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Trade Liberalization and Free Trade Rules

            Trade liberalisation carries real economic challenges for small Pacific Island countries (PICs). Free trade rules expressed under regional free trade agreements (FTAs) have created a combination of situations that threaten the capability of Pacific Island economies and political and social stability in the region. [ CITATION KIL09 l 1033 ]. However, free trade is applied upon food and goods, requiring all countries together with South Pacific Island countries to open doors to every other countries product and removes any protections for their own. Free trade is a system of trade policy that allows traders to act and to transact without the interference from government. Under the free trade policy, prices are a reflection of true supply and demand, and the sole determinants of resource allocation. Free trade differs from the other forms of trade policy where the allocation of goods and services amongst trading countries are determined by artificial prices that may or may not reflect the true nature of supply and demand. Free trade agreement does not automatically lead to poverty eradication and are often harmful to countries at the different stages of development. It reduces government tariff revenue, and can increase unemployment and fuel social crises. The free trade has at-least has two rules, as products from all countries must be treated the same, as preferential trade deals that give Island products better treatment than products from other countries are no longer acceptable. Furthermore, the south pacific islands cannot discriminate against foreign produced goods and it must be treated similar to the local products. .
             Moving on Pacific Agreement on Closure Economic Relations (PACER) was formalized on 18th August 2001 in Nauru and came in force on 3rd October 2002. The development of trade relations and development between Pacific Islands Forum member countries, which includes Australia and New Zealand as well as PICs.

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