The problem in context

The background to accession

Vanuatu began its WTO accession process in July 1995, and the main momentum towards membership came in 1997 with the advent of a structural adjustment package known as the Comprehensive Reform Programme (CRP). This set of reforms aimed to improve governance, enhance the role of the private sector, increase economic growth and further liberalize the economy. As part of this last process the programme was directed at reducing trade barriers within the context of WTO membership. The import-substitution policy, followed since independence in 1980, was failing. The economy was generally closed, while Vanuatu had always run a visible trade deficit; some policy-makers and politicians felt that the economy should integrate more into the global economy.

A further impetus towards accession was that all Vanuatu's neighbours and principal trading partners were WTO members – Fiji, the Solomon islands, Papua New Guinea, Australia and New Zealand. There was a feeling that trade relations would be enhanced under the WTO framework.

Economic conditions

The CRP did not meet many of its objectives. Growth in gross domestic product (GDP) declined in the following five years: per capita GDP was no higher in absolute terms in 2003 than in 1998, and is now about US$1,150. Exports fell 40% during the same period, incoming investment fell faster than world-wide foreign direct investment trends and government expenditure increased as a proportion of GDP.