The Marshall Islands, the Federated States of Micronesia and Palau

Home , Alonso de Salazar, Koreans in Micronesia, Marshall Islands, Palau

By Anirban Biswas

A. Brief overview of the Asia-Pacific Trade Agreement

During the past decade the intraregional share of total Asia-Pacific exports increased from 44% in 2000 to 52% in 2013, with developing Asia-Pacific countries making the highest contribution.1 In this regard, regional trade agreements such as APTA could be a very good platform for expanding intraregional trade under the agreement.

As APTA provides a good platform for South-South trade and has provisions for special and differential treatment for small Pacific Island countries with special needs, such as Micronesian Trade and Economic Community (MTEC) member countries - the Federated States of Micronesia (hereinafter referred to as Micronesia), the Marshall Islands and Palau, these three countries can reap the benefits from increasing trade in the region by joining APTA.2

This section discusses briefly how the study objective was conceived and provides an overview of trade among the Participating States of APTA. It also sets the objective, and discusses the methodology and data sources related to the study. In section B, the economic background, geographical condition, historical/political aspects and external trade structures as well as different preferential trade agreements of the Marshall Islands, Micronesia and Palau are discussed. Section C evaluates the export potential for the Marshall Islands, Micronesia and Palau by examining their exports under the existing concessions given by the Participating States of APTA (covering more than 10,000 items in the Fourth Round). The export potential at 6-digit Harmonized Commodity Description and Coding System (HS) level has been identified. Section D deals with possible opportunities of trade between the Participating States of APTA and the three island nations in services, investment and trade facilitation following the Framework Agreement of APTA and implementation. Section D also evaluates whether the three island countries can form linkages with APTA member countries on these sectors and whether this will be an opportunity for them to reduce their trade costs. Trade expansion needs better productive capacity, infrastructure and, above all, investment in certain industries. In this regard, foreign direct investment (FDI) from APTA countries to these MTEC countries could be beneficial. Section E provides relevant recommendations.

1 Asia-Pacific Trade and Investment Report, 2014 (p. 9). 2 Prasad and Chen (2014). The study attempted to find the possible benefits for the PIFC (Pacific Island Forum Countries) members in acceding to APTA. They considered only six countries (out of 14 countries) due to their large economy size and noticeable trade with APTA country members. The left out countries includes the Marshall Islands, Federated States of Micronesia and Palau.

1. Objective

The Asia Pacific Trade Agreement provides a good platform for South-South and intraregional trade, and economic cooperation. In this regard, it could be very useful and timely for the Pacific Island countries to look at the possibility of regional integration, which could help them to develop their trade and economies as well as connect them to big economies in the Asia Pacific region. With this in mind, the main objective of this chapter is to examine the potential benefits for the Marshall Islands, Micronesia and Palau in their accession to APTA, not only in terms of goods but also in services, investments and trade facilitation measures following the framework agreements. In addition, this chapter attempts to examine the other areas of possible cooperation between APTA and the Marshall Islands, Micronesia and Palau, e.g. tourism, FDI and productive capacity.

2. Data source and methodology

A detailed analysis of trade potential requires disaggregated data on trade. For that purpose, data were obtained from the WITS COMTRADE database at the 6-digit disaggregation of HS classification. In addition, data on tariff concessions offered by each of the Participating States of APTA, required to identify the products under tariff concession, were obtained from the APTA Secretariat of ESCAP. Data were also collected on various economic indicators from the World Bank, ESCAP, the CIA World Fact Book and government reports by the Marshall Islands, Micronesia and Palau.

In some cases, data were not available on exports by these three island countries. To increase the probability of data availability, the mirror data method was used, i.e. world imports from the Marshall Islands, Micronesia and Palau were considered as the exports by these countries to the world. Similarly, imports from the Participating States of APTA by the Marshall Islands, Micronesia and Palau were considered as the exports of the Participating States of APTA to the three island countries.

The main objective on this study, therefore, is the identification of the principal export items from the Marshall Islands, Micronesia and Palau to the Participating States of APTA. After reviewing the revealed comparative advantage of these three countries in the world market, an analysis was carried out of the trade potential for exports by these countries to the Participating States of APTA. The revealed comparative advantage analysis helped to identify the sectors in which the three island nations have a comparative advantage in world market through a comparison of the country of interests’ trade profile with the world average. In addition, a trade complementarity analysis between the Marshall Islands, Micronesia and Palau and the Participating States of APTA was made. This analysis helped to show the extent to which the export patterns of the three island countries match the import pattern of the APTA member countries.

The revealed comparative advantage index was constructed following Balassa (1965): 푋 푋 RCA= ( 푖푗)/( 푛푗) …………………………………………………………………….. (1) 푋푖푡 푋푛푡 where x represents exports, i is a country, j is a commodity, t is a set of commodities and n is a set of countries (in this case it is world).

A Trade Complementarity Index (TCI) was constructed between the Marshall Islands, Micronesia and Palau and the Participating States of APTA. The TCI provides information on how well the export pattern of a country matches the import pattern of another country, thus indicating the prospect of trade between the two countries. The TCI between countries A and B is defined as: |푚 − 푥 | 푇퐶퐼 = 100(1 − 훴 ( 푖퐴 푖퐵 ))………………………………………….……...... (2) 푖퐵 2 where 푥푖퐵 is the share of good i in global exports of country B and 푚푖퐴 is the share of good i in all the imports of country A. The value of the index is zero when there is no trade between the countries and 100 when the import and export share of the two countries match exactly.

To identify the potential for exports from the three MTEC member countries to the Participating States of APTA, the following analysis was undertaken, taking into consideration of the products that are under MoP concession:3 (a) Individual MTEC member countries exports to individual APTA member countries; (b) Global imports of APTA member countries; (c) Individual MTEC member countries global exports; (d) MoP currently available for exports to APTA member countries.

The potential exports can be identified in two ways: (a) When an individual MTEC country’s global exports of product X are greater than the global imports of the same product by an individual APTA Participating State (i.e., C > B) , then the scope for potential export gain by that MTEC country’s export of product X to the individual APTA Participating State can be maximum by the value of ‘B – A’. This value is assumed to be the potential market share that can be captured by the individual MTEC member countries through increased exports to the Participating States of APTA; (b) When an individual MTEC country’s global exports of product X are less than the global imports of the same product by an individual APTA Participating State (i.e., C < B), then the scope for potential export gain by that MTEC country’s export of product X to the individual APTA Participating State can be maximum by the value of ‘C – A’. This value is assumed to be the potential market share that can be

3 Following Ratna, R.S. (2011). Benefits of Joining APTA: Case of Nepal, ESCAP, Bangkok.

captured by the individual MTEC member countries through increased exports to the Participating States of APTA.

The analysis considered the products that were exported by the Marshall Islands, Micronesia and Palau to the world during 2011, 2012 and 2013 and which come under the MoP list of each APTA Participating State.

As the MTEC member countries are geographically isolated and remote far from the Participating States of APTA, trade impediments such as cost of exporting/importing products and the time associated with trade activities become quite important. To address this issue the analysis attempted to find the time and cost of imports/exports by those countries. For this purpose data from the World Bank were utilized. In addition, FDI data from the UNCTAD database were used.

B. Overview of the Marshall Islands, Micronesia and Palau

1. Marshall Islands

The United Nations has classified the Marshall Islands as a Small Island Developing State.4 It is one of only four atoll nations in the world (Others being Kiribati, Maldives and Tuvalu). As one of the most isolated, smallest and vulnerable nations in the world5, it comprises five Islands and 29 coral atolls with a total land area of only 70 square miles.6 The country shares its maritime boundaries with Micronesia, Wake Island, Kiribati and Narau in the Pacific. It has a hot and humid tropical climate, with an average rainfall of 160 inches per year.7 The country is highly dependent upon foreign aid, primarily from the United States, from which it received around $1 billion between 1986 and 2001, and will receive a total financial package of around $1.5 billion for a 20-year period, from 2004 to 2024.8 It is also not a WTO member or observer.

In 1526, the Spanish navigator Alonso de Salazar was the first European to discover the island group. In 1788, it was named by a British naval captain, William Marshall. Between 1885 and 1914, the Marshall Islands were under German control. During World War I, Japan captured it and controlled it until the end of World War II, when the nation came under the control of the United States. In 1986, the Marshall Islands became an independent State, although it has a special political, economic and defence relationship with the United States under a Compact of Free Association agreement.

4 See www.rmiembassyus.org/Economy.htm#Econ (accessed on 24 February 2015). 5 The Marshall Islands are vulnerable to climate changes and sea-level rise. 6 See www.rmiembassyus.org/Geography.htm (accessed on 24 February 2015). 7 Ibid. 8 CIA World Fact Book, available at https://www.cia.gov/library/publications/the-world-factbook/geos/rm.html (accessed on 24 February 2015).

The fisheries sector is a major contributor to the overall development of the economy. The country is a resource rich nation in fisheries and has a large exclusive economic zone (EEZ). The economy of the Marshall Islands is a subsistence type but the country has only a few export products, e.g., fish (loins) which is a major export item. The major food crops are coconuts, breadfruit and pandanus. Meat production includes pigs and chickens. Industrial items such as handicrafts, fish (especially tuna) processing and copra are important. Hence, the country is heavily reliant on imports of food and fuel.

The small size and remoteness of this island nation poses many development challenges such as high transport costs for trade and higher costs of different economic activities, which hinder achievement of economies of scale and make the process of providing public service more complex.9

The Marshall Islands’ economy was severely affected by the 2008 international financial crisis. In 2010, GDP growth was around 6%, which was much better than -2% recorded in 2009. From 2011 the annual growth rate of GDP remained positive and was 3% in 2013. According to the IMF, this positive trend can be attributed to a surge in fishery output, and higher copra and coconut production.10 Fishery constitutes around 10% of the national GDP.11 According to the latest available data in 2011, the agricultural sector constituted 28% of GDP whereas the services sector’s share of GDP was 63% (figure 4.1). This implies that the Marshall Islands has a high dependence on the services sector compared with other sectors in the economy. However, in relation to services, almost 60% of Marshall Islands’ budget is financed by the United States under the US-Compact grant. The public sector employs a large number of Marshallese citizens in comparison to the private sector. This also contributes to the 63% of services share in GDP.

9 World Bank Report No. 69510-MH, p. I; available at http://documents.worldbank.org/curated/en/2013/02/17389687/marshall-islands-country-partnership-strategy- period-fy13-fy16 (accessed on 25 February 2015). 10 See www.imf.org/external/np/sec/pr/2014/pr1441.htm (accessed on 25 February 2015). 11 World Bank Report No. 69510-MH, p. I. Available at http://documents.worldbank.org/curated/en/2013/02/17389687/marshall-islands-country-partnership-strategy- period-fy13-fy16 (accessed on 25 February 2015.

Figure 4.1. GDP share of major sectors in Marshall Islands, 2011

Industry 9%

Agriculture 28% Services 63%

Source: Author’s calculation based on the World Bank data.

The Marshall Islands depend very much on external aid and finance to support the country’s public services system, e.g., health care, food security, infrastructure development, etc. According to the World Bank, the external debt of the Marshall Islands was around 57% of GDP in 2012, which left the economy vulnerable to debt distress and macroeconomic instability. The United States is a major contributor of financial aid, 60% of the Government budget is financed by the United States under the US-RMI compact arrangement.

According to the RMI 2011 Census,12 the current population is around 53,000. More than 74% of that population lives in Majuro (capital city) and Ebeye. The Marshall Islands workforce comprises 12,924 people. The national workforce participation rate in 2011 was 41.3% (65% male and 34.9% female). The unemployment rate among the economically active population was just 4.7%. However, the workforce is experiencing a change as it is shifting from subsistence agriculture and fishing to more specialized types of activities. According to ILO data, 79.6% of total workforce was engaged in services sector, 11% in agricultural sector and 9.4% in industrial sector during 2011 (figure 4.2).

12 RMI 2011 Census, p.17. Available at www.doi.gov/oia/reports/upload/RMI-2011-Census-Summary-Report-on- Population-and-Housing.pdf (accessed on 25 February 2015).

Figure 4.2. Workforce share in the major sectors of the Marshall Islands, 2011

Industry 9.4% Agriculture 11%

Services 79.6%

Source: Author’s calculation based on ILO data.

External trade of the Marshall Islands Imports are much higher than exports, which has resulted in a high negative trade balance over the years (figure 4.3). During 2013, exports and imports of merchandise amounted to 30% and 69% of GDP, respectively (ESCAP, 2014b).

Figure 4.3. Total exports and imports by the Marshall Islands, 2000-2014 16 000

14 000

12 000

10 000

8 000

6 000

4 000 Millions Millions United of States dollars

2 000

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Imports Exports

Source: Author’s calculation based on WITS COMTRADE data.

Figure 4.3 also shows that the country had a huge trade deficit after 2006 resulting from an increase in imports. The trade deficit was highest during 2009 and exports showed a decline post 2008, indicating a negative effect possibly due to the global economic recession.

An interesting picture emerges when looking at the destinations of exports from the Marshall Islands (figures 4.4 to 4.7). The United States is a good market, which may be due to the colonial history. In 2000, ASEAN and the United States were the major markets, accounting for 63.6% and 15.2%, respectively, of total exports by the Marshal Islands. The APTA market accounted for a negligible share of 0.1%. After 2010, the Marshall Islands exports to APTA member countries started to increase. During 2013, the APTA market share of the Marshall Islands exports increased to 32%, which was a significant rise from 3.5% in 2010.

Figure 4.4. Destinations of exports from the Marshall Islands, 2000 Australia Japan Rest of United 0.1% 0.9% the States world 15.2% 20.2%

APTA 0.1%

ASEAN 63.6%

Source: Author’s calculation based on WITS COMTRADE data.

Figure 4.5. Destinations of exports from the Marshall Islands, 2007

Japan United States ASEAN 1.5% 2.4% 6.3% Australia 0.1% APTA 0.1%

Rest of the world 89.7%

Source: Author’s calculation based on WITS COMTRADE data.

Figure 4.6. Destinations of exports from the Marshall Islands, 2010

Australia Japan United States 0.1% 2.3% 3.4%

ASEAN 29.8%

Rest of the world 61%

APTA 3.5%

Source: Author’s calculation based on WITS COMTRADE data.

Figure 4.7. Destinations of exports from the Marshall Islands, 2013

Australia Japan United States 0.2% 0.4% 2.4%

ASEAN 12%

Rest of the world 53% APTA 32%

Source: Author’s calculation based on WITS COMTRADE data.

Table 4.1 shows that fish products are the main export items from the Marshall Islands to China, which have increased during the period of 2010 to 2013. Exports by the Marshall Islands to India comprise mainly in mineral fuels and mineral oils (table 4.2), while in the case of the Republic of Korea exports comprise mainly ships, boats, floating structures, mineral fuels and mineral oils (table 4.3). In 2010, Bangladesh also imported mineral fuels from the Marshall Islands. However, one should also note in relation to exports of ships, boats and floating structures and mineral fuels from the Marshall Islands, this may be a result of exports from the United States military base in Kwajalein. Kwajalein is one of the islands in the Republic of Marshall Islands that hosts the United States military base. Table 4.1. Top export items by the Marshall Islands to China (US$ thousand) Chapter Product description Exports (average values code in 2010 and 2013) 03 Fish and crustaceans, molluscs 41 453.50 16 Preparations of meat, of fish 15.00 72 Iron and steel 25.65 84 Nuclear reactors, boilers, machinery 1.75 85 Electrical machinery and equipment 0.02 Source: Author’s calculation based on WITS COMTRADE data.

Table 4.2. Top export items by the Marshall Islands to India (US$ thousand) Chapter Product description Exports (average values code in 2010 and 2013) 27 Mineral fuels, mineral oils 3 465.00 33 Essential oils and resinoids 14.42 39 Plastics and rubber and articles thereof 1.67 49 Printed books, newspapers, pictures 1.17 84 Nuclear reactors, boilers, machinery 4.34 Source: Author’s calculation based on WITS COMTRADE data.

Table 4.3. Top export items by the Marshall Islands to the Republic of Korea (US$ thousand) Chapter Product description Exports (average values code in 2010 and 2013) 23 Residues and waste from the food industries 39.52 27 Mineral fuels, mineral oils 5 978.46 72 Iron and steel 420.61 74 Copper and articles thereof 70.00 85 Electrical machinery and equipment 53.61 89 Ships, boats and floating structures 87 346.85 Source: Author’s calculation based on WITS COMTRADE data. Overall, fish products, mineral fuels and mineral oils are the main export items by the Marshall Islands to the APTA region. The above discussion also shows that the APTA member countries have become a major export destination for the Marshall Islands. This could also be due to the aftereffects of the recent global recession, which create the need for better engagement by the Marshall Islands with the Participating States of APTA in order to protect from similar shocks in the future.

2. Micronesia

Micronesia comprises around 607 islands grouped into four island States of Yap, Chuuk, Pohnpei and Kosrae. The islands are scattered across 1.6 million km2 in the Pacific.13 Each State has its own language, culture and geography. Micronesia has a total land mass of 702 km2. The climate is tropical with heavy rainfall, especially in the eastern islands. The country is located in the typhoon belt, which results in severe storm damage.

13 World Bank Report No. 87818-FM, p. 1; available at http://documents.worldbank.org/curated/en/2014/04/19624065/micronesia-federated-states-country-partnership- strategy-period-fy2014-2017 (accessed on 26 February 2015).

The United States took control of Micronesia shortly after the end of World War II and maintained jurisdiction until 1986 when Micronesia achieved independence. Even after independence Micronesia has continued to receive substantial grants and other financial assistance from the United States under the agreement of Compact of Free Association between the two countries.14 The agreement also allows Micronesian citizens to live, work and study in the United States without a visa. Micronesia is a member of ESCAP, Pacific Islands Forum and the IMF. It is not a WTO member or observer.

Agriculture in Micronesia is of the subsistence type but the country also exports a few agricultural and fish products to the world. The main agricultural products are coconuts, betel nuts, sweet potatoes, bananas sakau (kava) and cassava. Fish constitutes a large share in Micronesia’s export basket. These agricultural and fish products could be a good for Micronesia’s exports subject to proper investment and production regime. Micronesia earns good revenue from allowing foreign fishing vessels to operate in its territories, although concern is rising with regard to overfishing. Export earnings from fish products and fishing licence fees have helped Micronesia to reduce a huge current account deficit created by the global financial crisis in 2009. There is no significant manufacturing sector. The country has a small tourism sector that has growth potential.

Figure 4.8. GDP share of major sectors in Micronesia, 2013

Agriculture 5%

Industry 8%

Services 87%

Source: Author’s calculation based on World Bank data.

14 According to the CIA World Fact Book, the United States provided $ 1.3 billion to Micronesia between 1986 and 2001 under the agreement. It is expected to provide $ 2.1 billion during 2004-2024.

Figure 4.8 shows that the services sector has a very high share of Micronesia’s GDP (87%). It can very well be observed that the economy and the population of Micronesia are very much dependent on its services sector.

Micronesia’s economy was seriously affected by the global financial crisis; in 2008, the country’s GDP growth rate was -3%, but in 2009 it showed signs of recovery with a growth rate of 1%. However, in 2013 the GDP growth rate15 again became negative when it dropped to -4%. The balance of trade (considered here as the difference between exports and imports) was also negative due to a high level of imports. In 2013, the balance of trade was minus $65.66 million. In 2012, the inflow of FDI was very low at 0.2% of GDP (ESCAP, 2014b).

In 2013 the total population of Micronesia was 103,900. The annual population growth rate was - 0.4% according to the Micronesia Census 2010. Chuuk State has the highest density of population. In 2010, the workforce in Micronesia totalled 37,919. Most of its workforce is concentrated into services sector with a share of 78% of total workforce during 2011(figure 4.9).

Figure 4.9. Workforce share in the major sectors of Micronesia, 2011

Agriculture 1%

Industry 21%

Services 78%

Source: Author’s calculation based on data from The World Fact Book, CIA.

External trade of Micronesia In 2013, exports and imports of merchandise amounted to 9.1% and 60.8% of GDP, respectively (ESCAP, 2014b).

15 See http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG.

Figure 4.10 shows the variation in Micronesia’s balance of trade during 2000-2014. It was highly negative from 2005 to 2013, especially in 2009 due to imports of capital goods such as electrical machinery, machinery related to nuclear reactors etc. The trade balance was positive only during 2001, 2003 and 2004.

Figure 4.10. Total exports and imports of Micronesia, 2000-2014 160

140

120

100

Millions Millions United of States dollars 20

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Imports Exports

Source: Author’s calculation based on WITS COMTRADE data.

During 2000, the United States, Japan and ASEAN accounted for a considerable market share of Micronesia’s total exports (figures 4.11 to 4.14). On the other hand, the Participating States of APTA had a negligible share of 0.16%. The export share with the rest of the world is very low, ranging from 1% to 9% between 2000 and 2013. The Participating States of APTA has become a major trade partner of Micronesia, accounting for a 34.6% share of Micronesia’s total exports in 2013.

Figure 4.11. Destinations of exports from Micronesia, 2000

Rest of the APTA Australia 0.2% world 0.8% 0.1%

Japan 30.1%

ASEAN 48%

United States 20.8%

Source: Author’s calculation based on WITS COMTRADE data.

Figure 4.12. Destinations of exports from Micronesia, 2007

Rest of the world Australia 9.1% 0.01% APTA 2.4%

Japan 19.7%

ASEAN United States 43.7% 25%

Source: Author’s calculation based on WITS COMTRADE data.

Figure 4.13. Destinations of exports from Micronesia, 2010

Rest of the world Australia 2.3% 0.01%

APTA Japan 8.6% 18.9%

United States 15.3%

ASEAN 54.9%

Source: Author’s calculation based on WITS COMTRADE data. Figure 4.14. Destinations of exports from Micronesia, 2013

Australia Rest of the world 0.1% 1.7%

United States Japan 5.2% 8.9%

APTA 34.6%

ASEAN 49.5%

Source: Author’s calculation based on WITS COMTRADE data.

Exports from Micronesia to China and the Republic of Korea have increased considerably in recent times (tables 4.4 and 4.5). The main export items to China and the Republic of Korea was

16 fish products. The other APTA member countries did not import products from Micronesia during 2000-2013, except for Sri Lanka in 2013 which imported only one item under plastics and articles thereof (HS code 39), with a very small export value of $990.

Table 4.4. Exports from Micronesia to China (US$ thousand) Chapter Product description Exports (average values code in 2010 and 2013) 03 Fish and crustaceans, molluscs 6 346.50 05 Products of animal origin, n.e.s. 61.55 76 Aluminium and articles thereof 12.25 85 Electrical machinery and equipment, 0.15 and parts thereof 94 Furniture, lamp and lighting fitting; n.e.s. 0.25 97 Works of art, collectors' pieces and antiques 1.35 Source: Author’s calculation based on WITS COMTRADE data.

Table 4.5. Exports from Micronesia to the Republic of Korea (US$ thousand) Chapter Product description Export (average values code in 2010 and 2013)

03 Fish and crustaceans, molluscs 869.40 05 Products of animal origin, n.e.s. 0.50 16 Preparations of meat, fish or crustaceans, molluscs 2.05 24 Tobacco and manufactured tobacco substitutes 8.25 56 Wadding, felt and non-wovens; special yarns 257.25 62 Articles of apparel and clothing accessories 2.20 72 Iron and steel 102.65 76 Aluminium and articles thereof 50.95 85 Electrical machinery and equipment, and parts 11.65 thereof 89 Ships, boats and floating structures 196.05 90 Optical, photographic, cinematographic, measuring, 0.80 checking, precision; medical or surgical instruments and apparatus; clocks and watches; musical instrument Source: Author’s calculation based on WITS COMTRADE data.

3. Palau

Palau consists of 16 States comprising a total of more than 340 islands. Only eight of the islands are inhibited. Koror, the main economic centre of Palau, covers 7.1 square miles. The climate is hot and humid. In 1986, Palau and the United States signed a Compact of Free Association and

17 in 1994 Palau became an independent country and a member of the United Nations. Under the Compact, the United States is responsible for Palau’s defence.

Agriculture in Palau is of the subsistence type, but subject to proper production procedures it could export agricultural products to the world. Its main agricultural items are coconuts, copra, cassava and sweet potatoes. Fishing forms an important share in the economy, with tuna taking up a significant share of Palau’s export basket. There are no large-scale manufacturing industries. Palau’s economy is mostly tourism-driven with the marine environment forming the main attraction. Visitor receipts represented around 45% of Palau’s GDP in 2005.16 Palau’s economy is also dependent upon financial assistance provided by the United States. Under the Compact of Free Association, the United States provided around $700 million to Palau during the first 15 years following the commencement of the Compact.

Palau is extremely dependent upon imports and has a high trade deficit. In 2013, services sector contributed the largest share to GDP in Palau (87%) (figure 4.15). Agricultural and Industrial sectors had very low share showing that services is the most important sector in this island country. Figure 4.15. GDP share of major sectors in Palau, 2013

Agriculture 4%

Industry 9%

Services 87%

Source: Author’s calculation based on World Bank data.

Most of its population is located in urban areas. According to the latest available data, the workforce is skewed towards the services sector, which consists of almost 86% of the total workforce during 2008 (figure 4.16). Agriculture has the lowest share of the workforce.

16 Mauritius +5 Report: Republic of Palau, p. 99; available at www.sidsnet.org/msi_5/docs/nars/Pacific/Palau-MSI- NAR2010.pdf (accessed on 2 March 2015).

Figure 4.16. Workforce share in the major sectors of Palau, 2008

Agriculture 2.4%

Industry 11.7%

Services 85.9%

Source: Author’s calculation based on ILO data.

Palau is a member of many international organizations, including the World Bank, the IMF and the United Nations. It is neither a member of WTO nor has observer status.

External trade of Palau

In 2013, exports and imports of merchandise amounted to only 3.2% and 68%, respectively, of GDP. The inflow of FDI was also very low at 2.5% of GDP in 2012 (ESCAP, 2014b). Figure 4.17. Total exports and imports by Palau, 2000-2014

70 60 50 40 30 20

Millions Millions United of States dollars 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Imports Exports

Source: Author’s calculation based on WITS COMTRADE data.

Figure 4.17 shows that Palau had a negative balance of trade from 2000 to 2014, with the highest negative balance occurring in 2013. It is also clear from figure 4.17 that Palau’s exports were comparatively low after the 2008 global financial crisis.

Japan and the United States are Palau’s most important export destinations. It could be due to their common colonial history as discussed above. Japan’s share in Palau’s total exports increased from 53.8% in 2000 to 91.05% in 2013 (figures 4.18 to 4.21). The share of the Participating States of APTA remained very small during the same period.

Figure 4.18. Destinations of exports from Palau, 2000 Rest of the world ASEAN 2.4% Australia/ New 0.2% Zealand APTA 0.1% 0.5%

United States 43.1% Japan 53.8%

Source: Author’s calculation based on WITS COMTRADE data. Figure 4.19. Destinations of exports from Palau, 2007

Australia/ New Zealand 0.1% Rest of the world United States ASEAN 5.8% 2% 3.6% APTA 0.7%

Japan 87.7%

Source: Author’s calculation based on WITS COMTRADE data.

Figure 4.20. Destinations of exports from Palau, 2010

Australia/New Zealand 1.3% Rest of the World United States ASEAN 5.4% 0.8% APTA 1.7% 0.3%

Japan 90.5%

Source: Author’s calculation based on WITS COMTRADE data.

Figure 4.21. Destinations of exports from Palau, 2013

Australia/New Zealand ASEAN Rest of the World 0.03% 0.1% 6.9% United States APTA 1.1% 0.8%

Japan 91%

Source: Author’s calculation based on WITS COMTRADE data.

4. Trade agreements of the Marshall Islands, Micronesia and Palau

The Marshall Islands and Micronesia are members of the South Pacific Regional Trade and Economic Co-operation Agreement. It was signed in 1980 and it is a non-reciprocal trade agreement in which Australia and New Zealand offer duty-free and unrestricted access for specified products originating from the developing island member countries of the Pacific Islands Forum.

Micronesia is a signatory to the Pacific Island Countries Trade Agreement (PICTA) that was signed in 2001 and came into force in 2003. However, Micronesia is yet to ratify the Agreement. It is a free trade agreement among the 14 Pacific Island Forum Countries (PIFCs). However, the Marshall Islands and Palau are not signatory members of PICTA. Micronesia and the Marshall Islands are signatory to PICTA Protocol on Trade in Services, which was concluded in 2012.

The Marshall Islands, Micronesia and Palau have jointly formed a group named the “Micronesian Trade and Economic Community”, which was signed on September 2014 with the objective of helping each other in social and economic development. The vision and goal of the treaty is (a) to endeavour towards the creation of MTEC, through the promotion of subregional trade and economic cooperation and integration, (b) to support the achievement of sustainable and equitable socio-economic development of its member States, and (c) to improve the standard and quality of life of their people, thus contributing to the progress and development of the Asia and Pacific Region.17 Market diversification offers strong potential for boosting exports by the Marshall Islands, Micronesia and Palau (table 4.6). The Treaty will enter into force 30 days after the deposit of the instruments of ratification by two-thirds of the Member States listed in the Preamble. The Marshall Islands became the first country to ratify the Treaty establishing MTEC in February 2015. At the seventh MTEC Meeting in Majuro in July 2015, Micronesia and Palau announced that the package for the ratification of the MTEC Treaty had been submitted to their respective national Congress.

These three island countries are also participating in the negotiations for the “Pacific Agreement on Closer Economic Relations (PACER) Plus” between Pacific Island Countries and Australia and New Zealand. PACER-Plus will replace PACER, which came into force in 2002. The objective of this agreement is “to offer an opportunity to help PIFCs benefit from enhanced regional trade and economic integration.” 18 The key interests of the agreements can be summarized as19:

17 See www.micronesiaforum.org/index.php?p=/discussion/12517/fsm-marshall-islands-and-palau-sign-historic- micronesia-trade-and-economic-treaty/p1. 18 See http://dfat.gov.au/trade/agreements/pacer/Pages/pacific-agreement-on-closer-economic-relations-pacer- plus.aspx (accessed on 23 April 2015). 19 See http://dfat.gov.au/trade/agreements/pacer/Pages/pacific-agreement-on-closer-economic-relations-pacer- plus.aspx.

(a) Providing support for the long-term opportunity to create jobs, enhance private sector growth, raise standards of living, and boost economic growth in the Forum Island Countries; and (b) Enhancing trade facilitation and trade capacity-building in order to strengthen the PIFCs' ability to trade.

There is also some concern over this agreement. The Pacific island countries lack resources and are vulnerable to climate change. They also lack funds for infrastructure and development. Taxes on imported goods (often luxury goods) are an important source of revenue for funding various development projects. It is stated that tariffs are so important that if PACER-Plus removes these tariffs, it will have a disastrous impact, both on public services and on employment levels.20

Table 4.6. Market diversification as a percentage of total exports Palau 2000 2007 2010 2013 Australia/New Zealand 0.07 0.09 1.30 0.03 United States 43.06 2.02 0.84 1.13 Japan 53.75 87.72 90.46 91.05 APTA 0.54 0.74 0.31 0.78 ASEAN 0.20 3.58 1.66 0.09 Rest of the world 2.37 5.85 5.42 6.91 Marshall Islands 2000 2007 2010 2013 Australia/New Zealand 0.09 0.06 0.09 0.19 United States 15.15 2.37 3.36 2.37 Japan 0.91 1.47 2.31 0.41 APTA 0.10 0.10 3.49 32.03 ASEAN 63.58 6.28 29.76 12.00 Rest of the world 20.17 89.71 61.00 53.00 Micronesia 2000 2007 2010 2013 Australia/New Zealand 0.09 0.01 0.01 0.10 United States 20.82 25.02 15.35 5.18 Japan 30.08 19.73 18.87 8.91 APTA 0.16 2.45 8.57 34.59 ASEAN 48.03 43.74 54.89 49.51 Rest of the world 0.82 9.05 2.32 1.71 Source: Author’s calculation based on WITS COMTRADE data.

20 See http://aftinet.org.au/cms/pacific-islands-trade-agreement/pacific-agreement-closer-economic-relations-pacer.

C. Potential for exports by the Marshall Islands, Micronesia and Palau to APTA members

The Participating States of APTA provide concession at very much disaggregated level of HS classification. For most of the countries this concession list is available at the 8-digit level. For Sri Lanka concessions are available at the 6-digit level while for the Republic of Korea21 the list is available at the 10-digit level. The data collected from the WITS COMTRADE database during this study is at the 6-digit level of disaggregation. To make it compatible with this study the 8- and 10-digit concession list has been converted to the 6-digit level of HS disaggregation.

1. Analysis of Revealed Comparative Advantage of export items from the Marshall Islands, Micronesia and Palau

The Revealed Comparative Advantage (RCA) simply shows whether a country has comparative or relative advantage or disadvantage in any of its export products in world trade. This study calculates the RCA index, following equation (1), for MTEC members. Although the calculation was made for all export items of these three countries, only those items that have an RCA value of more than 1 are reported here.22 The RCA index has been constructed for 2010 and 2013, since this study deals with the recent trade structure of these island countries.

In the case of the Marshall Islands, there are only four items at the 2-digit level that have an RCA value of more than 1 (table 4.7). Among these, chapter 89 has the highest RCA value while chapter 3 has the second highest RCA value in the list. There is a huge gap between the RCA values of these two products and the rest of the products in the list. From the table it is clear that the comparative advantage of the Marshall Islands is concentrated only in chapter 89 followed by chapter 3. The four items had a share of 95% of the Marshall Islands’ total exports to the world in 2013. It is also evident from the export value of these items that the Marshall Islands is exporting to the world (table 4.10).

Table 4.7. RCA values of Marshall Islands export products Chapter code Product description 2013 03 Fish and crustaceans, molluscs 37.86 15 Animal or vegetable fats and oils 1.31 16 Preparations of meat, of fish 2.07 89 Ships, boats and floating structures 215.41 Source: Author’s calculation based on WITS COMTRADE data.

21 There are 15 ex-out items in the Republic of Korea’s 10-digit concession list. 22 An RCA value of less than 1 means comparative disadvantage.

Micronesia has seven items in the RCA list (table 4.8) that accounted for around 90% of the country’s total exports to the world in 2013. Compared to the Marshall Islands, Micronesia has the highest RCA value for chapter 3 and the second highest RCA value for chapter 46. In comparison, the other products had quite low RCAs.

Table 4.8. RCA values of Micronesia export products Chapter code Product description 2013 03 Fish and crustaceans, molluscs 154.52 05 Products of animal origin, n.e.s. 4.92 46 Manufactures of straw, esparto 46.07 56 Wadding; felt and non-wovens, special yarns 5.95 89 Ships, boats and floating structures 5.88 97 Works of art, collectors' pieces and antiques 0.05 99 Commodities not specified 1.84 Source: Author’s calculation based on WITS COMTRADE data.

Palau has five products in the RCA list (table 4.9). It has the highest RCA value for chapter 3. The five products constituted a 93% share of Palau’s total exports to the world in 2013.

Table 4.9. RCA values of Palau export products Chapter code Product description 2013 03 Fish and crustaceans, molluscs 163.16 22 Beverages, spirits and vinegar 0.77 59 Impregnated, coated, covered or laminated textile fabrics 2.95 76 Aluminium and articles thereof 1.07 97 Works of art, collectors' pieces and antiques 1.40 Source: Author’s calculation based on WITS COMTRADE data.

From tables 4.7 to 4.9, it is clear that Micronesia and Palau have a comparative advantage in fish, crustaceans and molluscs while the comparative advantage of the Marshall Islands is in ships, boats and floating structures which are low-skilled and low technology-intensive products.23 The export products with high RCA values have higher shares in the export baskets of these countries.

23 See http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&dcd=2&ved=0CCcQFjAB&url=http%3A%2F% 2Functad.org%2Fen%2FDocs%2Fitcdtab49_en.pdf&ei=D2xQVam2AdKB8QXY- ICYCQ&usg=AFQjCNFjhUCKmFhQyu1tQMJDiw1N0vx7Bg&bvm=bv.92885102,d.dGc (accessed on 11 May 2015).

Table 4.10. Top 20 export items of the Marshall Islands, Micronesia and Palau to the world (Average of 2011, 2012 and 2013) Marshall Islands Micronesia Palau Chapter Product description Export value Chapter Product description Chapter Product description code (US$ thousand) code Export value code Export value (US$ thousand) (US$ thousand) 89 Ships, boats and floating structures 590 018 03 Fish and crustaceans, molluscs 52 747 03 Fish and crustaceans, molluscs 18 281 03 Fish and crustaceans, molluscs 156 435 99 Commodities not specified according 1 081 72 Iron and steel 354 27 Mineral fuels, mineral oils 16 305 72 Iron and steel 360 76 Aluminium and articles thereof 151 16 Preparations of meat, of fish 6 599 85 Electrical machinery and equipment 267 99 Commodities not specified 150 99 Commodities not specified according 2 276 89 Ships, boats and floating structures 251 22 Beverages, spirits and vinegar 144 84 Nuclear reactors, boilers, machinery 2 179 81 Other base metals; cermet; article 238 71 Natural or cultured pearls 140 15 Animal or vegetable fats and oils 1 913 46 Manufactures of straw, esparto 213 85 Electrical machinery and equipment 108 72 Iron and steel 1 241 74 Copper and articles thereof 210 24 Tobacco and manufactured tobacco 88 71 Natural or cultured pearls 1 087 76 Aluminium and articles thereof 176 84 Nuclear reactors, boilers, machinery 77

85 Electrical machinery and equipment 955 56 Wadding, felt and non-wovens 159 87 Vehicles other than railway trains or 72 trams 23 Residues and waste from food 555 40 Rubber and articles thereof 144 74 Copper and articles thereof 53 74 Copper and articles thereof 552 64 Footwear, gaiters and the like 135 44 Wood and articles of wood 44 70 Glass and glassware 334 05 Products of animal origin, not else 114 39 Plastics and articles thereof 38 42 Articles of leather; saddlery 324 48 Paper and paperboard 107 19 Preparations of cereals, flour 37 20 Preparations of vegetables, fruit, 291 84 Nuclear reactors, boilers, machinery 73 33 Essential oils and resinoids 31 30 Pharmaceutical products 234 90 Optical, photographic, cinematograph 67 02 Meat and edible meat offal 26 90 Optical, photographic, 226 cinematograph 27 Mineral fuels, mineral oils 64 59 Impregnated, coated, covered 19 05 Products of animal origin, not else 194 83 Miscellaneous articles of base metal 60 05 Products of animal origin 17 95 Toys, games and sports requisites 128 30 Pharmaceutical products 51 97 Works of art, collectors' pieces 16 12 Oil seeds and oleaginous fruit 119 12 Oil seeds and oleaginous fruit 45 90 Optical, photographic, cinematograph 12 Source: Author’s calculation based on WITS COMTRADE data.

2. Analysis of trade complementarities

Trade complementarity shows the prospect of trade among countries. To measure trade complementarity, this study constructed a trade complementarity index (TCI) between the Participating States of APTA and the three individual island countries, following equation (2). The TCI value was low in 2013 for the Marshall Islands and the Participating States of APTA (table 4.11). The highest TCI value is with Sri Lanka followed by China.

Table 4.11. TCI between the Marshall Islands and the Participating States of APTA Importers (APTA members) 2013 Bangladesh - China 14.96 India 12.19 Republic of Korea 12.30 Sri Lanka 18.03 Source: Author’s calculation using WITS COMTRADE data.

The TCI value of Micronesia with the Participating States of APTA is higher compared with the case of the Marshall Islands, implying that there is an increasing match between imports by the Participating States of APTA and exports from Micronesia. The TCI value was highest for India followed by Sri Lanka (table 4.12).

Table 4.12. TCI between Micronesia and the Participating States of APTA Importers (APTA members) 2013 Bangladesh - China 28.78 India 35.39 Republic of Korea 30.86 Sri Lanka 31.65 Source: Author’s calculation using WITS COMTRADE data.

During 2013 the highest TCI value of Palau with the Participating States of APTA was for the Republic of Korea, followed by India and Sri Lanka (table 4.13).

Table 4.13. TCI between Palau and the Participating States of APTA Importers (APTA members) 2013 Bangladesh - China 27.56 India 33.72 Republic of Korea 33.96 Sri Lanka 32.35 Source: Author’s calculation using WITS COMTRADE data.

The overall TCI values of the Marshall Islands, Micronesia and Palau with the Participating States of APTA are quite low. A value close to 100 is ideal, but for these countries the TCI values are below 40, which essentially indicate low trade complementarity. This low complementarity index value could be due to trade barriers among these countries as well as factor endowments. As discussed in the previous section on RCA, these countries have great concentration of their comparative advantage in only one or two products, which results in the lack of complementarity.24

3. Export potential of the Marshall Islands

In 2013, the Marshall Islands exports to the Participating States of APTA, with the exception of Bangladesh,25 amounted to $271.57 million. The Republic of Korea was the top destination for the Marshall Islands export products, followed by China, India and Sri Lanka.

(a) Bangladesh

Data on trade between Bangladesh and the Marshall Islands are available only for 2011. Bangladesh has granted concessions on 598 items to the Participating States of APTA (at the 6- digit level of HS classification). Of those 598 items, the global imports were only 284 items worth $1,859 million.

Bangladesh imported products worth $140,000 from the Marshall Islands but none of those products were covered under the APTA concession list. To examine trade potential, global imports by Bangladesh were matched with global exports by the Marshall Islands. Only 12 products exported to the world by the Marshall Islands are on the Bangladesh APTA concession list; therefore these 12 products have the potential to become exports from the Marshall Islands to Bangladesh (table 4.14).

Table 4.14. Potential products for exports by the Marshall Islands to Bangladesh No. Chapter Product Marshall Bangladesh Bangladesh MoP code description Islands exports imports imports to world in from world from 2011(US$ in 2011 (US$ Marshall thousand) thousand) Islands in 2011 (US$ thousand)

1 611610 Gloves, mittens and 8.085 84.878 20 mitts, knitted/crocheted items, impregnated, coated or covered with plastics or

24 A similar result was found by Péidy (2005) for the Middle East and North Africa (MENA) countries. 25 Bangladesh-Marshall Islands trade data available only for 2011. 28

rubber

2 611699 Gloves, mittens and 0.054 403.962 20 mitts, knitted/ crocheted items of other textile materials 3 620113 Men's/boys’ 5.427 152.016 40 overcoats, raincoats

4 840710 Spark-ignition 63.798 448.377 10 reciprocating/rotary

5 840991 Parts suit. for use solely or 17.045 16 412.499 10 principally with spark- ignition internal combustion piston engines 6 842489 Other mechanical 0.096 609.784 15 appliances

7 847989 Other machines and 16 71 480.329 10 mechanical appliances

8 851810 Microphones and 0.652 589.904 15 stands

9 890110 Cruise ships, 70 304.463 35 053.305 20 excursion boats

10 890120 Tankers 96 108.042 74 189.745 20

11 890400 Tugs and pusher craft 11 751.158 540.825 20

12 900792 Parts and accessories for 0.228 22.042 20 projector

Total 178 275 199 987.7

Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

Since the total global imports by Bangladesh were more than the total imports by the Marshall Islands, the total trade potential for the latter country was almost $178.28 million.

There are an additional 19 products (table 4.15) on Bangladesh’s concession list that were (a) not exported by the Marshall Islands to the world,26 but which Bangladesh imported from the world; or (b) which the Marshall Islands exported to the world but Bangladesh did not import from the world. These products could be of future trade interest to the Marshall Islands, subject to both proper investment and production regimes.

26 These items are selected on the basis of exports by the Marshall Islands to the world during 2011 and 2013. It is quite possible that some or all of these items were not exported by the Marshall Islands in the year under consideration but were exported in other years. The same applies for Micronesia and Palau. 29

Table 4.15. Additional potential products for exports by the Marshall Islands to Bangladesh No. Chapter Product Marshall Bangladesh Bangladesh MoP code Description Islands exports imports imports from to world in 2011 from world in Marshall ( US$ thousand) 2011 Islands in 2011 (US$ thousand) (US$ thousand) 1 400911 Tubes, pipes and 435.908 10 hoses of vulcanized rubber 2 690810 Glazed ceramic 245.666 15 tiles, cubes and similar items 3 711291 Waste and scrap of 20 gold, incl. metal 4 720421 Waste and scrap of 45.355 20 stainless steel 5 731100 Containers for 14 909.311 30 compressed or liquefied gas, of iron or steel 6 848190 Parts of the 2 563.066 15 appliances of 84.81 7 851821 Single loudspeakers 424.928 15

8 890520 Floating/submersible 20 drilling 9 151311 Coconut (copra) 9 504.632 30 oil, crude 10 271111 Natural gas, 0.971 20 liquefied 11 840790 Spark-ignition 625.054 10 reciprocating/rotary engines 12 841480 Air pumps, air/other 42 484.249 15 gas compressors 13 842129 Filtering/purifying 2 017.346 15 machinery and appliances 14 853890 Parts suitable for use solely 5 011.716 10 with the apparatus of heading 85.35, 85.36 or 85.37, other 15 854470 Optical fibre cables 10 060.574 10

16 890130 Refrigerated vessels 20

17 902590 Parts and accessories 182.418 15

18 903300 Parts and accessories 2 348.413 15 n.e.s. in chapter 90 19 810330 Tantalum waste 41.378 20 and scrap Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

(b) China

In 2013, China imported nine types of products from the Marshall Islands with a total trade value of $77.75 million. Of those nine products, only three are under China’s concession list. The total trade value of these three products was $77.69 million (table 4.16). The Marshall Islands exported 84 types of product to the world that are on China’s concession list. The total trade value of these items was $180.72 million. China’s import value of these items from the world was $132,604.2 million. In this case, trade potential of the Marshall Islands with China was $180.72 million for those 84 items.

Table 4.16. Potential products for exports by the Marshall Islands to China No. Chapter Product description Marshall China China MoP code Islands imports from imports exports to world in 2013 from world in (US$ Marshall 2013 (US$ thousand) Islands in thousand) 2013 (US$ thousand)

1 030232 Yellowfin tuna (Thunnus albacares) 1 120.87 166.44 25 2 030341 Albacore/long-finned tuna 735.18 3 825.50 25 (Thunnus albacares) 3 030342 Yellowfin tuna (Thunnus albacares) 21 601.56 12 828.72 5 831.99 25 4 030343 Skipjack/stripe-bellied bonito 135 243.62 140 280.01 71 856.84 25 5 030349 Tunas (excl. of 0303.41-0303.46) 0.61 708.32 25 6 030612 Lobsters (Homarus spp.) 1.35 11 236.66 1.35 28

7 060290 Live plants, n.e.s., incl. their roots, 0.35 71 231.94 50 other 8 060313 Fresh orchids 2.01 12 390.80 50 9 060314 Fresh chrysanthemums 13.02 724.73 50 10 071339 Beans (Vigna spp., Phaseolus spp. 5.07 1 184.86 50 11 081090 Fresh fruit, n.e.s. in Ch. 8 18.83 921 505.80 33 12 151311 Coconut (copra) oil, crude 2 337.42 25 542.10 50 13 200899 Edible parts of plants, prepared 329.77 65 564.05 8 14 200990 Mixtures of juices, unfermented 0.48 22 854.50 13

15 210690 Food preparations 0.08 915 941.19 10 16 230120 Flours, meals and pellets of fish 400.08 1 676 179.26 100

17 230650 Oil-cake and other solid residues 220.86 27 780.91 50

18 271019 Petroleum oils and oils obtained 13 729.39 28 264 372.33 10 from bituminous minerals; other 19 300490 Medicaments 415.35 6 955 102.52 35

20 382490 Chemical products and preparations 0.17 6 387 579.92 35

21 392690 Articles of plastics 19.26 2 481 112.89 35

22 420229 Handbags, whether/not with 8.12 1 398.25 35 shoulder strap 23 420292 Trunks, suit-cases, vanity-cases 437.30 58 860.05 35 24 610190 Men's/boys' overcoats, car-coats 0.26 2 157.19 35 25 610342 Men's/boys' trousers, bib brace 0.20 19 751.49 35 26 610510 Men's/boys' shirts, 0.30 85 280.67 35 knitted/crocheted 27 610910 T-shirts, singlets and other vests 0.01 222 945.77 35 0.69 130 269.26 35 28 611020 Jerseys, pullovers, cardigans, waistcoats 29 611030 Jerseys, pullovers, cardigans, 0.21 112 651.7 35 waistcoats 30 611300 Garments made up of 1.07 407.07 35 knitted/crocheted 31 611693 Gloves, mittens and mitts, 0.11 4 554.55 35 knitted/crocheted) 32 611780 Other made-up clothing accessories 0.34 4 656.57 35

33 620193 Men's/boys', anoraks (incl. ski- 0.18 219 866.65 35 jacket) 34 620342 Men's/boys' trousers, bib and brace 0.20 281 276.20 35

35 620433 Women's/girls' jackets and blazers 37.16 65 705.73 35

36 620443 Women's/girls' dresses (excl. 0.45 50 958.05 35 knitted) 37 620462 Women's/girls', trousers, bib and 0.30 161 938.18 35 brace of cotton 38 620463 Women's/girls', trousers, bib and 2.06 42 994.69 35 brace of synthetic fibres 39 620520 Men's/boys' shirts (excl. knitted/) 21.22 200 700.85 50 40 620640 Women's/girls' blouses, shirts 0.73 27 557.73 35

41 621143 Track suits (excl. knitted/crocheted) 51.74 31 917.07 35 1.06 46 116.29 35 42 640610 Uppers and parts thereof (excl. stifferners) 43 680293 Mosaic cubes and the like, of 55.17 3 289.09 30 granite 44 710239 Diamonds, non-industrial 2 266.33 5 660 365.59 100

45 731815 Screws and bolts (excl. of 7318.11- 0.96 1 356 710.76 50 73)

46 732599 Cast articles of iron 14.65 37 417.59 15 47 732690 Articles of iron/steel, n.e.s. 34.80 1 675 310.63 15 48 740400 Copper waste and scrap 509.51 13 727 387.91 50 49 741220 Copper tube/pipe fittings 4.61 85 607.68 35 50 820559 Hand tools (incl. glaziers' diamond 1.14 54 850.75 35 51 840790 Spark-ignition reciprocating/rotary 0.08 205 536.53 30 engines 52 840991 Parts suitable for use solely or 0.93 2 805 436.90 35 principally with spark-ignition internal combustion piston engines 53 840999 Parts suitable for use solely or 211.11 704 669.00 35 principally with the engines of heading 84.07 or 84.08, other 54 841330 Fuel/lubricating/cooling medium 1.11 648 868.98 35 pumps 55 841391 Parts of the pumps of 8413.11- 6.17 700 125.31 50 8413. 56 841480 Air pumps, air/other gas 4.23 1 957 761.42 35 compressors 57 841490 Parts of air/vacuum pumps, 0.89 1 046 420.24 30 air/other gas compressors and fans 58 841590 Parts of the air-conditioning 19.91 456 804.31 35 machinery 59 842129 Filtering/purifying machinery and 58.38 856 869.70 35 appliances 0.62 1 088 070.22 35 60 842199 Parts of the filtering machinery and appliances 61 843149 Parts suitable for use solely or 1.82 1 136 408.71 35 principally with the machinery of headings 84.25 to 84.30, other 62 843351 Combine harvesters-threshers 7.84 141 097.17 35 63 844399 Other parts and accessories for print 0.35 4 752 050.01 20 by means of plates, cylinders and other printing components of heading 84.42, other

64 848180 Taps, cocks, valves and similar 0.18 4 204 469.30 35 appliances; other 65 848210 Ball bearings 0.07 1 194 285.53 35 66 848310 Transmission shafts (incl. cam 0.70 977 192.28 35 shafts) 67 850110 Electric motors of an output not 0.15 1 376 883.02 35 exceeding 37.5 W 68 850300 Parts suitable for use solely or 117.60 827 734.84 35 principally with the machines of heading 85.01 or 85.02. 69 850440 Static converters 102.65 4 030 861.83 35 70 850490 Parts of the machines of 85.04 7.80 2 509 044.23 35 71 850730 Electric accumulators 0.45 37 497.14 35 72 851770 Parts of telephone sets 0.10 18 012 888.45 35 73 852290 Parts (excl. pick-up cartridges) 314.38 348 959.24 35

74 852872 Other colour reception apparatus 0.28 24 989.11 35 75 852990 Parts suitable for use solely or 0.22 4 835 138.46 35 principally with the apparatus of headings 85.25 to 85.28, other 76 853530 Isolating switches and make-and- 0.95 20 301.02 20 breaks 77 853929 Other electric filament lamps 0.13 83 102.54 20 78 860900 Containers 6.71 14 447.30 35 79 870829 Parts and accessories of bodies of 0.20 4 621 204.96 10 the motor vehicles of headings 87.01 to 87.05., other

80 871200 Bicycles and other cycles 0.18 95 111.58 30 81 900720 Cinematographic projectors 0.41 41 859.22 35

82 901819 Electro-diagnostic apparatus 32.80 306 740.99 35 83 902590 Parts and accessories of 0.48 101 861.02 35 hydrometers, pyrometers, hygrometers 84 940600 Prefabricated buildings 183.25 68 460.84 35 Total 180 729.30 132 604 169.00 77 690.18

Source: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

The study finds that there are 75 additional products on China’s concession list where good potential exists (table 4.17), amounting to $28.72 billion of China’s imports in 2013. If the Marshall Islands can facilitate the manufacturing of these products through appropriate investment policies then it can benefit from APTA concessions.

Table 4.17. Additional potential products for exports by the Marshall Islands to China No. Chapter Product description Marshall China China MoP Code Islands imports from imports exports to the world in from the world 2013 (US$ Marshall in 2013 thousand) Islands in (US$ 2013 (US$ thousand) thousand)

1 010690 Live animals, n.e.s. 465.80 10 2 030239 Tuna, skipjack and bonito 33 3 040210 Milk in powder/granules 9 584 74.00 30 4 060390 Cut flowers and flower buds of a type 793.49 50 5 070820 Beans (Vigna spp., Phaseolus spp.) 50 6 070890 Leguminous vegetables 1.94 50 7 070930 Aubergine (eggplant), fresh 0.31 50 8 070960 Fruit of the genera Capsicum 50 9 080430 Pineapples, fresh/dried 40 279.89 34

10 160420 Prepared/preserved fish 29 891.10 18 11 190590 Bread, pastry, cakes, biscuits 169 053.08 14 12 300390 Medicaments 218 093.84 50 13 310100 Animal/vegetable fertilizers 3 750.05 50 14 320810 Paints and varnishes (incl. enamels) 137 086.31 10 15 320820 Paints and varnishes (incl. enamels ) 197 662.93 10 16 320890 Paints and varnishes (incl. enamels ) 307 058.64 10 17 321519 Printing ink (excl. black) 284 093.85 30 18 381400 Organic composite solvents/thinners 131 526.39 10 19 392119 Plates, sheets, film, foil and strip 204 336.22 30 20 392390 Articles for the conveyance/packing 254 661.59 35 21 392640 Statuettes and other ornamental articles 13 494.39 35 22 401390 Inner tubes, of rubber 382.01 40 23 401699 Articles of vulcanized rubber 705 622.44 5 24 410622 Tanned/crust hides and skins of goats 12 230.53 30 25 520839 Woven fabrics of cotton 24 979.85 35 26 551511 Woven fabrics of polyester staple 27 904.78 35 27 590310 Textile fabrics impregnated/coated 144 258.28 35 28 610220 Women's/girls' overcoats, car-coats 2 079.63 35 29 611699 Gloves, mittens and mitts, knitted 454.80 35 30 620113 Men's/boys overcoats, raincoats 20 619.56 35 31 620213 Women's/girls' overcoats, raincoats 67 776.80 35 32 620293 Women's/girls' anoraks 141 893.47 35 33 620333 Men's/boys' jackets and blazers 82 422.34 35 34 620343 Men's/boys' trousers, bib 71 133.61 35 35 621010 Garments made up of fabrics 950.17 35 36 621133 Track suits (excl. knitted) 51 180.94 35 37 621710 Made-up clothing accessories 30 223.38 35 38 621790 Parts of garments/clothing accessories 30 476.16 35 39 690810 Glazed ceramic tiles, cubes 649.27 35 40 691010 Ceramic sinks, wash basins 43 111.58 35 41 691110 Tableware and kitchenware 30 625.12 35 42 701959 Woven fabrics of glass fibres 33 682.19 35 43 710399 Precious stones (excl. diamonds) 2 758 820.29 50 44 710490 Synthetic/reconstructed precious or semi- precious stones, other 183 929.86 30 45 711319 Articles of jewellery 476 242.61 35 46 732393 Table/kitchen/other household. articles 64 442.64 30 47 741533 Screws; bolts and nuts, of copper 41 996.12 20 48 741999 Other articles of copper 288 388.27 30 49 761699 Articles of aluminium 405 511.12 35

50 820900 Plates, sticks, tips 172 830.60 35 51 841381 Pumps, n.e.s., in 84.13 251 745.93 50 52 841451 Table, floor, wall, window, ceiling or 72 861.87 30 roof fans, with a self- contained electric motor of an output not exceeding 125 W 53 841459 Fans, other than table/floor/wall 660 523.24 35 54 841790 Parts of the industrial/laboratory 49 001.88 30 55 842139 Filtering/purifying machinery 1 007 157.90 35 56 844332 Other printers, copying machines 790 135.15 35 57 845210 Sewing machines of the household type 2 878.57 35 58 846729 Tools for working in the hand, 78 486.55 35 59 846799 Parts of tools for working 124 903.74 35 60 848690 Parts and accessories of machines 1 156 747.69 50 61 850431 Other electrical transformers, having a 237 623.81 35 power handling capacity not exceeding 1 kVA 62 850710 Electric accumulators, 156 115.88 35 63 850811 Vacuum cleaners, with self-containers 20 374.65 35 64 851580 Other machines and apparatus 422 207.83 35 65 852190 Video recording/repr. Apparatus, other 25 868.48 35 66 853710 Boards, panels, consoles, desks 3 733 316.12 50 67 854449 Other electric conductors 1 418 150.65 35 68 870810 Bumpers and parts thereof 375 982.56 4 69 870830 Brakes and servo-brakes 1 109 489.11 10 70 870850 Drive-axles with differential 606 811.44 10 71 870880 Suspension systems and parts thereof 747 940.63 10 72 871499 Parts and accessories of vehicles 263 721.69 30 73 900190 Lenses (excl. of 9001.30-9001.50), 2 690 637.05 35 Apparatus and equipment for automatically developing photographic 74 901010 (including cinematographic) film or 1 554.11 35 paper in rolls 75 903180 Measuring/checking instr., apparatus 3 849 573.69 35 Source: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

India imported only four products from the Marshall Islands in 2013 with a total trade value of $6.93 million. Only one product comes under India’s concession list. Sixty-eight products were exported by the Marshall Islands to the world that come under India’s concession list. The total export value was $22.74 million (table 4.18). India also imported these products from the world during the same year with an import value of $19,972.30 million. The export potential of the Marshall Islands to India for these 68 products was $22.74 million.

Table 4.18. Potential products for exports by the Marshall Islands to India No. Chapter Product description Marshall India imports India MoP code Islands from the world imports exports to in 2013 (US$ from the world in thousand) Marshall 2013 (US$ Islands in thousand) 2013 (US$ thousand)

1 030344 Bigeye tuna (Thunnus obesus) 5 557.98 0.65 100 2 030349 Tuna (excl. of 0303.41-0303.46) 0.61 343.77 100 3 030559 Dried fish other than cod 125.00 1 784.77 100 4 030611 Rock lobster and other sea crawfish 34.10 1.47 100 5 030612 Lobsters (Homarus spp.) 1.35 216.11 100 6 030614 Crabs, whether/not in shell, frozen 0.59 45.85 100 7 030729 Scallops, incl. queen scallops 1.78 224.46 40 8 030799 Molluscs and invertebrates 39.49 1.46 30 9 050800 Coral and similar materials unworked 218.87 3 537.25 40 10 230120 Flours, meals and pellets of fish 400.08 16 519.87 40 11 382200 Diagnostic/laboratory reagents 0.07 309 640.17 40 12 382490 Chemical products and preparations 0.17 458 718.23 7

13 401590 Articles of apparel and clothing 1.99 7 994.50 30 14 440929 Wood (including strips 16.34 7 862.63 10 15 442010 Statuettes and other ornaments 1.31 386.56 40 16 480255 Paper and paperboard 289.10 4 661.43 30

17 481940 Sacks and bags 0.68 6 314.60 12 18 490199 Printed books, brochures, leaflets 2.34 99 279.71 2.34 30 19 490600 Plans and drawings for architectural 1.04 46 447.79 40 20 491110 Trade advertising material 0.25 12 881.49 30 21 491199 Printed matter 0.66 120 603.65 30 22 710239 Diamonds, non-industrial 2 266.33 7 136 329.30 5 23 720410 Waste and scrap of cast iron 12.50 39 776.09 30 24 720429 Waste and scrap of alloy steel 0.67 67 622.87 45 25 720449 Ferrous waste and scrap 357.78 1 948 026.80 30 26 730419 Line pipe of a type used for oil 140.30 108 163.97 40 27 730799 Tube/pipe fittings of iron/steel 0.01 131 978.33 40 28 730830 Doors, windows and their frames, 15.39 14 332.41 35

29 731100 Containers for compressed/liquefied 18.71 23 715.73 40 30 732599 Cast articles of iron 14.65 74 691.79 40 31 741220 Copper tube/pipe fittings 4.61 7 853.57 40 32 820559 Hand tools (incl. glaziers' diamond) 1.14 15 403.70 10

33 820590 Sets of articles of2 1.13 7 624.70 10 34 830242 Mountings, fittings 4.37 33 229.90 5 35 841391 Parts of the pumps of 8413.11-8413. 6.17 263 213.52 40 36 841480 Air pumps, air/other gas compressors 4.23 442 792.89 5 37 841490 Parts of air/vacuum pumps, air/other 0.89 438 451.06 5 gas compressors and fans 38 841590 Parts of the air-conditioning machines 19.91 334 455.57 5 39 842199 Parts of the filtering/purifying 0.62 266 531.99 40 machines 40 842699 Lifting machinery n.e.s. in 84.26 0.20 12 144.91 40 41 843149 Parts suit. for use solely/principal 1.82 436 010.89 20 42 843351 Combine harvester-threshers 7.84 3 268.48 25 43 848030 Moulding patterns 1.35 2 640.43 30 44 848180 Taps, cocks, valves and similar appliances 0.18 693 055.20 5 45 848190 Parts of the appliances of 84.81 1.25 229 331.96 20 46 850300 Parts suitable for use solely or 117.60 433 973.14 20 principally with the machines of heading 85.01 or 85.02. 47 852290 Parts (excl. pick-up cartridges) 314.38 44 323.46 80 48 852990 Parts suitable for use solely or 0.22 1 033 924.60 30 principally with the apparatus of headings 85.25 to 85.28., other 49 853180 Electric sound 0.14 33 854.31 5 50 853223 Fixed electrical capacitors 0.01 3 579.16 5 51 880320 Under-carriages and parts thereof 1.51 418.18 60 52 890110 Cruise ships, excursion boats 13.28 469 828.05 45 53 890399 Yachts and other vessels for pleasure 7.63 3 686.28 45 54 890590 Light-vessels, fire-floats 363.61 1 261 967.40 40 55 890690 Vessels, n.e.s. in 89.01-8906.10 4.28 535 333.95 30 56 890790 Floating structures 12.22 11 978.84 30 57 890800 Vessels and other floating structures 12 030.00 1290 544.30 45 58 901819 Electro-diagnostic apparatus 32.80 108 823.79 40 59 902000 Breathing appliances 0.90 7 847.33 45 60 902290 X-ray generators (excl. tubes) 33.43 150 950.66 10 61 902590 Parts and accessories of hydrometers 0.48 12 071.13 20 and similar floating instruments, thermometers 62 902780 Instruments and apparatus for physical 0.10 264 348.72 15 or chemical analysis, other 63 903300 Parts and accessories n.e.s. in Ch.90 16.45 275 680.25 20 64 940330 Wooden furniture 13.22 74 015.73 7 65 940390 Parts of the furniture of 94.03 2.25 58 852.42 5 66 940600 Prefabricated buildings 183.25 39 105.89 7 67 961210 Typewriter/similar ribbons, inked 2.00 29 069.36 10

68 970400 Postage/revenue stamps 9.70 57.84 100 Total 22 735.31 19 972 347.00 2.34 Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

It is shown from the study that there are 65 additional items on India’s concession list which the Marshall Islands could export to India (table 4.19), subject to a proper production regime and availability of resources, amounting to $4.4 billion of India’s imports in 2013. Among these potential items, fish products (chapter 3) could be the most important as India grants a 100% tariff concessions (duty free).

Table 4.19. Additional potential products for exports by the Marshall Islands to India No. Chapter Product description Marshall India India MoP code Islands imports from imports exports to the world in from the the world in 2013 (US$ Marshall 2013 (US$ thousand) Islands in thousand) 2013 (US$ thousand)

1 010690 Live animals, n.e.s. 4 143.93 30 2 030239 Tuna, skipjack and bonito 12.66 100 3 030569 Fish other than herrings 12.02 100 4 030791 Molluscs and invertebrates 30 5 200599 Vegetables and mixtures of vegetables 456.80 30 6 200799 Preparations of fruit 2 999.02 30 7 251749 Granules, chippings and powder 270.28 40 8 300120 Extracts of glands/of other organs 3 185.71 40 9 310100 Animal/vegetable fertilizers 11 847.86 40 10 320300 Colouring matter of vegetable 7 676.64 30 11 520811 Woven fabrics of cotton, unbleached 8 956.76 7 12 710490 Synthetic/reconstructed precious 42 568.90 5 13 721050 Flat-rolled products of iron 25 982.51 30 14 731512 Articulated link chain 17 836.12 40 15 810330 Tantalum waste and scrap 94.93 45 16 820551 Household tools 2 004.64 10 17 840710 Spark-ignition reciprocating/rotary 190 386.67 40 18 841181 Gas turbines other than turbo-jets 3 475.96 45 19 841381 Pumps n.e.s. in 84.13 149 058.47 40 20 841920 Medical/surgical/laboratory 28 000.69 30 21 841989 Machinery, plant and equip. 281 333.98 40 22 842139 Filtering/purifying machinery 203 393.07 20 23 842489 Other mechanical appliances 116 120.01 40 24 845210 Sewing machines of the household type 17 170.19 15 39

25 848790 Machinery parts 44 451.18 45 26 852910 Aerials and aerial reflectors 67 751.69 40 27 853910 Sealed beam electric filament lamp 1 171.57 7 28 880310 Propellers and rotors and parts thereof 2 235.78 60 29 901010 Apparatus 3 653.04 40 30 950300 Tricycles, scooters, pedal cars 270 167.22 43 31 960350 Brushes constituting parts of machines 4 737.78 10 32 030759 Octopus (Octopus spp.) 18.08 30 33 160420 Prepared/preserved fish 41.96 45 34 252490 Asbestos other than crocidolite 235 181.68 40 35 381400 Organic composite solvents 25 518.47 7 36 381600 Refractory cements, mortars 108 786.25 7 37 400932 Tubes, pipes and hoses, of vulcanized 9 299.77 15 38 401140 New pneumatic tyres, of rubber 11 984.02 14 39 401390 Inner tubes, of rubber 1 941.67 14 40 401699 Articles of vulcanized rubber 249 671.48 30 41 410622 Tanned/crust hides and skins of goats 3 253.74 20 42 410719 Leather further prepared after tanning 49 985.31 40 43 482390 Paper, paperboard 44 161.70 7 44 690810 Glazed ceramic tiles, cubes 7 352.45 30 45 720421 Waste and scrap of stainless steel 1 005 074.20 45 46 740329 Other copper alloys 12 606.41 45 47 741999 Other articles of copper 42 416.27 45 48 820900 Plates, sticks, tips 112 292.20 30 49 830790 Flexible tubing of base metal 9 913.20 30 50 842389 Weighing machinery 6 468.21 30 51 842490 Parts of mechanical appliances 112 303.99 40 52 843680 Agricultural/horticultural/forestry 1 310.26 45 53 850431 Other electrical transformers, having a 49 490.77 20 power handling capacity not exceeding 1 kVA 54 900190 Lenses (excl. of 9001.30-9001.50), 48 497.95 5 55 903180 Measuring/checking instr. 493 166.90 15 56 940310 Metal furniture of a kind 26 594.50 5 57 940389 Furniture of other materials 7 885.28 7 58 960340 Paint/distemper/varnish 2 189.12 10 59 030232 Yellowfin tuna (Thunnus albacares) 1 120.87 100 60 030234 Bigeye tuna (Thunnus obesus) 4 768.13 100 61 030341 Albacore/long-finned tuna 735.18 100 62 030342 Yellowfin tuna (Thunnus albacares) 21 601.56 100 63 030343 Skipjack/stripe-bellied bonito 135 243.62 100 64 051191 Products of fish/crustaceans/molluscs 21.74 40

65 890130 Refrigerated vessels (excl. of 8901) 7 000.00 45 Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

(d) Republic of Korea

In 2013, the Republic of Korea imported 25 products from the Marshall Islands with a total import value of $186.90 million. Of these 25 products, only six come under the Republic of Korea’s concession list. The import value of these six products was $1.02 million (table 4.20). With regard to the items in the Republic of Korea’s concession list, the Marshall Islands exported 94 items to the world and which were also imported by the Republic of Korea from the world. The export value for the Marshall Islands of those 94 products was $20.76 million. The total value of those products imported by the Republic of Korea from the world was $68,369.10 million. The trade potential in this case for the Marshall Islands would be $20.76 million for these 94 items.

Table 4.20. Potential products for export by the Marshall Islands to the Republic of Korea No. Chapter Product description Marshall Republic of Republic MoP code Islands Korea imports of Korea exports to from the world imports the world in 2013 (US$ from in 2013 thousand) Marshall (US$ Islands in thousand) 2013 (US$ thousand)

1 030799 Molluscs and invertebrates 39.49 65 481.47 20 2 060313 Fresh orchids 2.01 1 121.52 14.4 3 060314 Fresh chrysanthemums 13.02 6 736.10 14.4 4 271019 Petroleum oils and oils obtained from 13 729.39 6 913 868.14 1 015.91 30 bituminous minerals; other 5 271099 Waste oils 21.02 11 112.20 30 6 271111 Natural gas, liquefied 120.09 30 645 106.47 30 7 300490 Medicaments 415.35 2 224 994.43 30 8 321590 Writing/drawing ink and other inks 0.35 62 865.11 30 9 380190 Preparations based on graphite 4.87 13 180.84 30 10 382200 Diagnostic/laboratory reagents 0.07 516 815.27 30 11 382490 Chemical products and preparations 0.17 2 004 344.32 30 12 392690 Articles of plastics 19.26 780 236.84 30 13 401590 Articles of apparel and clothing 1.99 4 905.93 30 accessories 14 401693 Gaskets, washers and other seals 0.02 172 430.54 22.5 15 420229 Handbags, whether/not with shoulder 8.12 22 127.15 30 16 420292 Trunks, suit-cases, vanity-cases 437.30 218 960.42 30 17 460219 Basketwork, wickerwork and other 1.54 5 724.05 30 articles

18 560900 Articles of yarn/strip/the like of 0.20 5 331.02 0.20 30 19 610190 Men's/boys' overcoats, car-coats 0.26 1 696.92 30 20 611780 Other made-up clothing accessories 0.34 4 531.97 30 21 620412 Women's/girls' suits (excl. knitted) 0.09 1 985.69 37.69 2308 22 620433 Women's/girls' jackets and blazers 37.16 99 433.88 50 23 620443 Women's/girls' dresses (excl. knitted) 0.45 72 958.20 37.69 2308 24 620462 Women's/girls' trousers, bib and brace 0.30 325 182.37 40 overalls, breeches and shorts; of cotton 25 620463 Women's/girls', trousers, bib and brace 2.06 202 306.56 50 of synthetic fibres 26 620640 Women's/girls' blouses, shirts 0.73 95 308.61 50 27 621143 Track suits (excl. knitted/crocheted) 51.74 106 969.26 30 28 640610 Uppers and parts thereof 1.06 150 868.29 50 29 710239 Diamonds, non-industrial 2 266.33 44 949.87 50 30 720241 Ferro-chromium, containing by weigh 1 675.91 564 663.08 50 31 731815 Screws and bolts (excl. of 7318.11-73) 0.96 250 048.63 50 32 732599 Cast articles of iron 14.65 141 876.01 30 33 732690 Articles of iron/steel, n.e.s. 34.80 2 052 409.43 30 34 820559 Hand tools (incl. glaziers' diamond) 1.14 39 256.27 10 35 820590 Sets of articles of two or more of the 1.13 8 522.52 35 foregoing subheadings 36 840690 Parts of the steam turbines 7.16 273 454.48 33 37 840991 Parts suitable for use solely or 0.93 521 222.90 30 principally with spark-ignition internal combustion piston engines 38 840999 Parts suitable for use solely or 211.11 935 868.76 7.80 50 principally with the engines of heading 84.07 or 84.08., other 39 841290 Parts of the engines and motors of 84 0.05 44 994.18 33 40 841330 Fuel/lubricating/cooling medium pump 1.11 560 050.60 50 41 841350 Other reciprocating positive 0.66 160 530.56 33 displacement pumps 42 841391 Parts of the pumps of 8413.11-8413. 6.17 234 328.20 30 43 841480 Air pumps, air/other gas compressors 4.23 795 879.81 30 44 841490 Parts of air/vacuum pumps, air/other gas 0.89 659 903.20 30 compressors and fans 45 841590 Parts of air-conditioning machinery 19.91 174 278.88 50 46 842123 Oil/petrol-filters 0.43 93 785.19 33 47 842129 Filtering/purifying machinery 58.38 257 452.10 33 48 842131 Intake air filters 0.19 24 676.33 33 49 842199 Centrifuges, including centrifugal 0.62 339 328.95 33 dryers; filtering or purifying machinery and apparatus, for liquids or gases., other 50 844399 Printing machinery used for printing by 0.35 783 359.07 25 means of plates, cylinders and other

printing components of heading 84.42, other 51 845811 Horizontal lathes 216.68 72 327.12 33 52 848140 Safety/relief valves for pipes/boilers 70.64 96 448.70 35 53 848180 Taps, cocks, valves and similar 0.18 1 906 338.29 50 appliances 54 848190 Parts of the appliances of 84.81 1.25 454 031.99 35 55 848310 Transmission shafts (including cam 0.70 163 226.36 30 shafts and crank shafts) and cranks 56 848320 Bearing housings 0.07 6 568.98 33 57 848330 Bearing housings, not incorporating 0.05 122 946.75 33 58 848360 Clutches and shaft couplings 0.20 145 229.36 0.20 33 59 848390 Toothed wheels, chain sprockets 0.09 177 849.27 33 60 850300 Parts suit. for use solely 117.60 343 239.47 30 61 850440 Static converters 102.65 1 477 104.90 50 62 850450 Inductors, n.e.s. 24.53 337 761.85 30 63 850490 Parts of the machines of 85.04 7.80 283 362.73 30 64 851521 Machines and apparatus for resistance 0.53 29 606.17 33 65 851770 Parts of telephone sets 0.10 3 140 266.42 0.10 40 66 851821 Single loudspeakers 0.11 48 430.92 30 67 851830 Headphones and earphones 0.21 221 232.29 10 68 852290 Parts (excl. pick-up cartridges) 314.38 90 432.63 30 69 852610 Radar apparatus 0.93 118 281.73 33 70 852872 Other colour reception apparatus 0.28 102 272.27 50 71 852990 Parts and accessories suitable for use 0.22 674 857.06 0.04 50 solely or principally with the apparatus of headings 85.19 to 85.21, other 72 853180 Electric sound/visual signalling 0.14 45 202.88 35 appliances 73 853530 Isolating switches and make-and-break 0.95 35 865.01 30 switches 74 853650 Switches other than isolating switches 11.19 344 993.29 30 75 853690 Electrical apparatus for switching or 4.35 299 349.81 50 protecting electrical circuits, or for making connections to or in electrical circuits, for a voltage not exceeding 1,000 volts; other apparatus 76 853890 Parts suitable for use solely with the 3.41 1 446 066.65 35 apparatus of heading 85.35, 85.36 or 85.37, other 77 853929 Other electric filament lamps 0.13 19 829.50 30 78 854442 Other electric conductors fitted with 1.97 485 519.15 30 connectors 79 870829 Parts and accessories of the motor 0.20 284 549.13 50 vehicles of heading nos. 87.01 to 87.05; other parts and accessories of bodies (including cabs) 80 870894 Steering wheels, steering columns 0.11 208 433.85 50

81 890590 Light-vessels, fire-floats, floating 363.61 138 866.31 50 platforms 82 901490 Parts and accessories of navigation 0.20 34 572.51 25 equipment 83 901819 Electro-diagnostic apparatus used 32.80 164 385.23 30 84 902000 Breathing appliances 0.90 22 230.60 30 85 902290 X-ray generators (excl. tubes) 33.43 128 894.55 25 86 902590 Parts and accessories of the instr 0.48 71 488.06 25 87 902710 Gas/smoke analysis apparatus 0.43 151 261.85 25 88 902780 Instruments and apparatus for physical 0.10 444 867.81 33 or chemical analysis, other 89 903210 Thermostats 29.89 41 767.20 30 90 903300 Parts and accessories n.e.s. in Ch.90 16.45 57 616.91 25 91 940600 Prefabricated buildings 183.25 90 030.54 25 92 950669 Balls other than golf/table-tennis 1.76 26 201.78 30 93 950691 Articles and equip. for general physical 0.03 98 500.81 30 exercise, gymnastics or athletics 94 961210 Typewriter/similar ribbons, inked 2.00 19 358.27 30

Total 20 762.50 68 369 089.00 1 024.24

Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

The study shows that there are 83 additional items that the Marshall Islands could export to the Republic of Korea (table 4.21), subject to productive capacity and a proper investment regime, amounting to $17.04 billion of the Republic of Korea’s imports in 2013.

Table 4.21. Additional potential products for exports by the Marshall Islands to the Republic of Korea No. Chapter Product description Marshall Republic of Republic of MoP code Islands Korea Korea exports to imports imports the world from the from in 2013 world in Marshall (US$ 2013 (US$ Islands in thousand) thousand) 2013 (US$ thousand) 1 271210 Petroleum jelly 3 323.09 30 2 300390 Medicaments (excluding goods of 73 092.45 30 heading 30.02, 30.05 or 30.06), other 3 320300 Colouring matter of vegetable 15 555.74 30 4 320810 Paints and varnishes, based on 13 410.50 35 polyesters 5 320820 Paints and varnishes, based on acrylic or 123 610.35 30 vinyl polymers 6 320890 Paints and varnishes, other 370 078.20 30 7 321519 Printing ink (excl. black) 53 471.00 30 8 381400 Organic composite solvents 47 370.21 30

9 381600 Refractory cements, mortars 56 830.20 10 10 392610 Office/school supplies, of plastics 14 669.19 25 11 392640 Statuettes and other ornamental articles 6 846.45 30 12 401019 Conveyor belts/belting 12 113.56 30 13 401390 Inner tubes, of rubber 699.79 25 14 401699 Articles of vulcanized rubber 137 110.85 30 15 410719 Leather further prepared after tanning 31 344.06 50 16 520811 Woven fabrics of cotton, unbleached 58 749.93 50 17 520839 Woven fabrics of cotton, other fabrics 5 787.84 25 18 520949 Woven fabrics of cotton containing 85 662.83 25 % or more by weight of cotton, weighing more than 200 g/m, other fabrics 19 540234 Textured yarn other than sewing thread 158.61 30 20 590310 Textile fabrics impregnated/coated 6 562.56 30 21 620113 Men's/boys overcoats, raincoats 88 345.05 30 22 620213 Women's/girls' overcoats, raincoats 178 088.75 50 23 620293 Women's/girls' anoraks 425 777.19 50 24 620442 Women's/girls' dresses (excl. knitted 34 993.52 37.69230 crocheted /) 8 25 620920 Babies' garments and clothing 11 034.38 37.69230 accessories 8 26 620930 Babies' garments and clothing 5 957.04 37.69230 accessories 8 27 621133 Track suits (excl. knitted/crocheted) 169 036.78 30 28 690810 Glazed ceramic tiles, cubes 2 648.05 22.5 29 691010 Ceramic sinks, wash basins 90 238.55 50 30 691110 Tableware and kitchenware 79 964.54 22.5 31 710399 Precious stones (excl. diamonds) 1 726.66 30 32 710490 Synthetic/reconstructed precious 51 432.00 30 33 711319 Articles of jewellery and parts thereof 312 164.57 30 34 730840 Equipment for scaffolding 22 894.79 30 35 731819 Threaded articles of iron/steel 24 628.54 25 36 732393 Table/kitchen/other household articles 167 795.01 30 37 732410 Sinks and wash basins, of stainless steel 1 742.46 30 38 740329 Other copper alloys 21 444.62 50 39 741999 Other articles of copper 78 637.75 30 40 820110 Spades and shovels 3 620.16 30 41 820340 Pipe-cutters, bolt croppers 8 379.71 10 42 820900 Plates, sticks, tips 179 808.86 10 43 831130 Coated rods and cored wire 8 157.62 33 44 841181 Gas turbines other than turbo-jets 42 046.22 33 45 841191 Parts of the turbo-jets 300 307.79 30 46 841221 Linear acting (cylinders) 96 188.55 30 45

47 841360 Rotary positive displacement pumps 105 852.07 35 48 841451 Table/floor/wall/window/ceiling or roof 109 810.26 40 fans, with a self- contained electric motor of an output not exceeding 125W 49 841459 Fans, other than table/floor/wall 203 055.73 33 50 841790 Parts of industrial or laboratory 47 518.66 25 furnaces and ovens, including incinerators, non-electric 51 841850 Refrigerating/freezing chests 16 262.39 25 52 841899 Parts of the refrigerating 51 484.05 25 53 841989 Machinery, plant and equip. 448 842.25 33 54 842139 Filtering/purifying machinery 347 797.30 37.5 55 842489 Other mechanical appliances 50 744.65 25 56 842490 Parts of mechanical appliances 110 177.02 25 57 844859 Parts and accessories of the machines 11 499.50 25 58 845819 Horizontal lathes 5 734.25 30 59 847710 Injection-moulding machines 178 623.04 33 60 847989 Other machines 2 259 111.21 30 61 848690 Parts and accessories of machines 1 237 389.55 50 62 850431 Other electrical transformers, having a 135 498.17 35 power handling capacity not exceeding 1 kVA 63 850811 Vacuum cleaners 64 138.40 30 64 851580 Other machines and apparatus 43 520.03 33 65 851679 Electro-thermic appliances 73 314.76 25 66 852190 Video recording appliances 38 376.41 30 67 852691 Radio navigational aid apparatus 130 458.66 33 68 852910 Aerials and aerial reflectors of all 150 781.25 30 69 853710 Boards, panels, consoles, desks 3 974 040.94 30 70 853910 Sealed beam electric filament lamp 697.90 30 71 853990 Parts of the electric lamps of 85.3 039 716.37 30 72 854449 Other electric conductors 259 069.82 30 73 870830 Brakes and servo-brakes 275 233.77 50 74 870850 Drive-axles with differential 136 292.50 50 75 870880 Suspension systems and parts thereof 97 645.23 50 76 900190 Lenses (excl. of 9001.30-9001.50), 431 304.96 30 77 901010 Apparatus and equipment for 10 397.58 33 automatically developing photographic (including cinematographic) film or paper in rolls 78 901480 Navigational instr. and appliances 104 484.31 25 79 903180 Measuring/checking instr. 953 777.23 30 80 903289 Automatic regulating/controlling 870 210.24 40 81 950300 Tricycles, scooters, pedal cars 561 873.44 30

82 950510 Articles for Christmas festivities 11 347.13 30 83 950699 Articles and equip. for sports, n.e.s. 56 669.48 30 Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

(e) Sri Lanka

In 2013, Sri Lanka imported only one item under its concession list from the Marshall Islands. Of the items on Sri Lanka’s concession list, the Marshall Islands exported 29 items to the world in 2013. These items were also imported by Sri Lanka from the world but not from the Marshall Islands in the same year (table 4.22). The export value of the 29 items exported by the Marshall Islands was $1.81 million while Sri Lanka’s total import value of these items was $395.59 million. In this case, the Marshall Islands trade potential with Sri Lanka could be $1.81 million for those 29 products.

Table 4.22. Potential products for exports by the Marshall Islands to Sri Lanka No. Chapter Product description Marshall Sri Lanka Sri MoP Code Islands imports Lanka export to from the imports the world world in from in 2013 2013 (US$ Marshall (US$ thousand) Islands thousand) in 2013 (US$ thousan d)

1 030559 Dried fish other than cod 125.00 86 850.52 50 2 120991 Vegetable seeds 0.27 6 731.65 25 3 392590 Builders' ware of plastics 47.67 1 541.46 10 4 392690 Articles of plastics, n.e.s. 19.26 31 883.46 10 5 420229 Handbags, whether/not with shoulder strap 8.12 1 154.85 5 6 420292 Trunks, suitcases, vanity cases 437.30 90.92 10 7 442010 Statuettes and other ornaments 1.31 70.05 10 8 480255 Paper and paperboard 289.10 26 583.37 10 9 610910 T-shirts, singlets and other vests 0.01 3 256.69 10 10 611780 Other made up clothing accessories 0.34 763.70 10 11 730419 Line pipe of a kind used for oil 140.30 249.16 50 12 730830 Doors, windows and their frames 15.39 3 326.84 50 13 732599 Cast articles of iron 14.65 788.33 10 14 830629 Statuettes and other ornaments 0.13 188.78 10 15 840991 Parts suitable for use solely or principally 0.93 4 561.25 10 with spark-ignition internal combustion piston engines 16 840999 Parts suit. for use solely 211.11 18 915.68 10

17 842129 Filtering/purifying machinery 58.38 1 517.99 10 18 842951 Self-propelled front-end shovel 190.23 13 298.10 10 19 848190 Parts of the appliances of 84.81 1.25 2 288.71 10 20 848210 Ball bearings 0.07 9 262.27 5 21 850940 Food grinders and mixers; fruit/vegetables 31.00 8 210.82 25 22 852872 Other colour reception apparatus 0.28 70 126.67 0.27 5 23 852990 Parts and accessories suitable for use solely 0.22 3 684.59 10 or principally with the apparatus of headings 85.19 to 85.21, other 24 853650 Switches other than isolating switches 11.19 9 693.85 10 25 853690 Electrical apparatus for switching or 4.35 8 468.15 10 protecting electrical circuits, or for making connections to or in electrical circuits, for a voltage not exceeding 1,000 volts; other apparatus 26 870899 Other parts and accessories 3.48 11 238.09 10 27 902590 Parts and accessories of the instr. 0.48 198.65 10 28 903300 Parts and accessories n.e.s. in chapter 90 16.45 4 712.00 10 29 940600 Prefabricated buildings 183.25 65 931.87 10 Total 1 811.51 395 588.50 0.27 Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

The study finds that there are 22 additional items that the Marshall Islands could export to Sri Lanka (table 4.23), subject to productive capacity and a proper investment regime, accounting for $123.17 million of Sri Lanka’s imports in 2013.

Table 4.23. Additional potential products for exports by the Marshal Islands to Sri Lanka No. Chapter Product description Marshall Sri Lanka's Sri Lanka MoP code Islands import imports exports to from the from the world world in Marshall in 2013 2013 (US$ Islands in (US$ thousand) 2013 thousand) (US$ thousand) 1 293628 Vitamin E and its derivatives 5710.47 25 2 330741 Agarbatti and other odoriferous preparation 2359.03 10 3 392119 Plates, sheets, film, foi land strip 3567.20 10 4 392610 Office/school supplies, of plastics 1184.99 14.3 5 392620 Articles of apparel and clothing accessories 26258.60 5 6 392640 Statuettes and other ornamental articles 526.27 10 7 410719 Leather further prepared after tanning 1649.87 50 8 570110 Carpets and other textile floor coverings 55.14 10 9 630790 Other made-up textile articles 872.06 10 10 691010 Ceramic sinks, wash basins 1554.02 14.3

11 691090 Ceramic sinks, wash basins 6501.16 14.3 12 730840 Equipment for scaffolding 20845.05 50 13 841850 Refrigerating/freezing chests 5919.43 5 14 841899 Parts of the refrigerating/freezing 5769.35 50 15 842139 Filtering/purifying machinery 3379.82 10 16 842410 Fire extinguishers, whether or not charged 2247.64 25 17 845210 Sewing machines of the household type 439.00 16.68 18 847989 Other machines 18328.01 40 19 852190 Video recording/reproducing apparatus 8167.00 10 20 853990 Parts of the electric lamps of 85.3 323.16 10 21 903033 Other instruments and apparatus 537.75 10 22 950300 Tricycles, scooters, pedal cars 6970.11 10 Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

4. Export potential of Micronesia

Among the Participating States of APTA, China was largest trading partner of Micronesia during 2013. The other two Participating States of APTA that imported products from Micronesia during the same year were the Republic of Korea and Sri Lanka. The total value of Micronesia’s exports to the Participating States of APTA during 2013 was $12.38 million.

(a) Bangladesh

Bangladesh imported only one item in 2008 from Micronesia with an import value of $4,995; however, it was not on Bangladesh’s concession list. Six other items on Bangladesh’s concession list were exported by Micronesia to the world and imported by Bangladesh from the world in that year. The export value of those items for Micronesia was around $10,000. The value of those items imported from the world by Bangladesh was $72.3 million (table 4.24). Micronesia’s trade potential with Bangladesh for those six items would be $10,000.

Table 4.24. Potential products for exports by Micronesia to Bangladesh No. Chapter Product Micronesia Bangladesh Bangladesh MoP code description exports imports imports to the world from World in from in 2008 2008 (US$ Micronesia (US$ thousand) in 2008 (US$ thousand) thousand)

1 090411 Pepper (genus Piper), neither crushed 7.45 1 459.48 10 nor ground 2 731100 Containers for compressed or 0.3 35 225.62 30 liquefied gas, of iron or steel. 3 842121 Filtering/purifying machinery 0.28 16 421.81 15

4 848190 Parts of the appliances of 84.81 0.12 1 985.83 15 5 853890 Parts suit. for use solely or 1.65 3 955.95 10 principally with the apparatus of heading 85.35, 85.36 or 85.37., other 6 853931 Electric discharge lamps; fluorescent, 0.25 13 222.35 10 hot cathode Total 10.05 72 271.06 Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

However, the study finds that there are two additional items that could be exported by Micronesia to Bangladesh in the future such as plaits (HS 460194) and switch blades (HS 730230), amounting to $0.6 million (table 4.25).

Table 4.25. Additional potential products for exports by Micronesia to Bangladesh No. Chapter Product Micronesia Bangladesh Bangladesh MoP code description exports imports imports from to the world from World Micronesia in in 2008 (US$ in 2008 (US$ 2008 (US$ thousand) thousand) thousand) 1 460194 Plaits and similar products of plaiting 17.335 20 2 730230 Switch blades, crossing frogs 570.421 20 Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

(b) China

In 2013, six items were exported by Micronesia to China with an export value of $9.98 million. Of those six items, only two come under China’s concession list. There are 46 items on China’s concession list that Micronesia exported to the world in 2013 and which were imported by China from the world (two of the 46 items were also imported from Micronesia, as mentioned above) in the same year (table 4.26). The total export value of these 46 items to the world for Micronesia was $30.27 million and the import value from the world for China was $50.6 billion. In this case, the value of Micronesia’s potential exports of these 46 items to China is $30.27 million.

Table 4.26. Potential products for exports by Micronesia to China No. Chapter Product description Micronesia China imports China MoP code exports to from the world imports the world in in 2013 (US$ from 2013 (US$ thousand) Micronesia thousand) in 2013 (US$ thousand)

1 030341 Albacore/long-finned tuna 8.16 3 825.50 25 2 030342 Yellowfin tuna (Thunnus 5 294.93 12 828.72 998.49 25 albacares) 3 030343 Skipjack/stripe-bellied bonito 24 579.84 140 280.01 8 952.72 25

4 030612 Lobsters (Homarus spp.), 0.71 11 236.66 28 5 060120 Bulbs, tubers, tuberous roots 6.08 0.89 50 6 210390 Sauces and preparations therefor 0.37 76 286.83 13 7 321519 Printing ink (excl. black) 18.37 284 093.85 30 8 330300 Perfumes and toilet waters 0.04 96 988.58 35 9 340111 Soap and organic surface-active 9.90 32 580.82 35 products 10 391732 Tubes, pipes and hoses of plastics 0.39 173 625.25 30 11 391739 Tubes, pipes and hoses of plastics 0.02 113 090.43 35 12 392310 Boxes, cases, crates and similar 0.00 442 804.66 35 articles 13 392690 Articles of plastics 9.59 2 481 112.90 35 14 401699 Articles of vulcanized rubber 0.88 705 622.44 5 15 610342 Men's/boys' trousers, bib and brace 0.05 19 751.49 35 16 610910 T-shirts, singlets and other vests 8.67 222 945.77 35 17 610990 T-shirts, singlets and other vests 5.87 107 170.46 35 18 620293 Women's/girls' anoraks 1.44 141 893.47 35 19 620342 Men's/boys' trousers, bib and brace 0.07 281 276.20 35 20 620429 Women's/girls' ensembles (excl. 0.04 387.35 35 knitted/crocheted) 21 620439 Women's/girls' jackets and blazers 0.80 30 500.95 35

22 620443 Women's/girls' dresses (excl. 2.74 50 958.0 35 knitted/crocheted) 23 620453 Women's/girls' skirts and divided 0.66 15 438.36 35 skirt 24 620520 Men's/boys' shirts (excl. 7.16 200 700.85 50 knitted/crocheted) 25 620610 Women's/girls' blouses, shirts 6.37 11 614.86 35 26 620630 Women's/girls' blouses, shirts 1.07 47 587.40 35 27 620640 Women's/girls' blouses, shirts 12.25 27 557.73 35 28 701590 Clock/watch glasses and similar 4.03 7 074.50 30 glass 29 711311 Articles of jewellery 0.61 38 168.85 35 30 731815 Screws and bolts (excl. of 7318.11- 0.10 1 356 710.80 50 73) 31 732020 Helical springs of iron/steel 0.03 335 326.78 15 32 732690 Articles of iron/steel, n.e.s. 5.07 1 675 310.60 15 33 740400 Copper waste and scrap 211.19 13 727 388.00 50 34 820790 Interchangeable tools for hand 0.02 76 818.20 35 tools 35 842129 Filtering/purifying machinery 0.32 856 869.70 35 36 842199 Parts of the filtering 0.07 1 088 070.20 35 37 842720 Self-propelled fork-lift trucks 31.62 121 264.07 35 38 844399 Other parts and accessories for 0.57 4 752 050.00 20 print 39 848180 Taps, cocks, valves and similar 0.05 4 204 469.30 35

application for pipes, boilers shells, tanks, vats or the like; other appliances 40 848310 Transmission shafts (including 0.96 977 192.28 35 cam shafts and crank shafts) and cranks 41 848340 Gears and gearing (excl. toothed 4.86 1 819 744.60 35 wheels) 42 850440 Static converters 0.28 4 030 861.80 35 43 853710 Boards, panels, consoles, desks 8.96 3 733 316.10 50 44 854449 Other electric conductors 15.02 1 418 150.70 35 45 860900 Containers 7.57 14 447.30 35 46 870829 Parts and accessories of the motor 0.82 4 621 205.00 10 vehicles of heading nos. 87.01 to 87.05; other parts and accessories of bodies (including cabs) Total 30 268.63 50 586 599.00 9 951.21 Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

It is shown from the study that there are 72 additional items on China’s concession list that were exported by Micronesia to the world in 2013 (table 4.27), 70 of which were imported by China from the world. These 72 items could be exported by Micronesia to China in the future, subject to production and a proper investment regime, amounting to $100.6 billion.

Table 4.27. Additional potential products for exports by Micronesia to China No. Chapter Product description Micronesia China imports China MoP code exports to from the imports the world world in 2013 from in 2013 (US$ Micronesia (US$ thousand) in 2013 thousand) (US$ thousand)

1 010690 Live animals, n.e.s. 465.80 10 2 030232 Yellowfin tuna (Thunnus albacares) 166.44 25 3 030345 Bluefin tuna (Thunnus thynnus) 779.54 25 4 070190 Potatoes other than seed potatoes 0.23 31 5 070820 Beans (Vigna spp., Phaseolus spp.) 50 6 070960 Fruits of the genera Capsicum 50 7 080430 Pineapples, fresh/dried 40 279.89 34 8 081090 Fresh fruit, n.e.s. in Ch. 8 921 505.80 33 9 120300 Copra 0.65 50 10 170490 Sugar confectionery other than chew 108 949.02 18 11 190531 Sweet biscuits 211 703.20 18 12 190590 Bread, pastry, cakes, biscuits 169 053.08 14 13 210690 Food preparations, n.e.s. 915 941.19 10 52

14 220870 Liqueurs and cordials 15 567.60 12 15 230990 Preparations of a type used in anim 216 609.02 50 16 250100 Salt (including table salt and denatured ) 356 315.76 50 17 252210 Quicklime 5 609.25 50 18 271019 Petroleum oils and oils obtained from 28 264 372.00 10 bituminous minerals; other 19 300490 Medicaments excluding goods of 6 955 102.50 35 heading 30.02, 30.05 or 30.06) consisting of mixed or unmixed products for therapeutic or prophylactic uses, other 20 320910 Paints and varnishes (incl. enamels) 53 947.96 35 21 330610 Dentifrices, in individual retail packages 30 157.43 35 22 340219 Organic surface-active agents 16 811.84 35 23 340290 Organic surface-active agents 394 295.37 35 24 380991 Finishing agents, dye carriers 232 461.00 8 25 382490 Chemical products and preparations 6 387 579.90 35 26 391740 Fittings (e.g., joints, elbows) 212 241.29 35 27 391990 Self-adhesive plates, sheets, film 2 437 100.20 35 28 392043 Plates, sheets, film, foil and strip 93 878.94 35 29 392190 Plates, sheets, film, foil 601 311.91 35 30 401110 New pneumatic tyres, of rubber 568 243.64 35 31 401310 Inner tubes, of rubber 439.62 13 32 420229 Handbags, whether/not with shoulder 1 398.25 35 33 420231 Articles of a kind normally carried in the 184 370.91 35 pocket or in the hand bag; with outer surface of leather or of composition leather 34 420232 Articles of a kind normally carried 55 501.46 35 carried in the pocket or in the hand bag; with outer surface of plastic sheeting or of textile material 35 420292 Trunks, suit-cases, vanity-cases 58 860.05 35 36 440890 Sheets for veneering 117 153.87 30 37 590390 Textile fabrics impregnated/coated 261 766.13 35 38 610442 Women's/girls' dresses, 18 423.04 35 knitted/crocheted 39 610449 Women's/girls' dresses, 2 546.39 35 knitted/crocheted 40 611020 Jerseys, pullovers, cardigans 130 269.26 35 41 611090 Jerseys, pullovers, cardigans 12 814.29 35 42 611190 Babies' garments and clothing 712.29 35 accessories 43 611522 Panty hose, tights, stockings, sock 2 515.20 35 44 611530 Other women's full-length/knee-length 389.03 35 45 611693 Gloves, mittens and mitts, knitted 4 554.55 35 46 620433 Women's/girls' jackets and blazers 65 705.73 35 53

47 620449 Women's/girls' dresses (excluding 26 827.21 35 knitted) 48 620459 Women's/girls' skirts and divided skirt 8 696.91 35 49 620461 Women's/girls', trousers, bib and bra 8 943.21 35 50 620469 Women's/girls', trousers, bib and bra 26 460.59 35 51 620590 Men's/boys' shirts (excluding knitted) 9 667.65 35 52 620690 Women's/girls' blouses, shirts 1 905.84 35 53 621149 Track suits (excl. knitted/crocheted) 9 387.23 35 54 621210 Brassieres and parts thereof 34 311.63 35 55 621710 Made up clothing accessories 30 223.38 35 56 630710 Floor-cloths, dish-cloths, dusters 19 733.87 35 57 640399 Other footwear; other 628 698.88 35 58 711719 Imitation jewellery, of base metal 79 360.50 35 59 820559 Hand tools (including glaziers' diamond) 54 850.75 35 60 820730 Tools for pressing/stamping/punching 811 757.78 15 61 821300 Scissors, tailors' shears 7 485.61 35 62 840999 Parts suit. for use solely 704 669.00 35 63 842839 Other continuous-action elevators and 796 363.45 35 64 843139 parts of other lifting machinery 313 211.88 50 65 846721 Drills of all kinds 18 105.65 35 66 850110 Electric motors of an output not >3 1 376 883.00 35 67 850131 DC motors (excl. universal AC/DC 467 720.34 35 motor) 68 851590 Parts of electric 129 680.04 35 69 870323 Vehicles (excl. of 87.02 and 8703.10) 36 289 072.00 10 70 870324 Vehicles (excl. of 87.02 and 8703.10) 7 668 363.10 10 71 870850 Drive-axles with differential 606 811.44 10 72 880212 Helicopters of an unladen weight>2 354 153.05 35 Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

In recent years, India has imported only one item from Micronesia with an import value of only $426. This item does not come under India’s concession list. There are 40 items that are on India’s concession list and were exported by Micronesia to the world in 2009. These 40 items were also imported by India from the world during 2009 (table 4.28). The total export value of those items exported by Micronesia to the world was $4.54 million while the value of India imports from the world was $2,306.1 million. In this case, the value of the potential exports of these 40 items by Micronesia to India is $4.54 million.

Table 4.28. Potential products for exports by Micronesia to India No. Chapter Product description Micronesia India India MoP code exports to imports from imports the world in the world in from 2009 (US$ 2009 (US$ Micronesia thousand) thousand) in 2009 (US$ thousand)

1 030342 Yellowfin tuna (Thunnus albacares) 3 674.07 498.38 100 2 030559 Dried fish other than cod 18.28 486.44 100 3 030729 Scallops, incl. queen scallops 8.33 23.63 40 4 030799 Molluscs; other including flours, 395.88 63.83 30 meals and pellets, fit for human consumption; other 5 050800 Coral and similar materials, shell of 55.41 3 685.12 40 molluscs, crustaceans or echinoderms and cuttle-bone 6 051191 Products of fish/crustaceans 105.63 34.36 40 7 160415 Mackerel, prepared/preserved 111.34 14.50 45 8 220190 Ice and snow 40.79 92.74 45 9 340220 Organic surface-active agents 2.48 10 100.06 12 preparations; put up for retail sale 10 370790 Chemical preparations for photograph 2.84 26 245.10 40 11 382200 Diagnostic/laboratory reagents 0.07 146 456.27 40 12 401012 Conveyor belts/belting, reinforced 0.03 5 823.12 15 13 401110 New pneumatic tyres, of rubber 0.43 67 421.77 15 14 401699 Articles of vulcanized rubber 2.02 138 829.27 30 15 442010 Statuettes and other ornaments 6.84 98.71 40 16 481840 Sanitary towels and tampons, napkins 0.40 50 289.58 30 17 490199 Printed books, brochures, leaflets 8.67 67 178.00 30 18 700721 Laminated safety glass 0.28 4 477.85 5 19 711311 Articles of jewellery 7.52 38 400.29 8 20 731100 Containers for compressed or of 2.07 42 307.08 40 liquefied gas, iron or steel 21 731512 Articulated link chain 6.10 9 519.30 40 22 820790 Interchangeable tools for hand tool 0.64 109 804.44 5 23 841391 Parts of the pumps of 8413.11-8413. 0.07 190 121.06 40 24 841490 Parts of air/vacuum pumps, air/other 0.15 272 415.01 5 gas compressors and fans 25 846721 Drills of all kinds 0.04 3 197.24 5 26 848180 Taps, cocks, valves and similar 1.82 481 551.38 5 application for pipes, boilers shells, tanks, vats or the like; other appliances 27 848190 Parts of the appliances of 84.81 0.17 146 664.82 20 28 851020 Hair clippers, with self-contained 0.02 522.87 5 electric motor

29 853910 Sealed beam electric filament lamp 1.19 1 630.22 7 30 854370 Electrical machines and apparatus 2.89 263 335.88 15 having individual functions; other 31 890690 Vessels, n.e.s. in 89.01-8906.10 6.46 159 555.83 30 32 900510 Binoculars 2.64 11 650.91 5 33 903281 Hydraulic/pneumatic auto. regulating 0.98 3 443.46 15 34 940350 Wooden furniture 0.06 24 154.87 7 35 960330 Artists' brushes, writing brushes 3.11 1 300.07 10 36 960622 Buttons, of base metal, not covered 0.00 6 875.79 5 with textile material 37 961519 Combs, hair-slides and the like; other 0.03 1 771.86 10 38 970110 Paintings, drawings and pastels 0.01 15 951.14 40 39 970400 Postage/revenue stamps 10.10 11.48 100 40 970600 Antiques of an age exceeding 100 58.39 83.34 100 years Total 4 538.26 2 306 087.00 Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

In addition, there are five additional items that could be among Micronesia’s exports to India in the future (table 4.29), amounting to $44.2 million. These items were exported by Micronesia to the world in 2009 but were not imported by India in that year from the world. Four of these products, such as yellowfin tuna, bigeye tuna (fresh or chilled and frozen) and skipjack, come under 100% MoP (duty free) on India’s concession list.

Table 4.29. Additional potential products for exports by Micronesia to India No. Chapter Product Micronesia India India MoP code description exports imports imports to the world from the from in 2009 (US$ world in Micronesia thousand) 2009 (US$ in 2009 US$ thousand) thousand) 1 030232 Yellowfin tuna (Thunnus albacares) 1 667.01 100 2 030234 Bigeye tuna (Thunnus obesus) 6 988.08 100 3 030343 Skipjack/stripe-bellied bonito 35 354.11 100 4 030344 Bigeye tunas (Thunnus obesus) 108.19 100 5 030791 Molluscs; other including flours, meals 65.67 30 and pellets, fit for human consumption Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

(d) Republic of Korea

Micronesia’s second-largest trade partner in 2013 was the Republic of Korea, which imported 13 items with a trade value of $2.4 million from Micronesia. Of those 13 items, only two are on the Republic of Korea’s concession list. There are 48 items on the Republic of Korea’s concession list, which were exported by Micronesia to the world and also imported by the Republic of Korea

56 from the world in 2013 (including the two items mentioned above) (table 4.30). The total export value of these 48 items for Micronesia was around $0.6 million and total import value for the Republic of Korea was $20.8 billion. In this case, Micronesia’s export potential to the Republic of Korea is $0.6 million for the 48 items.

Table 4.30. Potential products for exports by Micronesia to the Republic of Korea No. Chapter Product description Micronesia Republic of Republic of MoP code exports to Korea Korea the world imports from imports in 2013 the world in from (US$ 2013 (US$ Micronesia thousand) thousand) in 2013 (US$ thousand)

1 030799 Molluscs; other including 190.66 65 481.47 3.62 20 flours, meals and pellets, fit for human consumption; other 2 321519 Printing ink (excl. black) 18.37 53 471.00 30 3 330300 Perfumes and toilet waters 0.04 119 205.70 30 4 340111 Soap and organic surface-active 9.90 20 445.86 30 products and preparations for use as soap, in the form of bars, cakes, moulded pieces or shapes, and paper, wadding, felt and non-wovens, impregnated, coated or covered with soap or detergent; for toilet use (including medicated products) 5 370790 Chemical preparations for 0.79 474 225.48 50 photographs 6 382200 Diagnostic/laboratory reagents 0.09 516 815.27 30 on a backing, prepared diagnostic or laboratory reagents 7 392690 Articles of plastics &d articles 9.59 780 236.84 30 of other materials of headings 39.01 to 39.14., other 8 401693 Gaskets, washers & other seals 0.08 172 430.54 22.5 of vulcanised rubber 9 401699 Articles of vulcanized rubber 0.88 137 30 other 110.85

10 460219 Basketwork, wickerwork 188.51 5 724.05 30

11 610990 T-shirts, singlets and other 5.87 189 008.27 30 vests

12 620292 Women's/girls' anoraks of 2.11 37 646.69 37.692308 cotton

13 620293 Women's/girls' anoraks of man- 1.44 425 777.19 50 made fibers

14 620429 Women's/girls' ensembles (excl. 0.04 167.78 50 knitted) 15 620439 Women's/girls' jackets and 0.80 28 369.32 37.692308 blazers 16 620442 Women's/girls' dresses (excl. 0.04 34 993.52 37.692308 knitted)

17 620443 Women's/girls' dresses of 2.74 72 958.20 37.692308 synthetic fibres

18 620453 Women's/girls' skirts and 0.66 24 788.19 37.692308 divided skirts 19 620610 Women's/girls' blouses, shirts 6.37 12 060.71 37.692308 of silk or silk waste 20 620630 Women's/girls' blouses, shirts 1.07 93 175.87 37.7 of cotton 21 620640 Women's/girls' blouses, shirts 12.25 95 308.61 50

22 731815 Screws and bolts (excl. of 0.10 250 048.63 50 7318.11-73) 23 732020 Helical springs of iron/steel 0.03 37 363.03 33 24 732690 Articles of iron/steel, n.e.s. 5.07 2 052 409.40 30 25 820790 Interchangeable tools for hand 0.02 50 020.47 22.5 tool

26 830249 Mountings, fittings and similar 0.02 22 505.74 30 articles 27 841350 Reciprocating positive 0.79 160 530.56 33 displacement 28 842129 Filtering/purifying machinery 0.32 257 452.10 33

29 842199 Parts of the filtering 0.07 339 328.95 33 30 842720 Self-propelled fork-lift trucks 31.62 34 948.95 30

31 844399 Other parts and accessories for 0.57 783 359.07 25 print 32 847990 Parts of machines and 4.43 1 057 275.50 50 mechanical application 33 848140 Safety/relief valves for pipes, 0.71 96 448.70 35 boilers shells, tanks, vats or the like 34 848180 Taps, cocks, valves and similar 0.05 1 906 338.30 50 application for pipes, boilers shells, tanks, vats or the like; other appliances 35 848310 Transmission shafts (including 0.96 163 226.36 30 cam shafts and crank shafts) and cranks 36 848340 Gears and gearing (excl. 4.86 551 925.28 33 toothed wheels) 37 850440 Static converters 0.28 1 477 104.90 50 38 853620 Automatic circuit breakers 9.10 86 246.13 50 39 853650 Switches other than isolating 1.06 344 993.29 30

switches 40 853690 Electrical apparatus for 4.28 299 349.81 50 switching or protecting electrical circuits, or for making connections to or in electrical circuits, for a voltage not exceeding 1,000 volts; other apparatus 41 853710 Boards, panels, consoles, desks 8.96 3974 040.90 30

42 853890 Parts suitable for use solely 0.13 1 446 066.60 35 with the apparatus of heading 85.35, 85.36 or 85.37, other 43 854442 Other electric conductors fitted 0.07 485 519.15 30 with connectors 44 854449 Other electric conductors of a 15.02 259 069.82 30 voltage not exceeding 1,000 V, other 45 870829 Parts and accessories of the 0.82 284 549.13 50 motor vehicles of heading nos. 87.01 to 87.05; other parts and accessories of bodies (including cabs) 46 902780 Instruments and apparatus for 47.18 444 867.81 33 physical or chemical analysis, other 47 903300 Parts and accessories n.e.s. in 1.59 57 616.91 1.59 25 chapter 90 48 950300 Tricycles, scooters, pedal cars 0.00 561 873.44 30 Total 590.40 20 843 880.00 5.21 Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

In addition, the study finds that there are 60 additional items that were not exported by Micronesia in 2013 but were exported in previous years (table 4.31). These items were imported by the Republic of Korea in the same year and come under the Republic of Korea’s concession list. These 60 items could potentially be exported by Micronesia to the Republic of Korea in the future, subject to proper production and investment regime, accounting for $19.6 billion.

Table 4.31. Additional potential products for exports by Micronesia to the Republic of Korea No. Chapter Product description Micronesia Republic of Republic of MoP code exports to Korea Korea the world in imports from imports 2013 (US$ the world in from thousand) 2013 (US$ Micronesia thousand) in 2013 (US$ thousand)

1 271019 Petroleum oils and oils obtained 6 913 868.1 30 from bituminous minerals; other 59

2 300490 Medicaments (excluding goods of 2 224 994.4 30 heading 30.02, 30.05 or 30.06) consisting of mixed or unmixed products for therapeutic or prophylactic uses, other 3 320910 Paints and varnishes (incl. 2 2696.58 30 enamels) 4 321490 Non-refractory surfacing 19 614.66 30 preparation 5 330610 Dentifrices, in individual retail 23 079.63 25 packages 6 340219 Organic surface-active agents, 7 440.92 30 other 7 340290 Organic surface-active agents, 72 670.23 30 other 8 380991 Finishing agents, dye carriers 80 822.75 30 9 382490 Chemical products and 2 004 344.30 30 preparations 10 392610 Office/school supplies, of plastics 14 669.19 25 11 400829 Rods and profile shapes 10 343.08 30

12 401031 Endless transmission belts of 10 617.08 30 trapezodialcross-section (V-belts), V-ribbed, of an outside circumference exceeding 180 cm but not exceeding 240 cm 13 401290 Solid/cushion tyres, tyre treads 10 384.96 50 14 420229 Handbags, whether or not with 22 127.15 30 shoulder strap, other 15 420231 Articles of a kind normally carried 139 313.90 30 in the pocket, with outer surface of leather 16 420232 Articles of a kind normally carried 89 394.80 30 in the pocket, with outer surface of plastic sheeting or of textile materials 17 420292 Trunks, suit-cases, vanity-cases, 218 960.42 30 With outer surface of plastic sheeting 18 420299 Trunks, suit-cases, vanity-cases, 80 072.05 30 other 19 440890 Sheets for veneering 83 036.48 30 20 620433 Women's/girls' jackets and blazers 99 433.88 50

21 620449 Women's/girls' dresses (excl. 18 342.82 37.69 knitted) 22 620452 Women's/girls' skirts and divided 13 493.67 37.69 skirt 23 620459 Women's/girls' skirts and divided 5 968.37 50 skirt, of other textile materials 24 620461 Women's/girls', trousers, bib and 5 679.95 7.69 bra, of wool or fine animal hair 25 620469 Women's/girls', trousers, bib and 19 394.17 50 bra, of other textile materials

26 620590 Men's/boys' shirts (excl. knitted) 22 570.19 30 27 620690 Women's/girls' blouses, shirts 14 136.54 37.69

28 620990 Babies' garments and clothing 2 905.13 37.69 accessories 29 640399 Other footwear; other 446 553.22 30 30 711719 Imitation jewellery, of base metal 64 449.76 30 31 810520 Cobalt mattes and other 51 342.64 30 intermediate products of cobalt metallurgy 32 820299 Saw blades (excl. of 8202.20- 22 146.02 30 8202.9) 33 820411 Hand-operated spanners and 18 316.55 10 wrenches, non-adjustable 34 820412 Hand-operated spanners and 14 973.67 10 wrenches, adjustable 35 820559 Hand tools (incl. glaziers' 39 256.27 10 diamond) 36 820730 Tools for pressing/stamping 20 189.14 50

37 821300 Scissors, tailors' shears 14 749.63 33 38 831110 Coated electrodes of base metal, 18 412.19 33 for electric arc-welding 39 840999 Parts suitable for use solely or 935 868.76 50 principally with the engines of heading 84.07 or 84.08., other 40 841360 Rotary positive displacement 105 852.07 35 pumps 41 841981 Other machinery, plant and 76 033.67 25 equipment for making hot drinks, cooking or heating food 42 844851 Sinkers, needles and other articles 21 021.79 25

43 846610 Tool holders 42 072.32 50

44 846694 Parts and accessories for machines 98 612.55 25 of heading nos. 84.62 or 84.63 45 848330 Bearing housings, not 122 946.75 33 incorporating ball or roller bearings and plain shaft bearing 46 848390 Toothed wheels, chain sprockets 177 849.27 33 and other transmission elements presented separately; parts 47 850140 Electric motor and generators 96 098.58 30 (excluding generating sets); other AC motors, single-phase 48 851590 Parts of electric (including 56 434.79 30 electrically heated gas), laser or other light or photo beam, ultrasonic, electron beam, magnetic pulse or plasma arc soldering, brazing or welding machines and apparatus, whether or not capable of cutting

49 851769 Other apparatus for transmission or 31 535.57 25 reception of voice, images or other data 50 852910 Aerials and aerial reflectors of all 150 781.25 30 kinds; parts suitable for use therewith 51 853190 Parts of electric sound or visual 179 942.30 30 signalling apparatus, i.e. bells, sirens, indicator panels, burglar or fire alarms; other than those of heading 85.12 or 85.30 52 853669 Lamp-holders, plugs and sockets; 1 256 641.10 50 other 53 854370 Electrical machines and apparatus 1 766 499.80 33 having individual functions; other 54 870850 Drive-axles with differential, 136 292.50 50 whether or not provided with other transmission components, no- driving axles; parts thereof 55 871120 Motorcycles (including mopeds) 55 087.56 50 and cycles fitted with an auxiliary motor, with or without side-cars; with reciprocating internal combustion piston engine of a cylinder capacity exceeding 50 cc but not exceeding 250 cc 56 902300 Instruments, apparatus and models 36 934.65 30 designed for demonstrational purposes 57 902580 Hydrometers and similar floating 20 782.40 25 instruments 58 903190 Parts and accessories of the 405 843.01 30 measuring or checking instruments 59 903289 Automatic regulating/controlling 870 210.24 40 instruments, other 60 940510 Chandeliers and other electric 38 700.02 25 ceiling or wall lighting fittings Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

(e) Sri Lanka

Micronesia exported 16 items on Sri Lanka’s concession list to the world and the same 16 items were imported by Sri Lanka from the world in 2013 (table 4.32). Of the 16 items, only one was imported by Sri Lanka from Micronesia in the same year. For Micronesia the total export value of these products to the world was $404,550 while the import value from the world for Sri Lanka was $124.9 million. The potential for exports of the 16 items by Micronesia to Sri Lanka is therefore $404,550.

Table 4.32. Potential products for exports by Micronesia to Sri Lanka No. Chapter Product description Micronesia Sri Lanka Sri Lanka MoP code exports to imports imports the world in from the from 2013 (US$ world in Micronesia thousand) 2013 (US$ in 2013 (US$ thousand) thousand)

1 330300 Perfumes and toilet waters 0.04 8 960.18 10 2 330499 Beauty/make-up preparations 17.77 6 456.22 10 3 391739 Tubes, pipes and hoses of plastics 0.02 3 047.66 10 4 392690 Articles of plastics and articles of 9.59 31 883.46 0.992 10 other materials of headings 39.01 to 39.14, other 5 480256 Paper and paperboard 307.77 13 639.37 10 6 610910 T-shirts, singlets and other vests, of 8.67 3 256.69 10 cotton 7 610990 T-shirts, singlets and other vests, of 5.87 4 068.21 5 other textile materials 8 731210 Stranded wire, ropes and cables of 30.78 6 495.31 10 iron 9 842129 Filtering/purifying machinery and 0.32 1 517.99 10 apparatus for liquids; other 10 843390 Parts of harvesting or threshing 3.25 1 391.54 20 machinery including straw or fodder balers; grass or hay mowers; machines for cleaning, sorting or grading eggs, fruit or other agricultural product, other than machinery of heading 84.37 11 847990 Parts of Machines and mechanical 4.43 4 556.59 40 appliances having individual functions, n.e.s. 12 853620 Automatic circuit breakers 9.10 9 812.72 10 13 853650 Switches other than isolating switches 1.06 9 693.85 10 14 853690 Electrical apparatus for switching or 4.28 8 468.15 10 protecting electrical circuits, or for making connections to or in electrical circuits, for a voltage not exceeding 1,000 volts; other apparatus 15 903300 Parts and accessories, n.e.s., for 1.59 4 712.00 10 machines, appliances, instruments or apparatus of chapter 90 16 950300 Tricycles, scooters, pedal cars and 0.00 6 970.11 10 similar wheeled toys Total 404.55 124 930.00 Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

5. Export potential of Palau

In 2013, the total value of Palau’s exports was $130,000 to the Participating States of APTA - China, India and the Republic of Korea.

(a) China

China imported three items from Palau in 2013, of which only one item was on China’s concession list. Forty-two items on China’s concession list were exported by Palau to the world in 2013. China also imported these items from the world in the same year (table 4.33). Palau’s total export value for these products was $4.73 million while China’s import value for these products was $47.4 billion. As China’s import value is more than Palau’s export value, the potential for Palau’s exports of the 42 items to China is $4.73 million.

Table 4.33. Potential products for exports by Palau to China No. Chapter Product description Palau China imports China's MoP code exports to from the world import the world in 2013 (US$ from in 2013 thousand) Palau in (US$ 2013 thousand) (US$ thousand)

1 030232 Yellowfin tuna (Thunnus albacares) 4 488.68 166.44 25 2 030235 Bluefin tuna (Thunnus thynnus) 22.63 2 044.56 33 3 190590 Bread, pastry, cakes, biscuits 35.54 169 053.08 14 4 220890 Un-denatured ethyl alcohol of an 9.35 48 775.58 12 alcoholic strength by volume of less than 80% vol.; other 5 250100 Salt (including table salt and 3.28 356 315.76 50 denatured salt) and pure sodium chloride 6 253090 Mineral substance, n.e.s.; other 3.95 224 143.44 50 7 320412 Acid dyes, whether or not 0.32 99 239.06 35 premetallised, and preparations based thereon; mordant dyes and preparations based thereon 8 330790 Depilatories, sterile contact lens care 0.04 47 481.37 35 solution and other 9 350699 Prepared glues and other prepared 2.09 228 330.34 35 adhesives, not exceeding a net weight of 1 kg; other 10 392690 Articles of plastics and articles of 5.21 2 481 112.90 35 other materials of headings 39.01 to 39.14, other 11 401039 Transmission belts or belting; other 0.02 157 157.98 35

12 401110 New pneumatic tyres, of rubber 1.20 568 243.64 35 13 580632 Narrow woven fabrics (excl. of 5806) 0.51 125 104.37 35 14 590310 Textile fabrics impregnated, coated, 56.53 144 258.28 35 covered or laminated with plastics other than those of heading 59.02; with polyvinyl chloride 15 610910 T-shirts, singlets and other vests, of 0.08 222 945.77 35 cotton 16 610990 T-shirts, singlets and other vests, of 0.21 107 170.46 35 other textile materials 17 620311 Men's/boys' suits; of wool or fine 0.27 69194.31 35 animal hair 18 620462 Women's/girls' trousers, bib and brace 0.01 161 938.18 35 overalls, breeches and shorts; of cotton 19 621210 Brassieres, whether or not knitted or 1.95 34 311.63 35 crocheted 20 640590 Footwear other than with uppers, other 0.13 3 254.10 35 21 690100 Bricks, blocks, tiles and other ceramic 1.72 5 565.48 35 goods of siliceous fossil meals (i.e. kieselguhr, tripolite or diatomite) or similar siliceous earth 22 691110 Tableware and kitchenware, of 0.03 30 625.12 35 porcelain 23 731815 Threaded articles; other screws and 0.09 1 356 710.80 50 bolts, whether or not with their nuts or washers 24 732690 Articles of iron/steel, n.e.s. 3.51 1 675 310.60 15 25 740400 Copper waste and scrap 32.84 13 727 388.00 50 26 761699 Other articles of aluminium 0.52 405 511.12 35 27 820559 Other hand tools (including glaziers' 1.59 54 850.75 35 diamonds) 28 820790 Interchangeable tools for hand tool 4.13 76 818.20 35 29 840991 Parts suitable for use solely or 0.06 2 805 436.90 35 principally with spark-ignition internal combustion piston engines 30 841391 Parts of the pumps of 8413.11-8413. 0.03 700 125.31 50 31 841590 Parts of the air-conditioning machines 0.57 456 804.31 35 32 843143 Parts for boring or sinking machinery 19.42 559 587.50 35 of subheading 8430.41 or 8430.49 33 844399 Other parts and accessories for 0.13 4 752 050.00 20 printing machinery 34 846791 Tools for working in the hand, 0.07 14 686.89 35 pneumatic hydraulic or with self- contained electric or non-electric motor; parts of chain saws 35 848180 Taps, cocks, valves and similar 0.64 4 204 469.30 35 application for pipes, boilers shells, tanks, vats or the like; other appliances

36 848310 Transmission shafts (including cam 1.03 977 192.28 35 shafts and crank shafts) and cranks 37 850131 Other DC motors and DC generators; 0.29 467 720.34 0.29 35 of an output not exceeding 750 W 38 850490 Parts of electrical transformers, static 22.33 2 509 044.20 35 converters (for example rectifiers) and inductors 39 870322 Other vehicles, with spark-ignition 3.63 854 375.90 10 internal combustion reciprocating piston engine; of a cylinder capacity exceeding 1,000 cc but not exceeding 1,500 cc 40 870829 Parts and accessories of the motor 0.09 4 621 205.00 10 vehicles of heading nos. 87.01 to 87.05; other parts and accessories of bodies (including cabs) 41 870830 Brakes and servo-brakes; parts thereof 0.57 1 109 489.10 10 42 870880 Suspension systems and parts thereof 1.00 747 940.63 10 (including shock absorbers) Total 4 726.26 47 363 149.00 Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

The study shows that there are 57 additional items which were exported by Palau to the world in previous years but not in 2013 (table 4.34). The items are on China’s export concession list and were imported by China from the world. Therefore, those items could provide potential export items for Palau in the future, subject to a proper production process and investment regime, amounting to $146.8 billion.

Table 4.34. Additional potential products for exports by Palau to China No. Chapter Product description Palau China China MoP code exports to imports from imports the world the world in from in 2013 2013(US$ Palau in (US$ thousand) 2013 (US$ thousand) thousand)

1 060319 Cut flowers and flower buds; other 1 336.95 50 2 081090 Fresh fruit; other 921 505.80 33 3 170490 Sugar confectionery (including white 108 949.02 18 chocolate), not containing cocoa; other 4 210690 Food preparations, n.e.s. ; other 915 941.19 10 5 220290 Other non-alcoholic beverages (i.e. 141 603.86 16 soya milk drinks, fruit pulp or fruit juice based drinks, beverages containing milk) 6 230990 Preparations of a kind used in animal 216 609.02 50 feeding; other 7 271019 Petroleum oils and oils obtained from 28 264 372.00 10 bituminous minerals; other

8 300310 Medicaments containing penicillin 2 559.78 50 9 300490 Medicaments (excluding goods of 6 955 102.50 35 heading 30.02, 30.05 or 30.06), other 10 330510 Shampoos 43 769.64 35 11 330610 Dentifrices, in individual retail 30 157.43 35 packages 12 330730 Perfumed bath salts and other bath 42 166.62 35 preparations 13 340111 Soap and organic surface-active 32 580.82 35 products and preparations for use as soap, in the form of bars, cakes, moulded pieces or shapes, and paper, wadding, felt and non-wovens, impregnated, coated or covered with soap or detergent; for toilet use (including medicated products) 14 340120 Soap in other forms (excluding of 27 472.29 35 3401) 15 382490 Prepared binders for foundry moulds 6 387 579.90 35 or cores, chemical products and preparations of the chemical or allied industries; other 16 390110 Polyethylene having a specific gravity 2 661 992.00 8 of < 0.94 17 391990 Self-adhesive plates, sheets, film, foil, 2 437 100.20 35 tape, strp and other flat shapes, of plastics, whether or not in rools; other 18 392049 Other plates, sheets, film, foil and 98 485.70 35 strip, of plastics, non-cellular and not reinforced, laminated, supported or similarly combined with other materials; of polymers of vinyl chloride: other 19 392310 Boxes, cases, crates and similar 442 804.66 35 articles 20 392640 Statuettes and other ornamental 13 494.39 35 articles 21 420100 Saddlery and harness for any animal 1 345.01 40 22 420232 Articles of a kind normally carried in 55 501.46 35 the pocket or in the hand bag; with outer surface of plastic sheeting or of textile materials 23 600690 Knitted/crocheted fabrics; other 5 216.05 35 24 610462 Women's/girls' trousers, bib and brace 37 930.76 35 overalls, breeches and shorts; of cotton 25 610590 Men's/boys' shirts, knitted or 7 177.90 35 crocheted; of other textile materials 26 610620 Women's/girls' blouses, shirts and 6 224.08 35 shirt-blouses, knitted or crocheted; of man-made fibres 27 611030 Jerseys, pullovers, cardigans, knitted 112 651.70 35 or crocheted; of man-made fibres 28 621790 Parts of garments/clothing accessories 30 476.16 35

29 630710 Floor-cloths, dish-cloths, dusters 19 733.87 35 30 640399 Other footwear; other 628 698.88 35 31 670290 Artificial flowers, foliage and fruit; of 585.95 40 other materials 32 680430 Hand-sharpening/polishing stones 6 707.31 35 33 700992 Glass mirrors other than rear-view 16 680.20 35 mirrors; framed 34 711790 Imitation jewellery of base metal; 14 796.67 35 other 35 730429 Drill pipe of stainless steel; other 92 020.66 50 36 732620 Articles of iron/steel wire 24 029.78 50 37 821300 Scissors, tailors' shears 7 485.61 35 38 840790 Spark-ignition reciprocating/rotary 205 536.53 30 internal combustion piston engines; other engines 39 840890 Compression-ignition, internal 1 957 012.90 35 combustion piston engines; other engines 40 841490 Parts of air/ vacuum pumps, air/other 1 046 420.20 30 gas compressors and fans 41 843139 Other parts suitable for use solely with 313 211.88 50 the machinery of headings 84.28 42 848210 Ball bearings 1 194 285.50 35 43 850431 Other electrical transformers, having a 237 623.81 35 power handling capacity not exceeding 1 kVA 44 850440 Static converters 4 030 861.80 35 45 851310 Portable electric lamps 2 916.06 35 46 852990 Parts and accessories suitable for use 4 835 138.50 35 solely or principally with the apparatus of headings 85.19 to 85.21, other 47 853929 Other electric filament lamps 83 102.54 20 48 853931 Electric discharge lamps; fluorescent, 19 686.36 20 hot cathode 49 853939 Electric discharge lamps; other 363 437.54 20 50 870323 Vehicles of a cylinder capacity 36 289 072.00 10 exceeding 1,500 cc but not exceeding 3,000 cc 51 901380 Liquid crystal devices 39 681 134.00 35 52 901831 Syringes, with or without needles 158 901.20 35 53 901890 Instruments and appliances used in 1 597 321.80 35 medical, surgical, dental or veterinary sciences; other instruments and appliances 54 903180 Measuring/checking instruments, 3 849 573.70 35 appliances and machines; other instruments, appliances and machines 55 950790 Line fishing tackle (excluding of 7 838.85 35 9507)

56 960390 Brooms and brushes n.e.s. in 96.03 12 714.13 35 57 960719 Slide fasteners; other 149 332.61 35

Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

(b) India The latest trade data between India and Palau are available for 2012. India imported only one product from Palau in 2012, which is not on India’s concession list. Fifty other products on India’s concession list were exported by Palau to the world in the same year (table 4.35). India also imported the same products from the world. The total export value of those products for Palau was almost $0.6 million while India’s import value for those products was $10.5 billion. Therefore, the potential value of Palau’s exports of those 50 products to India is $0.6 million.

Table 4.35. Potential products for exports by Palau to India No. Chapter Product description Palau India imports India MoP code exports to from the world imports the world in 2012 (US$ from in 2012 thousand) Palau in (US$ 2012 thousand) (US$ thousand)

1 030799 Molluscs and invertebrates; other, 17.82 0.24 30 including flours, meals and pellets, fit for human consumption: other 2 220290 Other non-alcoholic beverages (i.e. 6.09 57 622.49 30 soya milk drinks, fruit pulp or fruit juice based drinks, beverages containing milk) 3 330410 Lip make-up preparations 1.75 11 181.64 10 4 330491 Beauty or make-up preparations; 1.73 5 022.87 15 powders, whether/not compressed 5 330499 Beauty/make-up preparations; other 13.30 78 257.17 15 6 330510 Shampoos 1.37 14 025.81 15 7 330610 Dentifrices, in individual retail 3.81 13 938.87 10 packages 8 340111 Soap and organic surface-active 11.27 8 016.28 15 products and preparations for use as soap, in the form of bars, cakes, moulded pieces or shapes, and paper, wadding, felt and non-wovens, impregnated, coated or covered with soap or detergent; for toilet use (including medicated products)

9 382490 Prepared binders for foundry moulds 0.62 413 022.21 7 or cores, chemical products and preparations of the chemical or allied industries; other 10 401110 New pneumatic tyres, of rubber; of a 0.48 214 330.20 15 kind used on motor cars (including station wagons and racing cars) 11 401519 Gloves (excluding surgical), mittens 0.42 20 001.31 30 12 401692 Erasers of vulcanized rubber, other 0.06 944.54 30 13 440399 Wood, in the rough (excl. of 4403.1) 28.07 1 203 371.70 45 14 441232 Plywood, consisting solely of sheets of 37.64 6 009.58 40 wood (other than bamboo); with at least one outer ply of non-coniferous wood 15 480210 Hand-made paper and paperboard 0.66 5 806.23 30 16 480254 Paper and paperboard; weighting less 0.08 7 597.69 30 than 40 g/m2 17 481930 Sacks and bags, having a base of a 0.17 8 211.01 5 width of 40 cm or more 18 481940 Other sacks and bags, including cones 1.36 6 002.38 12 19 482390 Other paper and paperboard 0.25 46 658.92 7 20 490199 Printed books, brochures, leaflets 0.03 113 423.99 30 21 711790 Imitation jewellery of base metal; 0.12 22 278.40 8 other 22 720421 Waste and scrap of stainless steel 7.56 1 016 273.50 45 23 720449 Ferrous waste and scrap; other 339.12 3 189 924.20 30 24 730429 Drill pipe of stainless steel; other 0.00 126 674.14 40 25 731029 Tanks, casks, drums, cans, boxes, of 0.10 37 902.37 40 iron or steel; other 26 732620 Articles of iron/steel wire 0.18 44 304.18 40 27 760720 Aluminium foil, backed with paper 0.48 97 830.18 40 28 780200 Lead waste and scrap 1.01 96 687.24 45 29 820790 Interchangeable tools for hand tools 4.77 189 262.30 5 30 821192 Knives having fixed blades 0.09 1 004.80 10 31 821210 Razors (excl. plastic razors) 0.62 4 346.03 10 32 821300 Scissors, tailors' shears 0.37 4 157.77 7 33 841490 Parts of air/vacuum pumps, air/other 83.43 544 194.81 5 gas compressors and fans 34 842489 Other mechanical appliances 0.38 87 102.95 40 35 848180 Taps, cocks, valves and similar 1.77 816 935.38 5 application for pipes, boilers shells, tanks, vats or the like; other appliances 36 850431 Other electrical transformers, having a 1.59 52 681.76 20 power handling capacity not exceeding

1 kVA 37 852990 Parts and accessories suitable for use 0.41 981 781.76 30 solely or principally with the apparatus of headings 85.19 to 85.21, other 38 853921 Electric filament lamps 0.02 25 627.26 7 39 901831 Syringes, with/without needles 1.54 36 143.88 30 40 902910 Revolution counters, production 0.19 1 847.56 10 counters taximeters, mileometers, pedometers and the like 41 903180 Measuring/checking instruments, 0.03 538 722.09 15 appliances and machines; other 42 940350 Wooden furniture of a kind used in 0.81 60 492.68 7 bedroom 43 940490 Mattress supports, articles of bedding 0.09 8 941.51 5 and similar furnishing; other 44 940550 Non-electrical lamps and lighting 0.25 10 707.88 5 fittings 45 950300 Tricycles, scooters, pedal cars and 0.38 204 664.45 43 similar wheel toys 46 960390 Brooms and brushes; other 0.96 9 586.77 5 47 960719 Slide fasteners; other 3.60 15 017.40 7

48 970110 Paintings, drawings and pastels 5.13 11 772.98 40 49 970400 Postage/revenue stamps, first-day 0.02 6.88 100 covers, stamp post-marks, postal stationary and the like 50 970500 Collections and collectors' pieces of 10.91 31.42 100 zoological, botanical, mineralogical, anatomical, historical, archaeological, palaeontological, ethnographic or numismatic interest Total 592.89 10 470 349.64

Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

It is shown from the study that there are 33 additional items on India’s concession list, which could be Palau’s export potential to India (table 4.36), subject to proper production and investment regime, amounting to $3.2 billion. Of these 33 items, 29 items were imported by India from the world and four were exported by Palau to the world but not to India. Three items that have 100% MoP on India’s concession list were neither exported by Palau to India and nor imported by India in 2012 and have high potential of exports.

Table 4.36. Additional potential products for exports by Palau to India No. Chapter Product description Palau India India MoP code exports to imports imports the world from the from in 2012 world in Palau in (US$ 2012 (US$ 2012 thousand) thousand) (US$ thousand)

1 030232 Yellowfin tuna (Thunnus albacares) 8 490.98 100 2 030234 Bigeye tuna (Thunnus obesus) 1 238.88 100 3 030235 Bluefin tuna (Thunnus thynnus) 13.60 100 4 030791 Molluscs; other including flours, meals 91.55 30 and pellets, fit for human consumption 5 050800 Coral and similar materials, shell of 4 598.46 40 molluscs, crustaceans or echinoderms and cuttle-bone 6 253090 Mineral substance, n.e.s. ; other 16 080.09 45 7 320412 Acid dyes, whether or not premetallised, 7 285.59 45 and preparations based thereon; mordant dyes and preparations based thereon 8 321290 Pigments (incl. metallic powders) 25 693.86 30 9 330790 Depilatories, sterile contact lens care 7 872.34 15 solution and other 10 350699 Prepared glues and other prepared 59 471.38 10 adhesives, not exceeding a net weight of 1 kg; other 11 400932 Tubes, pipes and hoses, of vulcanized 5 763.37 15 12 440349 Other, of tropical wood 740 814.72 45 13 441890 Builders' joinery and carpentry of wood; 12 528.16 12 other 14 442010 Statuettes and other ornaments, of wood 529.82 40 15 442190 Articles of wood n.e.s. in Chapter 44 34 712.47 10 16 481099 Paper and paperboard (excl. of 4810.13) 28 606.92 40 17 491199 Other printed matter, n.e.s. 101 448.35 30 18 680422 Millstones, grindstones, grinding wheels 94 259.25 5 and the like; of other agglomerated abrasives or of ceramics 19 700490 Drawn/blown glass, in sheets 10 106.85 5 20 701399 Other glassware of a kind used for table, 34 189.66 5 kitchen, toilet, office and indoor decoration 21 720410 Waste and scrap of cast iron 71 135.22 30 22 820320 Pliers (including cutting pliers) 4 905.40 12 23 820559 Other hand tools (including glaziers' 18 904.53 10 diamonds) 24 841391 Parts of the pumps of 8413.11-8413 289 839.50 40 25 841590 Parts of air-conditioning machines 299 743.11 5

26 843143 Parts for boring or sinking machinery of 291 750.86 5 subheading 8430.41 or 8430.49 27 853223 Fixed electrical capacitors 1 834.77 5 28 853939 Electric discharge lamps; other 13 101.44 7 29 854370 Electrical machines and apparatus having 403 605.32 15 individual functions; other 30 902780 Instruments and apparatus for physical or 244 978.27 15 chemical analysis, other 31 903300 Parts and accessories, n.e.s., for machines, 331 208.72 20 appliances, instruments or apparatus of chapter 90 32 940320 Metal furniture (excl. of 94.01) 57 251.42 5 33 961800 Tailors' dummies and other lay figures 7 024.58 100

Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

The Republic of Korea imported 12 items from Palau in 2013, worth $110,000. Only four of these 12 items are on the Republic of Korea’s concession list. Forty-four items, including the four items that were granted concessions by the Republic of Korea, were exported by Palau to the world in 2013 (table 4.37). The export value of those items for Palau was approximately $240,000. The import value of those 12 items by the Republic of Korea amounted to $11.5 billion. Therefore, the potential export value of the 44 items from Palau to the Republic of Korea is $240,000.

Table 4.37. Potential products for exports by Palau to the Republic of Korea No. Chapter Product description Palau Republic of Republic MoP code exports to Korea imports of Korea the world from the world imports in 2013 in 2013 (US$ from Palau (US$ thousand) in 2013 thousand) (US$ thousand)

1 030799 Molluscs and invertebrates 15.44 65 481.47 20 2 253090 Mineral substance, n.e.s.; other 3.95 55 331.60 50 3 320412 Acid dyes, whether or not premetallised, 0.32 38 919.51 30 and preparations based thereon; mordant dyes and preparations based thereon 4 330790 Depilatories, sterile contact lens care 0.04 39 872.97 0.04 30 solution and other 5 350699 Prepared glues and other prepared 2.09 18 758.33 50 adhesives, not exceeding a net weight of 1 kg; other

6 392690 Articles of plastics and articles of other 5.21 780 236.84 0.03 30 materials of headings 39.01 to 39.14, other 7 401039 Transmission belts or belting; other 0.02 22 116.10 30 8 401693 Gaskets, washers & other seals of 5.37 172 430.54 22.5 vulcanised rubber 9 442190 Articles of wood n.e.s. in Chapter 44 1.98 31 278.94 30 10 590310 Textile fabrics impregnated, coated, 56.53 6 562.56 30 covered or laminated with plastics other than those of heading 59.02; with polyvinyl chloride 11 610990 T-shirts, singlets and other vests, of 0.21 189 008.27 30 other textile materials 12 620462 Women's/girls' trousers, bib and brace 0.01 325 182.37 40 overalls, breeches and shorts; of cotton 13 690100 Bricks, blocks, tiles and other ceramic 1.72 4 955.55 22.5 goods of siliceous fossil meals (i.e. kieselguhr, tripolite or diatomite) or similar siliceous earth 14 691110 Tableware and kitchenware 0.03 79 964.54 22.5 15 700490 Drawn/blown glass, in sheets 0.14 850 306.33 50 16 731815 Screws and bolts (excl. of 7318.11-73) 0.09 250 048.63 50 17 732690 Articles of iron/steel, n.e.s. 3.51 2 052 409.40 30 18 820310 Files, rasps and similar tools 0.01 1 853.67 20 19 820320 Pliers (incl. cutting pliers) 0.31 17 969.60 10 20 820559 Other hand tools (including glaziers' 1.59 39 256.27 10 diamonds) 21 820790 Interchangeable tools for hand-tools 4.13 50 020.47 22.5 22 840991 Parts suitable for use solely or 0.06 521 222.90 30 principally with spark-ignition internal combustion piston engines 23 841360 Rotary positive displacement pumps 0.22 105 852.07 35 24 841391 Parts of the pumps of 8413.11-8413 0.03 234 328.20 30 25 841590 Parts of air-conditioning machines 0.57 174 278.88 50 26 842123 Oil/petrol-filters for internal combustion 0.14 93 785.19 33 engines 27 842131 Intake air filters for internal combustion 0.71 24 676.33 33 engines 28 842489 Other mechanical appliances 0.10 50 744.65 25 29 844399 Other parts and accessories for print 0.13 783 359.07 25 30 848180 Taps, cocks, valves and similar 0.64 1 906 338.30 50 application for pipes, boilers shells, tanks, vats or the like; other appliances 31 848310 Transmission shafts (including cam 1.03 163 226.36 30 shafts and crank shafts) and cranks 32 848320 Bearing housings 0.09 6 568.98 33 33 848360 Clutches and shaft couplings 7.60 145 229.36 33

34 850212 Electric generating sets with 10.70 5 560.57 33 compression-ignition internal combustion piston engines, of an output exceeding 75 kVA but not exceeding 375 kVA 35 850490 Parts of the machines of 85.04 22.33 283 362.73 30 36 851539 Machines and apparatus for arc welding 53.25 8 042.48 33 of metal; other 37 853650 Switches other than isolating switches 0.52 344 993.29 30 38 853690 Electrical apparatus for switching or 14.95 299 349.81 50 protecting electrical circuits, or for making connections to or in electrical circuits, for a voltage not exceeding 1,000 volts; other apparatus 39 854442 Other electric conductors fitted with 3.78 485 519.15 0.01 30 connectors 40 870829 Parts and accessories of the motor 0.09 284 549.13 50 vehicles of heading nos. 87.01 to 87.05; other parts and accessories of bodies (including cabs) 41 870830 Brakes and servo-brakes; parts thereof 0.57 275 233.77 50 42 870880 Suspension systems and parts thereof 1.00 97 645.23 50 43 903300 Parts and accessories, n.e.s., for 22.55 57 616.91 22.55 25 machines, appliances, instruments or apparatus of chapter 90 44 961800 Tailors' dummies and other lay figures 0.14 16 391.05 33

Total 243.88 11 459 838.00 22.62 Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

In 2013, 54 additional items not exported by Palau were imported by the Republic of Korea from the world (table 4.38). They are therefore potential items for exports by Palau to the Republic of Korea, subject to a proper production and investment regime, accounting for $24.3 billion

Table 4.38. Additional potential products for exports by Palau to the Republic of Korea No. Chapter Product description Palau Republic of Republic of MoP code exports to Koreas Korea the world imports imports from in 2013 from the Palau in (US$ world in 2013 (US$ thousand) 2013 (US$ thousand) thousand)

1 060319 Cut flowers and flower buds; other 5 609.31 14.4 2 271019 Petroleum oils and oils obtained from 6 913 868.10 30 bituminous minerals, other 3 300490 Medicaments 2 224 994.40 30

4 321290 Pigments (incl. metallic powders) 53 893.46 30 5 330410 Lip make-up preparations 59 413.42 30 6 330491 Beauty or make-up preparations; 16 865.34 30 powders, whether/not compressed 7 330610 Dentifrices, in individual retail 23 079.63 25 packages 8 330730 Perfumed bath salts and other bath 16 106.93 30 preparations 9 340111 Soap and organic surface-active 20 445.86 30 products and preparations for use as soap, in the form of bars, cakes, moulded pieces or shapes, and paper, wadding, felt and non-wovens, impregnated, coated or covered with soap or detergent; for toilet use (including medicated products) 10 382490 Prepared binders for foundry moulds or 2 004 344.30 30 cores, chemical products and preparations of the chemical or allied industries; other 11 390110 Polyethylene having a specific gravity 186 951.05 30 of < 0.94 12 392610 Office/school supplies, of plastics 14 669.19 25 13 392640 Statuettes and other ornamental articles 6 846.45 30 14 401519 Gloves (excluding surgical), mittens 61 185.63 30 15 401692 Erasers of vulcanized rubber other 332.35 30 16 420232 Articles of a kind normally carried in 89 394.80 30 the pocket or in the hand bag; with outer surface of plastic sheeting or of textile materials 17 420299 Trunks, suit-cases, vanity-cases, other 80 072.05 30 18 600690 Knitted/crocheted fabrics 2 490.18 30 19 640399 Other footwear; other 446 553.22 30 20 700420 Drawn/blown glass, in sheets 867.83 50 21 711419 Articles of goldsmiths'/silversmiths’ 690.34 30 wares, of other precious metal 22 711790 Imitation jewellery of base metal; other 12 999.63 30 23 732620 Articles of iron/steel wire 11 111.28 50 24 820110 Spades and shovels 3 620.16 30 25 820770 Tools for milling, for hand-tools 42 560.16 35 26 821210 Razors (excl. plastic razors) 30 659.64 30 27 821300 Scissors, tailors' shears 14 749.63 33 28 830249 Mountings, fittings and similar articles 22 505.74 30 29 840890 Compression-ignition, internal 438 990.60 30 combustion piston engines; other engines 30 841320 Hand pumps for liquids 3 316.59 22.5

31 841490 Parts of air/vacuum pumps, air/other 659 903.20 30 gas compressors and fans 32 848330 Bearing housings 122 946.75 33 33 850431 Other electrical transformers, having a 135 498.17 35 power handling capacity not exceeding 1 kVA 34 850440 Static converters 1 477 104.90 50 35 851310 Portable electric lamps 23 446.76 30 36 852990 Parts and accessories suitable for use 674 857.06 50 solely or principally with the apparatus of headings 85.19 to 85.21, other 37 853890 Parts suitable for use solely with the 1 446 066.60 35 apparatus of heading 85.35, 85.36 or 85.37, other 38 853929 Other electric filament lamps 19 829.50 30 39 853931 Electric discharge lamps; fluorescent, 95 874.20 30 hot cathode 40 853932 Electric discharge lamps; mercury or 30 934.98 35 sodium vapour lamps; metal halide lamps 41 853939 Electric discharge lamps; other 18 818.48 30 42 854370 Electrical machines and apparatus 1 766 499.80 33 having individual functions; other 43 901380 Liquid crystal devices 2 093 755.80 50 44 901831 Syringes, with/without needles 31 865.14 25 45 901890 Instruments and appliances used in 704 194.47 30 medical sciences, other 46 902780 Instruments and apparatus for physical 444 867.81 33 or chemical analysis, other 47 903180 Measuring/checking instr., apparatus 953 777.23 30 48 950300 Tricycles, scooters, pedal cars and 561 873.44 30 similar wheeled toys 49 950590 Festive/carnival/other entertainment 6 779.29 30 articles; other 50 950662 Inflatable balls 15 899.18 30 51 950691 Articles and equip. for general physical 98 500.81 30 exercise, gymnastics or athletics 52 950699 Articles and equipments for other 56 669.48 30 sports 53 950790 Line fishing tackle (excl. of 9507.) 27 654.49 35 54 960820 Felt tipped and other porous-tipped 12 437.23 25 pens and markers Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

With regard to the above export potential analysis, table 4.39 shows that the Marshall Islands’ potential value of exports to the APTA region could be $404.31 million, with the highest potential in Bangladesh and China. In the case of Micronesia, the potential export value could be

$35.82 million while for Palau it could reach $5.57 million. China could be the biggest export market in the APTA region for Micronesia and Palau.

Therefore, the analysis shows that, together, the Marshall Islands, Micronesia and Palau can gain $446 million in the APTA region market. In terms of export value, the Marshall Islands could gain the most from possible accession to APTA with a potential export value of $404.31 million. Table 4.39 also presents the rate of increase in the value of exports by the MTEC countries to the APTA region. Palau can achieve the highest rate of increase in export value at 27,338%.

Table 4.39. Rate of increase in exports to the Participating States of APTA Country Value of exported Value of potential Rate of increase (%) items that come export under MoP items that come (US$ million) under MoP (US$ million) Marshall Islands 78.71 404.31 414.00 Micronesia 9.96 35.82 260.00 Palau 0.02 5.57 27 338.00 Total 88.69 445.70 403.00 Sources: Author’s calculation using WITS COMTRADE and ESCAP APTA Secretariat data.

D. Reducing trade costs, enhancing services and investment

Briguglio (1995) described the difficulties that the small island developing countries generally face. The difficulties arise from their small size, insularity and remoteness, proneness to natural disasters, environmental factors and other issues. He described how these factors could affect the economy. Small size poses various problems such as limited natural resources endowment, high levels of imports and no possible substitution for those imports, high dependence on export markets, a small domestic market, limited domestic competition, limited economies of scale and limited human capital. Insularity and remoteness creates the problems of high trade costs. Often these islands are more prone to exploitation of their limited natural resources. They are also highly dependent upon external finances.

The above problems are quite common in the Marshall Islands, Micronesia and Palau, as pointed out in section B. Getting into a trade agreement can help these small island countries to overcome such bottlenecks. In this regard, it is essential to discuss the important aspects of the APTA Framework Agreement on Trade Facilitation, Trade in Services and Investment.

1. Trade facilitation

The Framework Agreement on Trade Facilitation, signed in 2009, broadly covers the areas that are beyond the existing obligations of WTO. The areas that are of prime focus in the agreement concern advanced information sharing, co-operation and undertaking obligations through future work programmes.

Trade facilitation measures are important for achieving a successful trade agreement. Trade liberalization or trade promotion together with better transportation facilitates can enhance trade; however, trade facilitation means more than just that aspect. In today’s world, trade facilitation also includes measures for reduction in transaction costs associated with the “enforcement, regulation and administration of trade policies” (Staples, 2002). Its main aim is to reduce any unnecessary administrative costs of all the trade partners during trade. In this regard, the most hampering situation occurs due to customs clearance in the developing countries (in general, developed countries have a well-organized/capable customs administration).

The Marshall Islands, Micronesia and Palau are located remotely in the Pacific and do not have good accessibility. These facts give rise to cost disadvantages. Trade facilitation measures can reduce such costs and can help the islands to make better institutional provisions. In a possible situation of accession of these countries to APTA, the trade facilitation measures of APTA should be discussed in order to take advantage of membership. Before discussing trade facilitation further, the various indicators of trade facilitation need to be considered.

Trade cost is the most important indicator of trade facilitation. In today’s world, countries are now better connected and economically integrated because of the advent of better communications and technologies; however, the presence of trade costs hampers trade procedures. Trade facilitation measures are useful for minimizing these transaction costs. Figures 4.21 and 4.22 list the trade costs of Micronesia and Palau with 10 important trade partners including the Participating States of APTA. Data on the trade costs of the Marshall Islands are not available.

Figure 4.21. Cost of total trade for Micronesia 700

600

500

400

300 2009

200 2010 United States dollars 100 2011

Sources: ESCAP and World Bank database.

Figure 4.22. Cost of total trade for Palau 700

600

500

400 2009 300 2010 200

United States dollars 2011 100 2012 0

Sources: ESCAP and World Bank database.

From figures 4.21 and 4.22, it is apparent that Micronesia’s trade costs with Participating States of APTA are not among the lowest in the list. India has the highest trade cost in 2009 whereas China and the Republic of Korea are at the mid-range point on the list. In the case of Palau, trade cost with India is also quite high. The trade cost with China and the Republic of Korea are in the mid-lower range. In recent years, this cost has been declining for India and the Republic of Korea. 80

Tables 4.40 and 4.41 list the export and import costs of the Marshall Islands, Micronesia and Palau with the world.

Table 4.40. Export costs of MTEC countries (deflated US dollars per container) Country 2010 2011 2012 2013 Marshall Islands 731.4 725.2 711.2 685.4 Micronesia 1 254.4 1 192.7 1 153.8 1 116.1 Palau 944.8 779.7 777.6 764.7 Source: World Bank database.

Table 4.41. Import costs of MTEC countries (deflated US dollars per container) Country 2010 2011 2012 2013 Marshall Islands 757.7 751.3 736.7 710.0 Micronesia 1 254.4 1 192.7 1 153.8 1 116.1 Palau 879.5 727.7 734.4 722.3 Source: World Bank database.

Micronesia has the highest levels of export and import costs per container. The Marshall Islands and Palau have lower export and import costs than the average export and import costs of the Pacific island countries (ESCAP, 2013). In recent years, the costs of imports and exports have been decreasing for these three countries (tables 4.40 and 4.41).

The average number of days for exports and imports by the Pacific island countries in 2013 were 24 days and 26 days, respectively (ESCAP, 2013). The time to export is important, especially for these three countries, as they have agricultural and fish products in their export basket, which are perishable. Table 4.42 lists the export and import times of these three countries.

Table 4.42. Time for MTEC countries to export and import, 2013 Country Time to export (days) Time to import (days) Marshall Islands 23 25 Micronesia 30 31 Palau 26 31 Source: World Bank database.

According to ESCAP (2013), trade facilitation provides four benefits: (a) improved trade competitiveness; (b) increased FDI; (c) increased participation of SMEs in international trade; and (d) improved economic trade prospects. The APTA Framework Agreement on Trade Facilitation gives importance to sustained economic growth and development in all its Participating States through trade relations. To achieve this, the objective of the Trade Facilitation Framework Agreement is to simplify and harmonize trade procedures. Thus trade

81 facilitating measures can be very helpful. Tariff reductions or being granted margins of preference by other Participating States of APTA can increase their profits from exports. Transparent and easy formalities can help to reduce the time and cost of export, which is a crucial aspect.27

2. Trade in services

The Marshall Islands, Micronesia and Palau have some of the best unspoiled beaches in this region, which offers great potential for tourism development and source of revenue that can help them to meet budget/trade deficits. In fact, Palau is already a tourist destination and the tourism sector of the country already contributes to the economy. Co-operation and trade in services could become a very important source of revenue for development as trade only in goods cannot create much income due to higher transport costs. Access to overseas labour markets for the islanders through trade agreements could be beneficial by enabling them to earn income abroad and send money back to their countries to assist their families. However, there is an urgent need for financial, technical and specialized assistance in order to enable the three countries to promote and develop their service industry. The Framework Agreement on Trade in Services includes such provisions for the Participating States of APTA and a liberalized services regime in APTA, will enhance trade and investment in services between them. It may also make it possible to integrate their economies more effectively through supply chains and backward-forward linkages of industries in the region. The objectives under the framework agreement are to: (a) Enhance cooperation among the Participating States in order to improve efficiency and competitiveness as well as diversify production capacity, and the supply and

27 In this regard, we can mention about the MTEC trade and investment facilitation initiative. In line with the MTEC 2015-2019 Work Program, a sub-regional trade and investment facilitation needs assessment Workshop was convened in Majuro, Marshall Islands, on 7-9 July 2015 and was conducted with the technical assistance of the Commonwealth Secretariat, the International Trade Centre (ITC) and the United Conference on Trade and Development (UNCTAD) and the participation of ESCAP. The objectives of the workshop was take stock of the sub-region’s trade and investment facilitation current conditions and undertake a preliminary gap analysis and needs identification with a view to increase the flow of trade and investment within the sub-region and between the sub- region and the rest of the world.

The Workshop identified the measures and reforms necessary to facilitate trade and investment flows within the sub- region and between the sub-region and the rest of the world, including establishment and publication of average release time, simplifying formalities and documentation requirements, enhancing customs cooperation, establishment of enquiry points, introducing electronic payment, and setting-up of single windows.

National validation workshops are to be conducted to validate the preliminary assessment undertaken during the workshop. In this regard, cooperation with the APTA Participating States could prove to be crucial.

distribution of services of service suppliers within and outside the participating countries; (b) Substantially reduce restrictions with a view to facilitating trade in services among the Participating States; and (c) Liberalize trade in services by expanding the depth and scope of liberalization beyond WTO General Agreement on Trade in Services (GATS).

Under the agreement, the main areas of cooperation in services trade could be: (a) the establishment or improvement of infrastructural facilities; (b) joint production, marketing and purchasing arrangements; (c) research and development, and (d) the exchange of information.

The agreement also supports the identification of future areas of services for cooperation as well as starting negotiations on providing preferential market access in the services sectors. These provisions would go beyond the commitments of countries under GATS and associated schedules.

3. Investment

With regard to achieving economic development and competitiveness in the world market, the most important factors are: (a) the availability of advanced knowledge of technology, (b) better infrastructure facilities to enable the implementation of such know-how in the domestic economy, and (c) better financial capacity or capability to sustain economic development. These factors are important to building efficient and modern industrial sectors that can help a country to gain a foothold in export markets. The availability of adequate investment can help a country to more easily meet these demands.

The Marshall Islands, Micronesia and Palau are suffering from the lack of those factors. They do not have modern infrastructure, e.g., health facilities, transport systems, power generation and telecommunications, which is a big drawback for their development goals and it leaves them continually dependent upon foreign financial support. They do not have economies of scale, which is essential to inducing better industrial development. Micronesia even has the problem of a high unemployment rate that is clearly a result of the country’s underdeveloped economic structure. In this regard, the Government of the Marshall Islands webpage 28 states that an initiative is underway to create a more favourable environment for (foreign) investment and land-lease procedures.

There is also information on the possible sectors in which such investment can make a contribution; they include the light manufacturing sectors such as coconut and coconut oil production, scrap recycling and waste management as well as the production and exporting of handicraft products using pandanus and other local materials. In addition, there are large mineral

28 See www.rmiembassyus.org/Economy.htm. 83 deposits such as high-quality cobalt, manganese etc. in the Marshall Islands’ 200-mile Exclusive Economic Zone (EEZ); however, the excavation of these minerals requires the proper technology and extensive investment. Palau, together with the Marshall Islands and Micronesia lack a suitably developed services sector, modern equipment and other technologies and FDI required for the development of such marine resources.

The APTA Framework Agreement on Investment addresses such issues. Accession to APTA can help in addressing those issues through integration. The Framework Agreement gives prime importance to sustainable economic growth and development in all its Participating States by recognizing that investment is crucial to providing knowledge and finance for sustaining the pace of economic, industrial, infrastructure and technology development. The objectives of this Framework Agreement are to: (a) Substantially liberalize and increase the flow of investment to the Participating States and the implementation of intra-APTA investment projects. Therefore, provisions are included for facilitating public-private sector linkages in order to improve intra-APTA investments; (b) Jointly promote Participating States as investment destinations; (c) Strengthen and increase the competitiveness of Participating States’ economic sectors; (d) Progressively reduce or eliminate investment regulations and conditions that may impede investment flows and the operation of investment projects in Participating States; (e) Progressively strive towards a harmonized investment regime among all the Participating States; (f) Promote the free flow of investment and technology transfer among Participating States; and (g) Exchange and harmonize investment data, and develop a collective database on APTA supporting industries and technology suppliers.

4. Other areas of cooperation

The Pacific island countries are blessed with huge marine resources. The Western and Central Pacific Ocean areas are considered to have the largest tuna resources in the world that contribute to the economies of the island countries. However, over the years, the island countries have been facing increasing difficulties in dealing with foreign fishing vessels. Vessels from many countries (e.g., China, the Republic of Korea, Japan and the United States) are entering their territorial ocean areas and exploiting the fisheries resources. There is an increasing concern over these practices whether or not they are sustainable. Fish numbers, especially in the case of tuna, are decreasing possibly due to the use of the more capital-intensive “purse seining” method of fishing by fishing vessels from the large nations (Havice and Campling, 2009). However, these island countries do not have sufficient monitoring vessels or other related technology and equipment. Hence, there is considerable illegal fishing by foreign vessels in their territories.

Palau took a commendable step in the conservation of its marine resources by planning to create the world’s first marine sanctuary in its EEZ, where fishing will not be allowed in order to protect its 1,300 fishes and 700 coral species.29 In 2009, Palau also created the world’s first shark sanctuary, covering 630,000 km2, which is an area almost the size of France. The Government has also developed a national framework for community-based conservation, and implemented some of the world’s most stringent regulations banning bottom trawling. These initiatives are not only good for the sustainability of the country’s marine resources; they also attract more tourists and thus more income from tourism. A recent study by Vianna et al (2012) of Palau’s shark sanctuary and its impact on the country’s economy, found that a reef shark can contribute around $2 million to Palau’s economy within its 16-year life span. The study also found that (a) 21% of divers who visit Palau do so to see sharks and that (b) the shark-diving industry contributes almost 8% to Palau’s total GDP. The shark-diving industry spends $1.2 million on salaries and other wages.

The Marshall Islands and Micronesia have created EEZ of about 750,000 square miles and 110,000,000 square miles, respectively, which is expected to be helpful in developing the fishing industry of both countries as well as in the conservation of marine resources, the strengthening of the marine ecosystem, including coral reefs, and in helping to boost the tourism industry.

Palau has been listed by the National Geographic among the “Last Great Places on Earth”30 and the conservation initiatives taken by the country will definitely make it more attractive to tourists. The Marshall Islands is famous for its excellent sports-fishing conditions. In recent years, some of its more remote and less-fished atolls, such as Bikini and Mili, have become prime destinations among deep-sea and fly-fishing enthusiasts.31 The Marshall Islands also has many Second World War wrecks and thus offers wreck-exploration scuba diving opportunities.

Fish 2.0, a business completion that connects sustainable fishing and aquaculture business with potential investors, held a workshop in February 2015 for entrepreneurs from Micronesia, the Marshall Islands, Palau, Guam and Saipan. The workshop participants came to the conclusions that: (a) These island countries need sustainability-oriented business inventions; (b) There is a need for considerable investment in the development of small fishing firms and community-based business initiatives, as there is not a sufficient supply of fish throughout the season. They also need better storage facilities and cold houses; and (c) More than 50% of tuna sold in the world market are supplied by the Pacific island countries but without processing or adding any value to such exports.

29 See http://epi.yale.edu/the-metric/small-nation-palau-makes-big-waves. 30See http://voices.nationalgeographic.com/2014/07/02/palau-plans-to-ban-commercial-fishing-create-enormous- marine-reserve/. 31 See www.rmiembassyus.org/Economy.htm. 85

Due to the lack of fish processing facilities, these island countries are unable to benefit from the potential fish processing business. A UNESCO (2008) report on sustainable development in Pacific island countries points the need for developing higher-price markets, higher-value products, value-adding through industry domestication and the development of new fisheries sources.32

Some important points emerge from the above discussion: (a) The island countries need a better monitoring mechanism, modern technologies, training and political grouping in order to protect their goal of protecting marine resources, local fish industries and the tourism sector; (b) In order to sustain and develop the tourism sector, better training and more investment is required in that sector; (c) Greater investment is needed in the fishing industry; and (d) The unspoiled beaches and marine resources could attract greater numbers of tourists, especially from China, India and the Republic of Korea.

These issues highlight the need for investment in different sectors, the development of better services and tourism sectors, and sustainable production and consumption practices. The possibility of investment and cooperation in services can be dealt with by following the APTA Framework Agreement on Investment and Services as discussed above. Further discussion on sustainability, tourism, FDI and productive capacity – areas in which co-operation can be expanded in the future as follows.

(a) Tourism

The geographical location and remoteness of the Marshall Islands, Micronesia and Palau could prove to be a boon for them. They have unexploited natural resources and their islands, and beaches are still virgin, making them perfect tourist destinations that are “far from the madding crowd”. A large number of tourists from China, India and the Republic of Korea visit the Asia- Pacific region and they could become a good source of tourism revenue for the Pacific island nations. The Asia-Pacific region had the second-highest number of tourist arrivals in 2013 (UNWTO, 2014). In 2013 the total number of tourist arrivals in Micronesia and Palau were 42,000 and 105,000,33 respectively. In comparison, the Marshall Islands received a much small number of tourists. According to the latest available data in 2012, tourist arrivals in the Marshall Islands totalled 4,600. According to several reports, Palau has become a popular destination for Chinese tourists, the number of whom is increasing every year.34 However, Palau does not have a

32 See www.unesco.org/new/fileadmin/MULTIMEDIA/FIELD/Apia/pdf/PACIFIC-SD%20report.pdf. 33 See http://data.worldbank.org/indicator/ST.INT.ARVL. 34 See www.ibtimes.com/china-outbound-tourism-palau-cuts-flights-china-alleviate-tourism-pressure-1848594.

86 good enough infrastructure to sustain this growing tourist influx. Accession to APTA could, therefore, help the Government of Palau to get assistance, especially from China, in this regard.

There is a need for proper care and management of natural resources as they are directly associated with tourism and the national economies of the Marshall Islands, Micronesia and Palau. Thus, the importance of eco-tourism is rapidly growing,35 as the eco-systems of these islands are fragile and can be easily affected by outside influences. The islands have good potential for eco-tourism, and future co-operation in this regard could certainly be beneficial.

(b) Productive capacity

From the analysis of export potential in section C of this chapter, it is clear that there is a need to increase market share. To achieve that objective, the most important step is to increase productive capacity.36 According to Freire (2011), the Marshall Islands, Micronesia and Palau had the lowest productive capacity in 2009. On the other hand, countries such as China and India have increased their productive capacity to much higher levels during the past 25 years. Funding such development can only become possible through external assistance; the Participating States of APTA could provide loans as well as share their experience through public and private partnerships. However, to attract such assistance, the Marshall Islands, Micronesia and Palau will 37 have to create favourable policies.

China and the Republic of Korea, which are the largest importers of fish products from the Marshall Islands, Micronesia and Palau; could help in formulating effective policies for that objective by following the provisions in Framework Agreements.

FDI is a good option for building productive capacity. According to UNCTAD, the Marshal Islands receives its highest percentage of FDI inflows from Japan. Another major contributor is the Republic of Korea, while the inflow of FDI from China is also considerable. In the case of Palau, it receives a very small amount of FDI compared with the Marshall Islands. Palau receives FDI only from Japan, the United States, China and the Republic of Korea. Information on FDI for Micronesia is not available.

35 According to Wikipedia, “eco-tourism is a form of tourism that involves visiting fragile, pristine and relatively undisturbed natural areas, intended as a low-impact and often small-scale alternative to standard commercial (mass) tourism”. 36 According to Freire (2011), productive capacity can be defined as the set of capabilities available in a country to produce and market its output of goods and services. 37 This would certainly be very important for the three countries to establish a vibrant productive sector in a number of targeted areas. 87

A study by the Commonwealth Secretariat (2015) suggested that FDI from the emerging south can be attracted if these small island countries enjoy preferential market access to other countries. The study also noted that China was increasingly investing in small States such as, Fiji, Papua New Guinea and Samoa, among others. FDI could also be a good platform for further cooperation between the Marshall Islands, Micronesia, Palau and the Participating States of APTA.

E. Conclusion and recommendations

The present study has attempted to show the benefits and challenges for the Marshall Islands, Micronesia and Palau through accession to APTA. These three Pacific island nations are remotely located in the Pacific Ocean and suffer from typical challenges, such as a lack of funds and resources, low economies of scale, climate change, high cost of transportation, etc.

They primarily export agricultural and fisheries products. Their manufacturing sector is very small. The GDP growth rate is low and the workforce is moving towards the services sector from the primary and secondary sectors. Their economies are becoming more dependent on the services sector.

The export items of these countries comprise primary products and fish products and they have a comparative advantage in the latter. However, they continue to suffer from a high trade deficit due to high imports and very low exports over the years.

The Marshall Islands and Micronesia are diversifying their export markets towards the Participating States of APTA. Previously, their main markets were the United States, Japan and ASEAN. The export market shares of the Marshall Islands and Micronesia in the Participating States of APTA are now 32% and 35%, respectively. The Marshall Islands is exporting mineral fuel and mineral oil products to India and the Republic of Korea plus fish products to China. Micronesia’s main export markets in the Participating States of APTA are the Republic of Korea and China, comprising mainly fish products to these markets. The prime export market for Palau is Japan.

The trade complementarity analysis between individual Participating States of APTA and the Marshall Islands, Micronesia and Palau shows that trade complementarity between the Participating States of APTA and Micronesia is increasing while for Palau it is increasing only with the Republic of Korea. Overall, trade complementarity between the Participating States of APTA and the Marshall Islands, Micronesia and Palau is low, possibly due to trade barriers.

Based on available data for 2013, calculation shows that the total market potential of the Marshall Islands is $404.31 million in four APTA markets (China, India, the Republic of Korea and Sri Lanka). It has market potential for 84 items in China, 68 items in India, 94 items in the Republic of Korea and 29 items in Sri Lanka. In the case of Micronesia, the APTA market

88 potential (China, India, the Republic of Korea and Sri Lanka) is $ 35.81 million. According to available data, Palau only exported to China and the Republic of Korea in 2013. Palau’s total export potential in these two countries is $ 4.97 million. For China the export potential is for 42 items and for the Republic of Korea it is for 44 items. Palau’s latest export data with India, which are available only for 2012, show that Palau has an export potential of $ 600,000 for 50 items.

A few other products that are not exported by the Marshall Islands, Micronesia and Palau to the Participating States of APTA could be potential export items subject to proper production and investment regimes. Some of these items, such as fish products (Chapter 3 of HS), are listed for 100% concessions on India’s MoP.

Although the trade costs of imports and exports by the Marshall Islands, Micronesia and Palau have been decreasing during recent years, they are still comparatively high when trading with Participating States of APTA. The Marshall Islands, Micronesia and Palau also have higher number of days for their exports and imports compared with the world average. The Framework Agreement of APTA on Trade Facilitation can address these issues by helping to minimize trade costs and related obstacles through measures such as tariff reductions, transparent and easier formalities in trade, the reduction of information asymmetry, etc.

The Marshall Islands, Micronesia and Palau have natural resources and natural beauty that could attract high numbers of tourists from the Participating States of APTA. However, in order to sustain growth in tourism they need financial, technical and specialized assistance. The lack of investment remains a major issue in these three island countries. Although they are receiving FDI, it is not adequate. For domestic purposes as well as for ensuring export competitiveness, development of productive capacity and technology is a major need. In addition, much more investment is needed for increasing productive capacity as well as building supportive industries for economic development and export competitiveness. The APTA Framework Agreement on Trade in Services and Investment can help strengthen cooperation in such issues by improving infrastructural and joint production facilities, promoting the free flow of funds among the Participating States of APTA, research and development and technology transfer.

China, India and the Republic of Korea, which are emerging global economic powers, have extensive economic expertise, technological know-how and experience. A recent study by the Commonwealth Secretariat (2015) showed that China, India and the Republic of Korea are the biggest trade partners for small countries (including Pacific island nations). Thus, accession to APTA can benefit the Marshall Islands, Micronesia and Palau in their progress along the development path by learning from, and partnering with China, India and the Republic of Korea.

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