Why Does Kyrgyzstan Need a Customs Union when Russia is the Main Protectionist?
Business and Economics, KyrgyzstanOne Comment
Translation of Mirsulzhan’s post (RUS).
The Russian “Vedomosti” newspaper reports that, according to Global Trade Alert, Russia and the European Union were leaders in introducing trade barriers in 2009, despite the declaration signed last November by the G20.
Since then, G20 nations have introduced 184 protectionist measures. Around the world, 257 such measures were introduced in addition to 56 that can be interpreted as violating the interests of partner-states. Another 188 measures are planned for 2010, six times fewer than the number of liberalization measures.
The instruments of trade wars – non-tariff barriers, sanitary measures and import quotas – were used in only 10% of cases. Tariffs were raised in 14% of cases (see diagram). Over 50% of all discriminatory measures were in the form of government support for local producers and trade protection (antidumping and compensation duties). There is no government aid among measures planned for 2010. Nearly 60% will be defensive.
The world’s biggest protectionist is the EU (90 measures). Among countries, first is Russia (37), followed by Argentina (21). The biggest victim of protectionism is China, which faces 146 defensive measures. The most vulnerable sectors are the metal and chemical industries: every third measure implemented is against them.
Russia’s increased duties have affected 7% of imports, while for 2% of imports duties were lowered, according to Minister of Economic Development Elvira Nabiullina. Some defensive measures were ineffective, while others helped maintain production. Her deputy, Andrei Slepnev, admitted that 96 measures were taken against Russian exporters, which cost the country $2 bn in 2009, or less than 1% of the total export value.
As for Kyrgyzstan, I like how Rafhat Hasanov describes the possibility of protectionism:
“…The WTO regime stipulates that Kyrgyzstan is not allowed to engage in protectionism. Theoretically, it is silly for a small country to do it in the first place. How can we protect ourselves against, say, American or even Russian companies? Our trade with WTO countries is duty-free. We are given the opportunity for the greatest possible welfare. No one can introduce dumping measures against us, like it is happening with Russia. The problem is that our closest partners in the WTO are 3000 km away. They are Taiwan, Japan and, perhaps, Pakistan. The other problem is that in order to transport goods, Kyrgyzstan needs to go through Kazakhstan, China or Russia. This is a serious obstruction, because these countries’ discriminatory measures hinder our export.”
In light of this, I don’t see the benefit of Kyrgyzstan entering a customs union with Russia, Belarus and Kazakhstan.
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It may have more to do with cultural ties w/ Russia and Kazakhstan. Maybe the NDN will benefit Kyrgyzstan in 2010. Article on Dordoi suggests the vitality of the Kyrgyz market throughout the ups and downs of tariff wars and such.
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