72783 v1 World Trade Indicators 2009/10 Tonga Trade Brief Trade Policy account the volume of exports it is 4.6 percent, with the rate faced by agricultural goods and non- Tonga’s trade regime is undergoing changes as a result agricultural goods significantly different, at 6.4 and 0.9 of its recent accession to the WTO. The simple percent, respectively. Over the course of 2008, the real average of the MFN applied tariff rate was 16.9 effective exchange rate of the Tongan currency, the percent in the most recent year (2006), which is pa’anga, appreciated by 6.3 percent, making exports significantly higher than the average for both the East less competitive. Asia and Pacific region and lower-middle-income countries, which were 10.5 and 11.9 percent, Tonga has ratified the Pacific Island Countries Trade respectively. Based on the MFN applied tariff, Tonga Agreements (PICTA), together with 10 other countries ranks 159th out of 181 countries (where 1st is least out of 14 members of the Pacific Islands Forum (the restrictive). Tonga’s exports are concentrated in the Forum Island Countries) that signed it in 2001.2 agricultural sector and, consequently, the average tariff PICTA, an agreement for free trade in goods, and, in for agricultural goods is 24.4, which is much higher future, services, falls under the broader Pacific than the tariff for non-agricultural goods. In the most Agreement on Closer Economic Relations (PACER) recent year for which there is data, Tonga had a that in addition to the Pacific Island Countries also maximum tariff on all goods (excluding alcohol and includes Australia and New Zealand.3 In August 2009, tobacco) of 45 percent. The trade policy space, as leaders of the Pacific Island Forum have agreed to measured by the wedge between bound and applied start negotiating PACER plus, a free trade agreement tariffs (the overhang), was only 0.5 percent in 2006, that would include Australia and New Zealand as well which is substantially lower than the averages for its as the Forum Island Countries and that would cover regional neighbors and fellow lower-middle-income goods, services, and investment.4 Tonga is also countries, which were 25.7 and 26 percent, engaged in negotiations with the EU on an Economic respectively. Regarding the extent of its commitment Partnership Agreement (EPA). This is a regional EPA to trade liberalization in services, Tonga ranked 42nd that involves all 14 countries that are signatories to out of 148 countries on the GATS Commitment PICTA. Index. In March 2008, the government removed excise tariffs Behind the Border Constraints on all imports of aircraft and aircraft parts in order to Tonga remained in the top 30 percent of international assist its domestic airline industry.1 business environments in 2009, being ranked 52nd out of 183 countries in the Ease of Doing Business index. External Environment With relatively low cost per container imported and exported, the country ranks 51st in the Trading Across The simple average of the rest of the world tariff faced Borders subcategory of the index, which looks at the by Tonga’s exports is 10.3 percent. When taking into extent of trade facilitation in the country. The number of required documents and days to export and import into and out of the country are comparable to the Unless otherwise indicated, all data are as of August 2009 regional averages. and are drawn from the World Trade Indicators 2009/10 Database. The database, Country Trade Briefs and Trade Outcomes Trade-at-a-Glance Tables, are available at http://www.worldbank.org/wti. Tonga suffered a recession in 2007, but made a comeback in 2008, partially due to increased revenue If using information from this brief, please provide the from tourism. Spending by tourists increased by more following source citation: World Bank. 2010. “Tonga than 50 percent in real terms for the fiscal year 2008 Trade Brief.� World Trade Indicators 2009/10: Country Trade (ending in June 2008). During 2008, Tonga’s total Briefs. Washington, DC: World Bank. Available at trade in goods and services grew by 14.9 percent in http://www.worldbank.org/wti. World Trade Indicators 2009/10 Tonga Trade Brief nominal U.S. dollar terms.5 Prices for squash and 4. Pacific Islands Forum Secretariat, August 2009. vanilla, two of Tonga’s most important exports, 5. All trade data in this section is from Tonga declined in 2008. Fishing conditions in 2008 were also Department of Statistics unless otherwise noted. poor, contributing further to the decline in the 6. Asian Development Bank, 2009, p. 287. agriculture, forestry, and fishing sector of 3.2 percent.6 7. U.S. Department of State, 2009. The fall in demand due to the global recession caused a decrease in total exports in the last quarter of 2008 of 7.1 percent over the fourth quarter of 2007. Despite References this, exports managed to increase by 8.9 percent for Asian Development Bank. 2009. Asian Development the year, or 10.2 percent including re-exports. Tonga’s Outlook 2009: Rebalancing Asia’s Growth. June 26, 2009. main export markets are Australia, New Zealand, . countries experiencing economic recessions, exports Bilaterals.org. April 2009. “PACER & PICTA.� are expected to decrease. However, in the first quarter Bilaterals.org. June 29, 2009 . quarter of 2008 on the back of traditional exports, Kelsey, Jane. April 2004. “Big Brothers Behaving Badly: despite the fact that re-exports plummeted by over 99 percent over the same period. The Implications for the Pacific Islands of the Pacific Agreement on Closer Economic Relations Tonga suffered as prices for its imports rose sharply in (PACER).� Pacific Network on Globalisation the first half of 2008, increasing the cost of food, fuel, (PANG). . nominal U.S. dollar terms in 2008, although growth Matangi. “Tonga Lifts Aircraft Tariffs to Support slowed by the end of the year to 0.8 percent in the Domestic Airline Growth.� March 28, 2008. Matangi. fourth quarter. In the first quarter of 2009, imports fell July 6, 2009 . imports have historically been very high (in 2008, Pacific Islands Forum Secretariat. “Regional Trade.� imports were over 17 times higher than exports). To September 10, 2009. . of Tonga’s GDP in 2008, are extremely important. ———. August 2009. “Fortieth Pacific Islands Forum: Over half of the population lives abroad, mostly in Forum Communique.� September 10, 2009. Australia, New Zealand, Japan, and the United States, . recession.7 Foreign direct investment inflows Tonga Department of Statistics. 2009. Quarterly Foreign accounted for 10.8 percent of the GDP in 2007. Trade Report: 1st Quarter 2007-1st Quarter 2009. . U.S. Department of State: Bureau of East Asian and 1. Matangi, March 28, 2008. Pacific Affairs. May 2009. “Background Note: 2. Bilaterals.org, April 2009. Tonga.� June 26, 2009 . April 2004, p. 18.