Palau has made a concerted effort to promote commercial ties in order to bolster its economic expansion. Despite having a tourist, fishing, and some agricultural economy, Palau has entered into trade agreements to promote sustainable development and fortify its international ties. The main trade agreements that the country has and how they affect its economy are summarized in this article.

COFA with the US
An agreement predominating among the rest, is the Compact of Free Association signed by Palau with the United States in 1994. With this accord, exclusive military access to Palau’s territory is provided to the United States, in exchange for financial, defense and other services, as well as resources’ access. In addition, the COFA enables citizens of Palau to travel to the US freely and work or study without the need of acquiring a visa which facilitates the movement of people and economy between the two nations. Because it facilitates better access to U.S. markets and offers substantial finance, COFA is important to Palau’s economy even if it is not exactly a trade agreement.
The Pacific Islands forum (PIF) and regional trade cooperation
Fiji, Samoa, Tonga, and other Pacific Island nations are urged to collaborate provincially through the Pacific Islands Forum (PIF), of which Palau is a functioning part. A significant task of PIF is the Pacific Agreement on Closer Economic Relations (PACER) Plus, which looks to build investment and trade in the region. PACER Plus’s main objectives are to lower trade barriers, enhance market accessibility, and foster more economic collaboration amongst Pacific countries as well as with Australia and New Zealand. Even though Palau hasn’t signed PACER Plus yet, its participation in PIF shows that it is dedicated to regional trade cooperation, which may result in lower tariffs and more possibilities for Palauan products and services to be traded.
Free trade arrangement with Taiwan
One of its most important commercial partners, Taiwan, and Palau have remained close. A formal Free Trade Agreement (FTA) has not been ratified, but Palau and Taiwan have developed strong economic connections, with Taiwan giving Palau substantial development assistance in sectors including infrastructure, healthcare, and education. Exports of fisheries and agriculture from Palau benefit from this economic alliance, which promotes investment and commerce between the two nations.
UNCTAD initiatives
Trade-related technical assistance and capacity-building programs have been made available to Palau via a number of UNCTAD (United Nations Conference on Trade and Development) projects. Palau’s position as a Small Island Developing State (SIDS), which presents specific vulnerabilities because of its remote location and little resources, is one of the trade issues that these programs assist it solve. Participating in UNCTAD projects helps the country strengthen its trade and economic sectors, particularly in the areas of climate adaptation, sustainable fishing, and tourism.
Fisheries and trade agreements
Palau adopted several treaties to help manage and promote sustainable fishing within its Exclusive Economic Zone (EEZ) because the fisheries sector is one of the important sectors of the economy of this nation. Palau’s joining the PNA, which is an arrangement concerning the management of tuna resources for the benefit of the Pacific members, is, among many others, a great hallmark in the quest for sustainable resource sharing cooperation. Working with PNA guarantees that Palau keeps up sustainable fishing methods, protecting its marine resources and earning money from fishing permits. Palau has also worked on fisheries-related commerce with nations such as the European Union and Japan, granting licenses for access to its seas in return for payments and technical assistance. Along with providing revenue for Palau, these agreements support sustainable management techniques in the Pacific fisheries industry.
Partnerships with Australia and Japan
Palau has significant trade and development aid partners in Australia and Japan. Bilateral agreements with these nations address a variety of topics, such as infrastructure, fishing, and tourism. Large amounts of grants and loans, particularly from Japan, are given to Palau to assist infrastructure and tourist project development. Palau also receives finance and trade capacity-building assistance from Australia via the Department of Foreign Affairs and Trade (DFAT). Palau’s trading opportunities are enhanced by these partnerships, which also support development initiatives that are essential to the country’s economic stability.
World trade organization (WTO)
Palau is not a member of the World Trade Organization (WTO) yet, but it has shown an intention to accede to the organization to help in its economic integration with the rest of the World. In this case, Palau, after joining WTO, would have an opportunity to participate in negotiations, resolve trade disputes and operate within a system of trade governed by rules. This could also enable Palau join other countries in the reduction of trade restrictions, thereby enhancing economic opportunities in fisheries and tourism for instance.
You may also find these articles helpful