RESTRICTED  
  
WT/TPR/G/3 49 
8 November  2016 
(16-6109) Page: 1/11 
Trade Policy Review Body   Original: English  
 
TRADE POLICY REVIEW  
REPORT BY  
SOLOMON ISLANDS  
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the 
Marrakesh Agreement Establishing the World Trade Organization), the policy statement by 
Solomon Islands  is attached.  
 
 
Note: This report is subject to restricted circulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Solomon Islands . WT/TPR/G/349  • Solomon Islands  
 
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  Contents  
1   ECONOMIC ENVIRONMENT  ................................ ................................ ..........................  3 
1.1   Overview  ................................ ................................ ................................ ....................  3 
1.2   Economic Growth  ................................ ................................ ................................ ........  3 
1.3   Fiscal Policy  ................................ ................................ ................................ ................  3 
1.4   Monetary Policy  ................................ ................................ ................................ ...........  4 
1.5   National Debt  ................................ ................................ ................................ ..............  4 
1.6   Inflation  ................................ ................................ ................................ .....................  4 
1.7   Trade, Balance of Payments and Foreign Direct Investment  ................................ ..............  4 
1.8   Sectoral Performance  ................................ ................................ ................................ ... 5 
1.9   Economic Challenges and Reform Efforts  ................................ ................................ ........  6 
1.10   Constitutional Reform  ................................ ................................ ................................ . 6 
1.11   LDC Graduation  ................................ ................................ ................................ .........  6 
2   TRADE AND TRADE RELA TED POLICIES  ................................ ................................ ....... 7 
2.1   Diagnostic Trade Integration Study and Trade Pol icy Framework  ................................ ....... 7 
2.2   Trade in Services and Investment  ................................ ................................ ..................  7 
2.3   Most Favoured Nation (MFN) Tariffs  ................................ ................................ ...............  7 
2.4   Export Taxes and Import Duties  ................................ ................................ ....................  7 
2.5   Competition Policy  ................................ ................................ ................................ ....... 8 
2.6   Intellectual Propert y ................................ ................................ ................................ .... 8 
3   TRADE NEGOTIATIONS A ND RELATIONSHIPS  ................................ .............................  8 
3.1   Bilateral  ................................ ................................ ................................ .....................  8 
3.1.1    Future Relations  ................................ ................................ ................................ ....... 8 
3.2   Regional  ................................ ................................ ................................ .....................  9 
3.2.1    Melanesian Spearhead Group  ................................ ................................ .....................  9 
3.2.2    Pacific Island Countries Trade Agreement  ................................ ................................ .... 9 
3.2.3    Pacific Agreement on Closer Economic Relations Plus  ................................ ....................  9 
3.2.4    Economic Partnership Agreement and Interim Economic Partnership Agreement  .............. 10 
3.3   Multilateral Trading Arrangements under the WTO  ................................ .......................... 10 
3.3.1    Aid for Trade  ................................ ................................ ................................ ........... 10 
3.3.2    Trade Facilitation Agreement  ................................ ................................ ..................... 10 
3.3.3    Fisheries Subsidies  ................................ ................................ ................................ ...10 
3.3.4    Special and Differential Treatment: Small and Vulnerable Economies  ............................. 11 
4   CONCLUSION ................................ ................................ ................................ .............  11 
 
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  1  ECONOMIC ENV IRONMENT  
1.1  Overview  
1.1.  Since the last Trade Policy Review in 2009, Solomon Islands has made a number of important 
steps towards improving its trading  and wider economic environment. As a result, the economic 
performance of Solomon Islands has been less volatile  than previous years, with both the economy 
and the trade balance growing.  
1.2.  Furthermore, Solomon Islands has adopted legislation on customs valuation; notified its 
Category A commitments under the Trade Facilitation Agreement (TFA), which Solomon Islands 
intends to ratify once technical assistance requirements have been identified; adopted public 
procurement legislation; formulated a dedicated Trade Policy Framework (TPF) to guide Solomon 
Islands ' trade, industry, investment and economic agenda over the comi ng years; made progress 
in the fisheries sector and set up an effectively functioning National Trade Development Council, 
the only cross government, private sector and civil society committee dedicated to ensuring the 
trade agenda is well captured within t he wider national development strategy.  
1.3.  As a small island state with limited domestic capacity, trade is an integral part of the 
Solomon Islands ' economy. This reliance on trade underpins the Solomon Islands ' commitment to 
pursuing policies which promote the expansion of a liberal trading regime and greater 
diversification of domestic production to secure more value added from exported goods and 
services. Though Solomon Islands relies to a greater extent on preferential trading arrangements 
than on the mul tilateral agreements headed by the WTO, it still recognises the importance of the 
WTO in delivering global economic growth and seeks to work cohesively with other members to 
pursue a beneficial global trading regime. As such, Solomon Islands fully supports  the conclusion 
of the Doha Development Round to achieve concrete developmental outcomes.  
1.2  Economic Growth  
1.4.  Growth in the Solomon Islands ' economy has markedly improved since the last Trade Policy 
Review. During the Global Financial Crisis in 2009, the econo my suffered a severe downturn but 
quickly recovered registering 7. 9% real GDP growth in 2010. Since 2011, growth rates have 
trended downwards but remained relatively stable since 2013, recording 2. 9% growth in 2015. 
From 2016, GDP growth is predicted to re main steady, despite the expected declines in exports of 
primary commodities and the continued depression in the global economy. This growth should be 
driven by expansions across major sectors including wholesale and retail, manufacturing, 
construction, ho spitality, and crucially, planned public investments. Lower energy prices will 
continue to support household incomes and growth in retail and trade. Additional sources of 
potential future growth include commodities exports, particularly of cocoa, fisheries , forestry and 
coconuts. The National Development Strategy, which sets out the strategic direction for the future 
development of Solomon Islands, in collaboration with donor efforts, are targeting these sectors in 
order to improve Solomon Islands ' capacity  to export by ensuring market access requirements are 
met and quality standards and testing facilities are improved.  
1.3  Fiscal Policy  
1.5.  The fiscal performance of Solomon Islands has been relatively strong since 2009 with 
successive fully funded budgets as a re sult of economic growth, marginal tax reforms and donor 
assistance. Between 2009 and 2014 total consolidated funding increased at an annual average rate 
of around 1 4%. In 2014, the Solomon Islands ' Government (SIG) recorded a fiscal surplus of 
SI$129 million due to non -implementation of planned projects, a large increase in export duty 
from logs and increases in non -tax revenue from the fisheries sector. Externally sourced funding 
provided by donors grew at an annual average rate of around 1 9% from 2009 to 2014.  
1.6.  In 2014 -15, revenue was subdued by the closure of the Gold Ridge Mine, and though 
revenue collection outperformed projections, donor support was lower than expected resulting in 
an overall deficit that was financed using reserves. Expenditure is set to grow in 2016, which if 
fully implemented would not be in line with a balanced budget. A notable achievement in 2015 was 
the full repayment of all outstanding domestic bonds. By the end of 2015, public sector debt stood 
at approximately 9% of GDP, one of  the lowest in the Pacific Islands.  WT/TPR/G/349  • Solomon Islands  
 
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  1.4  Monetary Policy  
1.7.  The introduction of the Central Bank of Solomon Islands (CBSI) Act in 2012 saw a marked 
improvement in transparency and accountability for the Solomon Islands monetary authority. 
Since the early 1980s, th e Solomon Islands dollar ( SI$) has continued to consistently track a trade 
weighted basket of currencies, dominated by the US dollar, which has been allowed to fluctuate 
within a pre -determined band allowing greater flexibility to absorb global commodity p rice 
movements and minimise revaluation loses. In 2014, CBSI reviewed the exchange rate policy to 
make it more accommodative by pegging the SI$ to a basket of major trading partners ' currencies 
and removed the tight exchange rate margins enabling currencie s within the exchange rate basket 
to adjust fully against each other to determine the value of SI$. Bilateral exchange rate 
movements in 2015 showed a weakening of SI$ against the US dollar but an appreciation against 
the Australian and New Zealand dollars , leading to cheaper exports to the US and cheaper imports 
from Australia and New Zealand.  
1.8.  Monetary conditions slowed in 2014, when the CBSI monetary base fell by 6% in the second 
half of the year, consistent with falls in gross foreign reserves, partly i nfluenced by leakages in the 
capital account combined with revaluation losses. By 2015, however, the downward trajectory had 
reversed, with reserve money reaching a higher level than that recorded in 2013, driven by 
improvements in net domestic assets. Wei ghted average lending and deposit rates increased in the 
second half of 2014, leading to a 7 basis point rise in the weighted interest rate margin, but fell 
back in 2015.  
1.5  National Debt  
1.9.  The Solomon Islands ' Government continues to manage public debt in acco rdance with the 
Solomon Islands Debt Management Framework which governs how the existing portfolio of 
government borrowing is managed and any new borrowings that are incurred. Since the inception 
of the Honiara Club Agreement (HCA) in 2005, there has been a steady downward trend in total 
government debt outstanding, which by 2015 stood at SI$697 million . Total debt stock, as a 
percentage of GDP, fell to 9% in 2015, from 1 2% in 2014; however, the trend is set to reverse in 
the near future once the pipe line debt is disbursed. Annual debt servicing as a proportion of 
domestically sourced revenue in 2015 was around 3. 1%; thanks to the policies implemented by 
successive governments, borrowing is now at a sustainable and affordable level.  
1.6  Inflation  
1.10.   From 2008 to 20 13, inflation in the Solomon Islands ' economy was relatively high, at an 
average of 7. 5%. Modifications to the exchange rate regime in 2012 strengthened the currency 
which has helped to moderate inflationary pressures, though at a cost of lower export grow th. By 
the end of 2014, headline inflation stood at just below 5%. Despite a sharp depreciation in SI$ 
against the US dollar, imported inflation was contained below zero per cent, likely attributed to 
declining fuel and food prices and an appreciation of t he SI$ against the Australian and 
New Zealand dollars.  
1.11.   In 2015, Solomon Islands experienced deflation for the first time, reaching its lowest point 
in June 2015 of negative 4. 8%, brought about primarily by lower domestic food prices. By the end 
of the year , headline inflation returned to positive figures, at 2. 9%, with steady increases in the 
three  month moving average recorded in the first quarter of 2016. Meanwhile, core inflation which 
excludes volatile, price control and excise items in the CPI has been  steadily declining since its last 
peak at 8. 3% in December 2012, and stood at 3. 7% at the end of 2015.  
1.7  Trade, Balance of Payments and Foreign Direct Investment  
1.12.   The balance of payments of Solomon Islands improved markedly in 2015 to a surplus 
position of SI$395 million , reflected in improvements in the capital and financial accounts and 
reduced current account deficit, caused by boosts in FDI inflows. The trade balance, however, 
experienced a slight deterioration in 2015 to SI$43 million . This was due to a  decline in export 
values caused by a depreciation of SI$ against the US dollar, and an appreciation against the 
Australian and New Zealand dollars, at 11. 5% and 10. 6%, respectively. The higher value of the 
SI$ led to an increase in imports from Australia and New Zealand, due the lower prices of imported WT/TPR/G/3 49 • Solomon Islands  
 
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  goods. This, combined with low oil prices, added to the negative trade balance.  Large capital 
outflows in the fourth quarter of 2014 contributed to the fall in gross foreign reserves.  
1.13.   Once logging exports contract, the trade balance is anticipated to worsen, particularly if 
growth in exports of other commodities remains stagnant. Notwithstanding data limitations, 
Solomon Islands has been the destination of significant inward investments; in 2015, approved 
foreign direct investment (FDI) applications rose by 1 4%, mainly in the wholesale and retail, 
mining, tourism, forestry and construction sectors. Total FDI stock in 2015 was estimated at 
SI$5,157  million , the highest level since 2011 and a 6. 6% increase on 2014. Looking ahead, the 
investment chapter in PACER Plus could promote further expansion in FDI; however Solomon 
Islands needs to ensure that foreign investment takes place in an appropriate regulatory 
environment.  
1.14.   As an aside, data scarcity severely hind ers the formulation of trade policy. Improvements 
are underway in this area, via the introduction of the ASYCUDA World system, but capacity and 
resource constraints limit its effective use.  
1.8  Sectoral Performance  
1.15.   Logging, along with mining, fisheries and agr iculture, dominate the Solomon Islands ' 
economy. Between 2011 and 2015, exports of logs increased relative to total exports, accounting 
for 46% of total exports in 2011, increasing to 6 8% in 2015. Exports of commercial crops, namely 
copra, coconut oil, pal m oil, fisheries and cocoa, have been subject to volatility over the last 
five years. Exports of cocoa, copra and palm oil peaked in 2011, at SI$231 million, SI$119 million 
and SI$326 million, respectively, and then declined to SI$97 million, SI$90 million and 
SI$208 million in 2015, respectively. Exports of fish products increased consistently from 2011 to 
2014, up to SI$459 million, subsequently declining to SI$381 million in 2015. Currently, a small 
percentage of the total catch in Solomon Islands ' EEZ i s processed domestically, with most 
exported to the EU. Compliance with the EU 's stringent import requirements is a challenge for 
Solomon Islands fisheries; however, progress is being made and Solomon Islands expects to lift its 
'illegal, unreported and un regulated (IUU) ' yellow card imminently. Encouraging investment to 
expand processing should increase the contribution of fisheries to the economy.  
1.16.   The tourism industry, though currently underdeveloped, offers robust growth potential for 
Solomon Islands an d the current tourism policy focuses on yield improvements, opportunities to 
generate linkages with other sectors, namely agriculture, and enhancing the domestic tourist 
experience. Visitor arrivals have been consistently above 20,000 since 2010, with the highest 
number recorded in 2013 of 24,431. Increased tourism could help alleviate the expected loss in 
export revenue from logging, smooth out the volatility of primary commodity exports, and 
generate employment. Currently, however, growth is constrained b y low investment in the tourism 
sector resulting in low inventory levels, limited human resource capacity, limited marketing and 
poor infrastructure. Solomon Islands offers unparalleled beauty with pristine tropical ecosystems, 
perfect for tourists seeking  adventure and an 'off the beaten path ' experience. With extensive 
diving sites of both natural reef and World War II heritage, and at a short distance from Brisbane, 
Australia, Solomon Islands has the opportunity to attract tourists searching for more tha n just a 
sandy beach.  
1.17.   The telecommunications and transport sectors offer concrete examples of private sector led 
growth since the previous Trade Policy Review. The 2009 telecommunications reforms have led to 
extraordinary growth in the sector; competition  has improved the efficiency and reliability of 
mobile phone services, significantly increasing employment and injecting substantial investment 
into the economy. The World Bank estimates that the telecommunications sector directly added 
3.3% to real GDP gr owth between 2008 and 2012. In the transport sector, the government 's 
growth record has been equally impressive. Since 2011, SIG, with support from the ADB and 
Australia, has contributed to the growth of the local contracting industry. By 2016, there were 
approximately 20 contractors able to undertake machine -based road works, compared to only 6 in 
2011. This in turn creates new employment opportunities. Moreover, in 2015, 6 0% of labour -
based road works were taken up by women. Tapping into the productive po tential of women is 
fundamental to enhancing the trade performance of Solomon Islands, a facet well understood by 
the Solomon Islands ' Government. In 2015, the National Strategy for the Economic Empowerment 
of Women and Girls was released, which sets out t he strategic areas to enhance gender equality 
and improve the economic status of women.  WT/TPR/G/349  • Solomon Islands  
 
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  1.18.   Nonetheless, economic growth is projected to average only 3 to 4% per annum over the 
medium term.  This rate of growth will not be sufficient to generate substantial imp rovements in 
living standards. The economic effects of the closure of production at the Gold Ridge Mine also 
highlight the challenges of Solomon Islands ' narrow economic base. That said, potential 
investment projects, including the Tina River Hydro Power p roject, and further investments in 
mobile telecommunication and ICT (including the undersea cable), could provide additional support 
to the medium -term growth outlook. The Solomon Islands ' liberal investment regime, upheld and 
promoted by the government, s hows its commitment to meeting these challenges and working on 
critical areas of reform that will generate growth in emerging sectors in the economy.  
1.9  Economic Challenges and Reform Efforts  
1.19.   There remain a number of substantial economic challenges facing the  Solomon Islands ' 
economy, not least the shortage of productive capacity to enable significant quantities and 
consistency of exports to the international market. Infrastructure remains poor; credit accessibility 
for small businesses remains limited and a l ack of clear property rights and conflict over land 
ownership, high utility costs and expensive communications further reduce the ease of doing 
business and impede investment.  
1.20.   There are a number of reforms underway, however, that should go some way to add ressing 
the myriad of challenges faced by the Solomon Islands economy. The upcoming Customs Act 
review should increase revenues through improved compliance measures. The National Transport 
Plan (2007 -2026) and National Infrastructure Investment Plan (2013)  set out the path for 
transport and infrastructure improvements and requests for development assistance should be 
linked with the priority initiatives identified therein. Reforms in areas such as competition and 
investment, applicable to the majority of se ctors across the economy, have led to benefits for 
consumers, for example in the telecommunications industry. Despite considerable progress to 
date, further reforms are still necessary across the economy, to overcome those challenges 
identified herein and reinforce the benefits.  
1.21.   Government expenditure should increasingly aim at tackling productive capacity issues, 
improving infrastructure, health and education. Many government reforms are underway that are 
aimed at addressing the impediments to doing busin ess in Solomon Islands, including 
comprehensive tax review, programmes designed to  improve access to finance for Solomon 
Islanders, and  the implementation of special economic zones to help attract investment. Despite 
many reforms, the business sector in So lomon Islands still suffers from an environment that is not 
conducive to investment compared to other countries in the region. An acute vulnerability to world 
commodity prices is also an ongoing challenge that Solomon Islands faces.  
1.10  Constitutional Reform  
1.22.   The Government 's constitutional reform programme is still underway, seeking to shift from 
a parliamentary democracy to a federali sed system of governance, which will devolve greater 
planning, and decision -making to provincial and community levels.  
1.11  LDC Gradu ation  
1.23.   In 2015, Solomon Islands met two thresholds for Least Developed Country graduation; per 
capita income, by 1 3% and human assets, by 9%. Subsequently, impact assessments to 
determine the vulnerability profile of Solomon Islands will be undertaken. Foll owing which, if in 
March 2018 Solomon Islands again meets two of the three graduation thresholds, it will in 
principle be found eligible for graduation, pending endorsement from United Nations ' Economic and 
Social Council (ECOSOC). Following endorsement of  eligibility, Solomon Islands would typically be 
given three  years until it officially graduates, at the end of 2021/ 22. This will depend to a certain 
extent on continued progress against the identified indicators.  WT/TPR/G/3 49 • Solomon Islands  
 
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  2  TRADE AND TRADE RELA TED POLICIES  
2.1  Diagnos tic Trade Integration Study and Trade Policy Framework  
2.1.  The Diagnostic Trade Integration Study (DTIS) completed in 2009 represents an important 
milestone in the process of developing a coherent approach to trade policy and trade related policy 
formulation, interlinking national activities, developing domestic legislation, identifying trade 
related technical assistance, prioritising trade agreements and mainstreaming trade policy into 
broader government planning processes. The action matrix comprising policy reform measures and 
capacity strengthening activities helped formulate the projects that have been and continue to be 
funded under the Enhanced Integrated Framework (EIF), specifically in the agricultural and 
tourism sectors.   
2.2.  Solomon Islands ' dedicated Tr ade Policy Framework (TPF) 2015 is an ambitious document 
outlining policy measures and strategies which seek to transform Solomon Islands into an 
internationally competitive and dynamic economy that reaches out to the Pacific and beyond. As 
the government 's comprehensive guide to trade policy, it effectively coordinates decision making 
and builds institutional support for trade policies to ensure effective participation in international 
trade by government, private sector and civil society. The objectives o f the TPF are incorporated 
into the wider National Development Strategy, exemplifying trade as an area of strategic 
importance to Solomon Islands. As of yet, little progress has been made to implement the policy 
recommendations of the TPF. Technical assist ance from donor partners is required to construct a 
detailed implementation plan and effective monitoring and evaluation tools.  
2.2  Trade in Services and Investment  
2.3.  Services account for the majority of economic activity in Solomon Islands, fluctuating 
between  55 and 6 0% of GDP between 2007 and 2012. Approximately one quarter of services are 
exported, comprised predominantly of travel and transportation. Services imports encompassed, in 
addition to travel and transport, of other business services. Trade in serv ices has run a persistent 
deficit since 2011 and in 2015 stood at SI$601 million, a marginal reduction on the 2014 trade in 
services deficit of SI$824 million. There are a number of pieces of legislation which regulate the 
quality of service provision for consumer protection, namely in the financial, aviation, and utilities 
sectors. In other sectors, a regulatory regime is absent or inadequate. Services legislation is 
currently being reviewed prior to making commitments on trade in services in trade agreeme nts, 
given the increased risk of exposure domestic consumers and producers may face following 
liberalisation. Solomon Islands has a very liberal investment regime with few restrictions in terms 
of sectors for foreign investors to enter. Land ownership, how ever, does cause a number of 
constraints for foreign investors and reform in this area is much needed.  
2.3  Most Favoured Nation (MFN) Tariffs  
2.4.  Over the past decade, tariff rates have fallen significantly with most goods taxed at 1 0%, 
below Solomon Islands ' WTO bound rates. Restrictions raising tariffs are, at present, limited only 
to those parties to the Melanesian Spearhead Group Trade Agreement (MSG TA) and Pacific Island 
Countries Trade Agreement (PICTA), covering a small volume of imports. If pending regiona l trade 
agreements are signed, however, this will increase the volume of trade being subject to lower 
bound rates.   
2.4  Export Taxes and Import Duties  
2.5.  The current regime governing import duties provides for a great deal of flexibility, given the 
absence of a l egislative framework that creates space for Solomon Islands to implement trade 
policy. Though there is a recognition that a liberal tariff policy has the potential to drive growth, 
the fiscal challenges that were mentioned in the previous Trade Policy Revi ew remain, including a 
narrow tax base given the limited size of the formal economy, vulnerability of fiscal revenue to 
commodity price shocks and restrictions over the use of export taxes in trade agreements as a 
means of generating fiscal revenue.  
2.6.  The d omestic economy of Solomon Islands continues to rely heavily on a small number of 
unprocessed commodities. Despite increases in on -shore processing in the fisheries sector, only WT/TPR/G/349  • Solomon Islands  
 
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  approximately 1 1% is processed in country, amounting to a substantial portion of lost potential 
revenue through value addition activities. The constraints faced in the manufacturing sector limit 
the scope for value addition, given the difficulties sourcing inputs from the domestic economy. 
Given these restrictions, the opportunity f or government intervention to promote domestic 
industrial activity is limited. Operating in the confines of low productive capacity, export taxes 
remain a necessary policy lever to encourage domestic processing to contribute to higher 
economic returns. Fur thermore, export taxes provide an important source of revenue and a 
practical means of capturing economic rents from natural resources. Trade agreements which seek 
to restrict the use of export taxes are carefully assessed and attempts to negotiate suffici ent policy 
space to allow for the continued use of export taxes, at least temporarily, are encouraged.  
2.5  Competition Policy  
2.7.  As trade expands and Solomon Islands integrates further into the global architecture, an 
efficient competition framework is necessary  to secure the interests of consumers and producers, 
ensure non -discrimination of foreign companies in the domestic economy and the efficient 
allocation of resources to incentivise innovation. Liberalisation and ensuing competition are 
recognised as key dr ivers of growth by the Solomon Islands ' Government, which along with the 
Asian Development Bank (ADB) is developing a comprehensive competition policy for Solomon 
Islands, to replace the former ad -hoc approach.  
2.8.  Due to its diverse geography, relatively spar se population dispersed over significant 
distances, relying on private provision of key services could lead to lower than socially optimal 
levels of service provision in key economic provisions. The dominance of state owned enterprises 
(SOE) in a number of  key sectors, including aviation, broadcasting, electricity, ports, post and 
water, seeks to connect the national economy and the provision of low cost access to these 
services is widely recognised as a driver of growth. Nevertheless the introduction of co mpetition in 
some of these sectors could, if managed appropriately to ensure a suitable regulatory framework is 
in place, lead to improved service provision at lower costs. The government must consider what 
type of investment it wishes to attract and how t o incentivise the private sector to participate. The 
recent problems with the Solomon Islands Ports Authority pricing structure show the problems that 
can arise through manipulation of key SOEs. A review into the current legislations governing these 
sector s should be undertaken to ensure greater transparency for Solomon Islanders.  
2.6  Intellectual Property  
2.9.  Solomon Islands ' interests in intellectual property remain much as they were detailed in the 
previous Trade Policy Review, principally, that given its minima l capacity to conduct original 
research and innovate, intellectual property should predominantly assist in poverty alleviation and 
rural development. At present, Solomon Islands ' intellectual property laws are dated and not in 
compliance with its obligatio ns as a WTO member, however, consultations on legislative reforms 
are under way. To best advance the interests of Solomon Islands, detailed consideration of the 
type of intellectual property protection required, consistent with its development plan, is 
necessary. Solomon Islands should continue to actively engage at the regional level to protect 
traditional biological resources and traditional knowledge, promoting the implementation of the 
Model Law on Traditional Knowledge and Expressions of Culture (TKEC)  and the finalisation of the 
draft framework on Traditional Biological Resources, Innovations and Practices.  
3  TRADE NEGOTIATIONS A ND RELATIONSHIPS  
3.1  Bilateral  
3.1.1   Future Relations  
3.1.  The dominance of East Asia in global markets and the resultant shifts in global tr ade patterns 
have precipitated a change in outlook for many developing countries. Under the Generalised 
System of Preferences, Solomon Islands ' exports have preferential, though not necessarily duty 
free, access to the markets of China, Chinese Taipei, Jap an and South Korea. Despite this access, 
exports from Solomon Islands are disadvantaged by the preferential access of other countries ' 
exports to these markets. To avert further preference erosion and ensure continued preferential 
access for key exports fr om Solomon Islands, such as copra and logs, trade policy may wish to WT/TPR/G/3 49 • Solomon Islands  
 
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  respond and shift accordingly, with the possibility of seeking improved access to Chinese markets 
and engaging more comprehensively with ASEAN Members.  
3.2  Regional  
3.2.1   Melanesian Spearhead Group  
3.2.  Despite the relatively low volume of trade undertaken by parties to the MSG Trade 
Agreements at present, the cultural, strategic and political importance of this regional grouping, to 
which Solomon Islands has been a party to since 1993, has the potential  to provide a strong 
coalition for improving access elsewhere, namely East Asia. In 2017, Solomon Islands will provide 
duty free access to all but a few exempted products from MSG countries and exports from 
Solomon Islands will have duty free access to the  markets of MSG countries. MSG parties ' 
willingness to extend negotiations to trade in services, investment and labour mobility under 
MSGTA3 is likely to produce considerable benefits for Solomon Islands. Foreign investment should 
lead to employment genera tion, lower prices and greater choice for consumers; as well as 
opportunities to develop skills and undertake trainings in other MSG countries, to then utilise in 
the domestic economy.  
3.2.2   Pacific Island Countries Trade Agreement  
3.3.  With the conclusion of other regional trading arrangements expected this year, the relevance 
of and interest in PICTA is likely to diminish amongst Forum Island Countries (FICs). Furthermore, 
under PICTA, labour mobility although originally included in the PICTA TIS, was excluded from  final 
Protocol. For Solomon Islands, the benefits it is likely to receive from labour mobility may be 
largely satisfied by the MSG agreements. Despite the limited comprehensive coverage of sectors 
offered under PICTA, compared to other regional/preferenti al trade agreements, Solomon Islands 
intends to continue engagements with other parties, although what limited resources are available 
should be prioritised to regional negotiations which will likely have a greater impact.  
3.2.3   Pacific Agreement on Closer Econo mic Relations Plus  
3.4.  Pacific Agreement on Closer Economic Relations (PACER) Plus negotiations commenced in 
2009 with the aim of strengthening regional integration, securing guaranteed preferential market 
access for FICs to the Australian and New Zealand econ omies and realising a truly developmental 
approach to trade relations. The main Chapters of the agreement include Trade in Goods, Trade in 
Services, Investment, Development Assistance and Labour Mobility. For Solomon Islands, the 
prospect of increased mark et access for goods and services exports to Australia and New Zealand 
is not the principle driver of negotiations. Increased imports from developed country partners are 
likely to exceed the modest increase in Solomon Islands ' exports, due to the extent of 
liberalisation demanded by the aforementioned parties and limited productive capacity in the 
domestic economy. The short term adjustment and implementation costs are likely to impose 
significant economic and political pressures. In acknowledging this, a co re component of the 
agreement is Development and Economic Cooperation, whereby it is envisaged that assistance will 
be provided to Solomon Islands so as to enable the effective implementation of the agreement, 
strengthen productive capacities and promote s ustainable growth and development through Aid for 
Trade.  
3.5.  Where Solomon Islands can accrue the greatest gains, given its sizeable comparative 
advantage in the supply of low skilled labour relative to neighbouring economies – identified along 
with developme nt cooperation as a key offensive interest – is from improved access to Australia 
and New Zealand labour markets. To date, Solomon Island workers have benefited immensely 
from the Recognised Seasonal Employer (RSE) scheme which sends unskilled labourers to  New 
Zealand, with numbers increasing from 238 in the 2007/08 season to 564 in the 2015/16 season. 
Despite this expansion, Solomon Islands lags significantly behind other Pacific Island countries; 
with Vanuatu for example sending over 3,000 workers in 2015 /16. Participation in the Seasonal 
Worker Scheme (SWP) in Australia is far lower than under the RSE, with only 54 workers being 
sent in the 2015/16 season. Current efforts are underway to expand participation and take 
advantage of the significant benefits that should accrue following the removal of caps on the 
number of workers entering Australian labour markets. There are also significant gains to be made 
from the expansion of both schemes into other industries, including hospitality and tourism. WT/TPR/G/349  • Solomon Islands  
 
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  Labour mo bility provides a clear mechanism for Solomon Islands to overcome some of its foremost 
intractable constraints, such as distance from major markets and high transportation costs. The 
benefits are significant, including skill development and remittances, wh ich spent in the domestic 
economy, will boost economic growth.  
3.6.  It is the intention that PACER Plus be concluded in 2016. Discussions on the legal text are 
almost finalised; however, at the time of writing negotiations between Australia and Solomon 
Islands on market access offers for goods are still under discussion.  
3.2.4   Economic Partnership Agreement and Interim Economic Partnership Agreement  
3.7.  Since the expiry of the waiver permitting Cotonou trading preferences in 2008, Solomon 
Islands has been trading with th e European Union (EU) under the latter 's GSP scheme offered to 
all LDCs. Negotiations of the comprehensive Economic Partnership Agreement (EPA), which 
commenced in 2002, have now stalled and are effectively terminated, given the inability to resolve 
the cu rrent impasse between some FICs and the EU related to the formers ' management of their 
fisheries industry. Faced with the loss of GSP preferences in the advent of LDC graduation, 
Solomon Islands has begun to explore alternative trading arrangements to safe guard and 
expanded access of its fisheries products to the EU market, namely signing the interim Economic 
Partnership Agreement (iEPA), as Fiji and Papua New Guinea have previously done. Solomon 
Islands remains committed to the regional efforts which seek to conclude a development friendly 
comprehensive EPA which will produce regional wide benefits.  
3.3  Multilateral Trading Arrangements under the WTO  
3.3.1   Aid for Trade  
3.8.  Solomon Islands is committed to the WTO framework and during the review period has made 
progress to implement and domesticate the WTO agreements. The establishment of a mission in 
Geneva should encourage greater participation by Solomon Islands going forward.  
3.9.  Despite the significant progress Solomon Islands has made improving the trading capacity of 
the economy over the past decade, particularly following the establishment and assiduous efforts 
of the National Implementation Unit (NIU) under the EIF, there remains substantial room for 
improvement, demonstrated by the outstanding recommendations of the DTIS and TPF.  
3.10.   Current aid for trade requirements include technical assistance to ensure effective 
implementation and compliance with pending trade agreements, at regional and multilateral levels, 
much needed infrastructure support to improve connectivity, expand tourism opportunities and 
reduce transportation costs, and support to develop the productive capacity of Solomon Islands ' 
exporters to take advantage of current market access opportunities. Significantly, diversification 
and value addition are essen tial facets that aid for trade programmes should address to secure 
foreign investment and encourage knowledge spill -over.  
3.3.2   Trade Facilitation Agreement  
3.11.   Since the last Trade Policy Review, Solomon Islands has notified its Category A 
commitments under the Tr ade Facilitation Agreement (TFA) and is in the process of ratification, 
which through the identification of technical assistance requirements across each article, should 
enable participants in the trade value chain to ensure goods being exported and import ed can do 
so with minimal disruption. In submitting its technical assistance and capacity building 
requirements, Solomon Islands hopes to address the fundamental challenges to trade facilitation, 
such as laboratory testing and infrastructure deficiencies t o increase competitiveness and reduce 
costs to enable more effective participation in the global trading system.  
3.3.3   Fisheries Subsidies  
3.12.   As a key industry in the Solomon Islands economy, the issue of fisheries subsidies is of 
considerable importance in Solomo n Islands ' engagement in the multilateral trading regime. As 
such, Solomon Islands considers excessive subsidisation by distant water fishing nations of their 
fisheries sectors as a key contributor to overfishing, with the resulting environmental and WT/TPR/G/3 49 • Solomon Islands  
 
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  econo mic damage, as well as acting as a distortion to global fishing trade. Solomon Islands 
continues to argue that current WTO disciplines need to be strengthened and that certain forms of 
subsidies which contribute to overfishing and overcapacity should be cu rtailed.   
3.3.4   Special and Differential Treatment: Small and Vulnerable Economies  
3.13.   As an LDC, Solomon Islands is entitled to special and differential treatment across WTO 
agreements, which enables the expansion of trading opportunities, safeguarding of trade int erests 
and support for capacity building to carry out general trade related activities. Though no 
agreement was reached on the way forward for the Doha Development Agenda at the 
10th Ministerial Conference in Nairobi, Solomon Islands continues to support t he establishment of a 
work programme for small and vulnerable economies to recognise the inimitable difficulties faced 
and to seek targeted support to overcome them.  
4  CONCLUSION  
4.1.  Solomon Islands is fully committed to implementing and maintaining an open econ omy which 
encourages trade and the diversification of industry to generate economic growth. Though 
progress has been made since the last Trade Policy Review, Solomon Islands still has a long road 
ahead to ensure the gains from trade are fully secured and r each the most vulnerable.  
4.2.  There are a number of intractable constraints faced by the Solomon Islands economy which 
make participation in the WTO rules -based multilateral trading regime difficult, including 
geographical isolation, supply side and productive  capacity constraints and vulnerability to natural 
disaster and climate change, which can further marginalise the economy from the global trading 
system. Solomon Islands seeks to underscore the importance of support from other Members to 
recognise these ch allenges and assist in their mitigation to guarantee the effective functioning of 
the WTO system for all members . 
 
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