Globalization
has always been a topic of hot debates. As from Kyrgyzstan’s perspective, I
think that globalization here may have had a twofold effect. While the membership
in World Trade Organization (WTO) has had some benefits, the dilemma for today
is about the costs and benefits for Kyrgyzstan after its possible accession to
the Customs Union (CU), consisting of Belarus, Kazakhstan and Russian
Federation. It is the most recent trade policy change in the region of Central
Asia. Whether joining the CU will be a further step for Kyrgyzstan to better
integrate into the global economy or will derive from globalization creating
protectionist regional economic block is a matter of time.
Kyrgyzstan is one of
the five Central Asian post-Soviet countries. Since the collapse of the USSR
and after gaining its independence, Kyrgyzstan actively started to integrate
into the global economy by signing the bilateral agreements with countries and
becoming a member of several preferential trade agreements with Commonwealth
Independent States (CIS). Furthermore, Kyrgyzstan was one of the first Central
Asian countries to join the WTO.[1]
Joining the WTO benefited
in greater free trade. China being geographically the closest WTO member
country contributed to lower prices of goods for Kyrgyz consumers. Kyrgyz
consumers have experienced a greater choice of goods. This membership opened a
niche for re-export of goods. Entrepreneurs found this activity - to import
cheap goods from China and resell them to the neighbor countries, very
profitable. Re-export has increased people’s incomes and provided employment
for many citizens.[2]”
The consequence for
Kyrgyzstan from adopting next possible trade policy – accession to the Customs
Union is still unclear. On the one hand, by joining the CU may indicate the
country to become a protectionist, but meantime, this policy may increase the
trade flows within the CU countries and thus, the country will experience more
economic integration within the Union. The costs of this step might be the
welfare of local producers, but on the benefit side is the welfare of
consumers. It may hurt local producers as a result of the flow of foreign
supplies. In the union of developed and less developed countries, the latest
lose due to unprotected infant industries and flow of foreign goods into
domestic market. In the case of Customs Union of Belarus, Kazakhstan and
Russia, Kyrgyzstan will be the smallest economy in the union. This can bring
certain benefits to the country, such as increase in trade and reduction of
unemployment. Roman Mogilevskii examined that trade turnover between Kazakhstan
and Russia in 2011 (1 year after creation of the CU) increased by 28% in
comparison to 2010, and the 2011/2010 growth rate between the Customs Union and
other Central Asian countries is 19%. He however suggests that this change may
also be due to the recovery from the economic crisis in 2008 – 2009[3].
Potential benefit might be a decreased unemployment rate in Kyrgyzstan. More
jobs may be created due to cheaper labour costs in Kyrgyzstan. Greater movement
of labour may help to reduce geographical inequality. Unemployment rate in 2013
in Kyrgyzstan was 8.5%, while in Kazakhstan and Russia it was around 5% and
less than 1% in Belarus.
However, Kyrgyzstan might
play a role of a supplier of raw materials after joining the CU. Increase of
exports of raw materials would limit our own processing industry and country
will have to import its own products but at a more expensive price due to
processing and adding value in CU partner countries. Higher standards for
labeling and packing requirements, sanitary measures, veterinary measures,
standardization and accreditation are all going to make it tough for domestic
firms to compete. Considering these consequences, strategies to stimulate the growth
of processing industries may help to overcome the problem in the long run.
Kyrgyzstan applies a
highly liberalized trade regime. It has trade regimes with CIS countries,
preferential treatment for the Least Developed Countries and the Most – Favored
National Treatment for the WTO member. Kyrgyzstan needs to be more pragmatic at
the negotiation stage for accession to the CU. Trade policy represents the international dimension of national
policies adapted for domestic reasons[4].Proper
calculations and accordingly, adoption of right domestic policies may lead
Kyrgyzstan although to less integration with the whole world, but definitely to
more integration with CU members. Upcoming trade policy – accession to the
Customs Union of Belarus, Russia and Kazakhstan can thus play a crucial role
for Kyrgyzstan.
In the scenario where
Kyrgyzstan won’t join the CU, it will have more options for further integration
into the global economy or else deepen its economic relations with WTO partner
countries.
[1] Kyrgyzstan became a member state
of the WTO on 20th of December, 1998.
[2] Roman Mogilevskii, Re-export
Activities in Kyrgyzstan: Issues and Prospects (Bishkek: University of
Central Asia, 2012).
[3] Roman Mogilevskii, Customs
Union of Belarus, Kazakhstan and Russia: Trade Creation and Trade Diversion in
Central Asia in 2010-2011 (Bishkek: University of Central, 2012).
[4] Walter Goode, Dictionary of
Trade Policy Terms (World Trade Organization, Fifth ed., 2007).
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