72763 v1 World Trade Indicators 2009/10 Solomon Islands Trade Brief Trade Policy percent, with only a slight difference between agricultural and non-agricultural goods. Over the According to the WTO, the Solomon Islands has course of 2008, the real effective exchange rate of the made progress in recent years towards reducing the Solomon Island dollar appreciated by 8.9 percent, level and variance of tariffs, decreasing the burden making exports less competitive. caused by customs procedures, and facilitating foreign investment. However, political instability has disrupted The Solomon Islands has ratified the Pacific Island this process.1 The Solomon Islands’ simple average of Countries Trade Agreements (PICTA), together with the MFN applied tariff rate has decreased significantly 10 other countries out of 14 members of the Pacific since 2006 to 10.4 percent. This is between the Islands Forum (the Forum Island Countries) that averages for the East Asia and Pacific region (9.3 signed it in 2001.2 PICTA, an agreement for free trade percent) and the lower-middle-income countries (11.4 in goods, and, in future, services, falls under the percent). Based on the MFN applied tariff, it ranks broader Pacific Agreement on Closer Economic 108th out of 181 countries (where 1st is least Relations (PACER) that in addition to the Pacific restrictive). The Solomon Islands’ exports are Island Countries also includes Australia and New dominated by the agricultural and fishery sectors and Zealand.3 In August 2009, leaders of the Pacific Island so the MFN applied tariff that is applied to agricultural Forum agreed to start negotiating PACER plus, a free goods (18.4 percent) is nearly twice the rate applied to trade agreement that would include Australia and New non-agricultural goods. The Solomon Islands’ Zealand as well as the Forum Island Countries and maximum MFN applied tariff on all goods (excluding that would cover goods, services, and investment.4 alcohol and tobacco) is 69 percent. The trade policy The Solomon Islands, along with the 13 other PICTA space, as measured by the wedge between bound and members, is taking part in the Pacific Economic applied tariffs (the overhang), has remained constant Partnership Agreement negotiations with the EU that in recent years and is now equal to 68.3 percent, which would reduce import tariffs for several of its exports.1 is relatively high when compared with 30.3 percent on In the meantime, the country continues to benefit average for its regional neighbors and 29.5 percent for from the “Everything But Arms� initiative� under lower-middle-income countries. Regarding the extent which its exports have duty-free and quota-free access of its commitment to trade liberalization in services, to the EU market. The Solomon Islands ranked 73rd out of 148 countries on the GATS Commitment Index. Behind the Border Constraints In terms of the conduciveness of its institutional External Environment environment to business, Solomon Islands ranked The simple average of the rest of the world tariff faced 104th out of 183 countries in the 2010 Ease of Doing by the Solomon Islands’ exports is 9.9 percent. When Business index. The Logistics Performance Index taking into account the volume of exports it is 0.5 (LPI), a measure of the extent of trade facilitation, rates Solomon Islands at 2.08 on a scale from 1 to 5 with 5 being the highest performance. This is Unless otherwise indicated, all data are as of August 2009 compared with 2.58 for the East Asia and Pacific and are drawn from the World Trade Indicators 2009/10 region and 2.47 for countries in the lower-middle- Database. The database, Country Trade Briefs and income group. It ranked 138th in the world and 11th in the East Asia and Pacific region (with Malaysia leading Trade-at-a-Glance Tables, are available at the regional group). The LPI area in which it http://www.worldbank.org/wti. performed the best was domestic logistics costs and its If using information from this brief, please provide the weakest performance was in the efficiency and following source citation: World Bank. 2010. “Solomon effectiveness of customs procedures. Islands Trade Brief.� World Trade Indicators 2009/10: Country Trade Briefs. Washington, DC: World Bank. Available at http://www.worldbank.org/wti. World Trade Indicators 2009/10 Solomon Islands Trade Brief Trade Outcomes Bilaterals.org. April 2009. “PACER & PICTA.� Bilaterals.org. June 29, 2009 . goods and services grew by 23.4 percent in nominal Central Bank of Solomon Islands. 2009. Quarterly Reports: U.S. dollar terms.5 Exports increased by 37 percent, 1st Quarter 2009, 4th Quarter 2008 and 1st Quarter 2008. due in part to higher commodity prices, although they . slowed considerably, growing by just 2.5 percent, in ———. May 2009. “Monetary Policy Statement: May the fourth quarter of 2008 over the same quarter in 2009.� September 11, 2009. . China tripling since the early part of the decade. Economist Intelligence Unit (EIU). 2008. “Country Exports are not highly diverse; the largest export Profile 2008: Solomon Islands.� The Economist products are fish, timber, cocoa, copra, and palm oil. Intelligence Unit. July 23, 2009. commercially exploitable natural forest will be ———. 2009. “Country Report: Solomon Islands.� The depleted within the next four years. Imports increased Economist Intelligence Unit. July 23, 2009. 14.4 percent in 2008 and have continued to grow in year compared to the corresponding period in 2008, International Monetary Fund (IMF). November 2008. leading to a further increasing trade deficit. Half of all “Solomon Islands: 2008 Article IV Consultation— imports are from Australia and Singapore.7 Staff Report; Staff Supplement; Public Information Notice on the Executive Board Discussion.� IMF Country Report No. 08/358. IMF. June 30, 2009. Notes . 2. Bilaterals.org, April 2009. Kelsey, Jane. April 2004. “Big Brothers Behaving Badly: 3. Pacific Islands Forum Secretariat and Jane Kelsey, The Implications for the Pacific Islands of the April 2004, p. 18. Pacific Agreement on Closer Economic Relations 4. Pacific Islands Forum Secretariat, August 2009. (PACER).� Pacific Network on Globalisation 5. All data in this section from Central Bank of Solomon (PANG). . 6. Central Bank of Solomon Islands. May 2009, p. 8. Pacific Islands Forum Secretariat. “Regional Trade.� 7. EIU, 2008, p. 12. September 10, 2009. . ____. August 2009. “Fortieth Pacific Islands Forum: Forum Communique.� September 10, 2009. References . . Review—Solomon Islands. Accessed Electronically: July 8, 2009.