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Introduction: After three decades as part of the UN Trust Territory of the Pacific under US administration, this westernmost cluster of the Caroline Islands opted for independence in 1978 rather than join the Federated States of Micronesia. A Compact of Free Association with the US was approved in 1986 but not ratified until 1993. It entered into force the following year when the islands gained...

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Economic Overview: Palau has one of the Pacific Islands’ higher standards of living. It has a well-established high-end tourism sector with good potential for expansion, although care is needed to maintain environmental standards. Palau has a strong services industry and an active private sector. Fisheries and small-scale agriculture are also important for local employment. Palau faces many development challenges including a small population and the high cost of service delivery due to the levels and cost of imported goods and expertise. The service sector dominates the Palauan economy, contributing more than 50 per cent of GDP and employing more than half ...

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History: Palau was initially settled more than 4,000 years ago, probably by migrants from what today is Indonesia. British traders became prominent visitors in the 18th century, followed by expanding Spanish influence in the 19th century. Following its defeat in the Spanish-American War, Spain sold Palau and most of the rest of the Caroline Islands to Germany in 1899. Control passed to Japan in 1914 and ...

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International Relations: Palau joined the United Nations (UN) as a full fledged member on 15 December 1994. It currently has bilateral relations with 40 countries, including the United Kingdom and the European Union.

Palau is a member of the Pacific Island Forum (PIF) and as such is part of the recently approved Umbrella Agreement including Australia and New Zealand called the 'Pacific Agreement on Closer Economic Relations' (PACER). This agreement includes the future creation of a free trade area amongst the 14 ACP Forum Island Countries (FICs) called the 'Pacific Island Countries Trade Agreement' (PICTA), without Australia and New Zealand.

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