Value Chains and Connectivity in the Pacific

This paper examines global value chain (GVC) activity in the Pacific, through the lens of newly assembled data on value added trade. It finds that GVC participation is very weak by world standards. Connections with relatively large markets like Australia and New Zealand are frequently stronger than connections with Pacific neighbours. The paper then examines data that could help explain these findings, focusing on bilateral trade costs and transport connectivity, as influenced by non-traditional trade policies like regulatory barriers. It concludes that there is considerable scope for the Pacific to promote value chain integration by improving connectivity in all its dimensions, particularly air.