Kazakhs agree to joint WTO approach

July 8. Asia Times

By Galiaskar Utegulov

Kazakhs agree to joint WTO approachA decision by Kazakhstan, Russia and Belarus to try to join the World Trade Organization (WTO) as a group rather than individually is likely to slow their accession process down. While Moscow and Minsk may be cautious about opening up their markets, a Kazakh economist argues that his country’s exporters are well placed to compete globally as well as regionally.

A new customs union comprising the three former Soviet states and due to start functioning next year is to apply for bloc membership of the WTO on behalf of its members Russia, Belarus and Kazakhstan. At a customs union meeting on June 9 in Moscow, the three states agreed to suspend individual negotiations with the WTO in favor of a joint accession process.

“Our common priority is to join the WTO, but now as a unified customs space,” Russian prime minister Vladimir Putin said at the meeting.

Russia and Belarus have been seeking WTO membership since 1995 and Kazakhstan since 1996.

Of the three, Russia was the closest of the three to joining. At an international economic forum in St Petersburg on June 4-6, Russian economic development minister Elvira Nabiullina said Moscow intended to complete negotiations by the end of this year. That meant Russia could have become a WTO member in mid-2010. That now seems to have fallen by the wayside.

Kazakhstan was probably next in line, despite suspending negotiations with the WTO on a number of occasions.

The customs union is one of a number of post-Soviet regional groupings, although to date Moscow has succeeded only in getting close allies Kazakhstan and Belarus to sign up. Following an agreement signed in October 2007, the union is due to come into being next January, with all the arrangements finalized a year-and-a-half later.

Customs clearance will then take place only on the external borders of the union, with goods flowing freely between member states.

According to Putin, the countries have agreed on 95% of the external customs tariffs they will apply.

Economists interviewed by IWPR think the decision to seek joint membership makes some sense, although Kazakhstan has its own reasons for agreeing to join the customs union first and only then the WTO.

Rahman Alshanov, a Kazakh economist, thinks Kazakhstan is in a win-win situation, because it will benefit immediately from the removal of barriers to Russian markets and will then be in a strong position to compete within the WTO.

“Kazakhstan’s largest trade turnover, US$7.5 billion, is with Russia, which is our most aggressive trading partner. The customs union will remove these barriers, and then we’ll see how competitive Kazakh companies are in comparison with Russian producers,” he said.

Alshanov said that with a relatively open economy and export revenues equivalent to just over 50% of gross domestic product last year, Kazakhstan was in better shape than either Russia or Belarus to compete in the WTO system.

Russia and Belarus are likely to be less enthusiastic than Kazakhstan about accepting the free-trade obligations imposed by WTO membership.

Dmitry Abzalov of the Center for Political Trends, a political think-tank in Moscow, reflects a sense of caution commonly held in Russia about abandoning protectionist barriers.

“WTO membership will be [seen to be] of value only after careful consideration. If the losses outweigh the gains, then [Russia] will be better to hold off on entry and negotiate better conditions so as to protect the domestic market,” he said.

In Abzalov’s view, “The WTO needs the customs union more than the customs union needs the WTO. It’s obvious that Russia, Belarus and Kazakhstan are very attractive markets for WTO members, which want to enter these markets.”

Viktor Ivonin, an economist based in Tashkent, believes Kazakhstan’s smaller neighbor, Kyrgyzstan, committed a grave error by rushing into WTO membership on its own in 1998.

“The market was rapidly filled with goods, and as a result the country effectively lost its industry and agriculture, which were unable to compete with foreign producers,” he said.

Alshanov said that in any case, a joint WTO application might take longer than expected, since Belarus – with the least open and least developed of the three economies – would find it hard to throw open its borders.

“The process may be delayed for a year or two, at least,” he said. “There is a risk that Belarus will propose unacceptable conditions for accession, impeding the joint accession format.”

If that happened, he said, the three states might end up going back to their original plans to join the WTO separately.