsey, Trade Outcomes April 2004, p. 18. Papua New Guinea’s real total trade in goods and 5. Pacific Islands Forum Secretariat, August 2009. services (in constant 2000 U.S. dollars) has been falling 6. Bilaterals.org, April 2009. at an increasing rate since 2005. In 2008, total trade 7. All nominal outcome data from IMF. dropped by 13.7 percent in real terms. Real exports fell 8. East Asia Update, April 2009. by 28.8 percent, twice as fast as in 2007. Real import growth was positive at 2 percent in 2008, which was less than half of its 2007 value. Expectations are that References exports will fall by a relatively low 4.5 percent in 2009. Bank of Papua New Guinea. 2009. “Exports: Classified Imports are expected to fall by 7.7 percent. by Commodity Group.� . steady growth, rising by an estimated 9.5 percent in 2008 over the previous year after growing by 12.9 Bilaterals.org. April 2009. “PACER & PICTA.� percent in 2007.7 Prices for Papua New Guinea’s Bilaterals.org. June 29, 2009 . world market in mid-2008 but have since fallen ———. December 2008. “EU-Pacific Interim FTA.� sharply.8 Total exports increased by an estimated 13.6 July 8, 2009 . and Japan, its two largest export markets, has Kelsey, Jane. April 2004. “Big Brothers Behaving Badly: continued to decrease demand for exports. This was The Implications for the Pacific Islands of the led by increases in the three largest exports, gold, Pacific Agreement on Closer Economic Relations copper, and petroleum (which together accounted for (PACER).� Pacific Network on Globalisation 76 percent of all exports in 2008) of over 20 percent. (PANG). . much lower than the rate of growth in the previous Pacific Islands Forum Secretariat. “Regional Trade.� year of 18.7 percent. September 10, 2009. . World Bank. April 2009. “East Asia Update.� World Bank, Washington, DC.