Back Matter

ANNEX I

Regional Cooperation Agreements and Initiatives in the CIS

  • Economic Cooperation and Organization, 1992: Islamic State of Afghanistan, Islamic Republic of Azerbaijan, Islamic Republic of Iran, Kazakhstan, the Kyrgyz Republic, Pakistan, Tajikistan, Turkey, Turkmenistan, and Uzbekistan.

  • Black Sea Economic Cooperation, 1992: Armenia, Azerbaijan, Georgia, Moldova, the Russian Federation, and Ukraine.

  • Energy Charter Treaty, 1994: signed by all Central Asian countries and most European countries.

  • CIS Free Trade Agreement, 1994: Armenia, Belarus, Georgia, Moldova, Kazakhstan, the Kyrgyz Republic, the Russian Federation, Tajikistan, Ukraine, and Uzbekistan. It has not been ratified by a number of states.

  • GUUAM, 1997: Azerbaijan, Georgia, Moldova, Ukraine, and Uzbekistan. Initially set up with the goal of developing hydrocarbon pipeline projects. A proposal to create a Free Trade Area was made in 2000.

  • Central Asia Cooperation Organization (CAREC), 1997: Azerbaijan, People’s Republic of China (focusing on Xinjiang Uygur Autonomous Region), Kazakhstan, Kyrgyz Republic, Mongolia, Tajikistan, Uzbekistan.

  • Eurasian Economic Community, signed in 2000, ratified in May 2001. It includes Belarus, Kazakhstan, the Kyrgyz Republic, the Russian Federation, and Tajikistan.

  • Shanghai Cooperation Organization, 2001: China, Kazakhstan, the Kyrgyz Republic, the Russian Federation, and Tajikistan.

  • Central Asia Cooperation Organization (CACO), 2002: Kazakhstan, the Kyrgyz Republic, the Russian Federation, Tajikistan and Uzbekistan.

  • Common Economic Area, September 2003: draft agreement between Belarus, Kazakhstan, the Russian Federation, and Ukraine.

  • Agreement on Partnership and Cooperation between Moldova and the EU, 1994. It became effective in 1998.

  • Agreement on Partnership and Cooperation between the EU and Uzbekistan, 1996. The main goal is economic cooperation.

  • Agreement on Partnership and Cooperation between the EU and the Russian Federation, 1998.

  • Agreement on Partnership and Cooperation between the EU and Turkmenistan, 1998.

  • Balkan Stability Pact, 1999: signed by Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the former Yugoslav Republic of Macedonia, Moldova, Romania, Turkey and the Federal Republic of Yugoslavia. In 2002 it admitted the Czech Republic, Poland and the Slovak Republic.

  • Caspian Sea Oil and Gas agreements, November 1999: Signed by Azerbaijan, Georgia, Kazakhstan, Turkey, and Turkmenistan concerning pipeline projects for the export of Caspian Sea oil and gas to world markets via Turkey, bypassing the alternative routes across Russia and the Islamic Republic of Iran. The two agreements envisage the construction of an oil pipeline from Baku in Azerbaijan to Ceyhan in southeast Turkey, and a Transcaspian gas pipeline linking Turkmenistan with northeast Turkey via the Caspian seabed and the Caucasus Mountains. The agreements also appear to resolve a border dispute between Azerbaijan and Turkmenistan over ownership of three Caspian oilfields linked to pipeline projects.

  • The Silk Road agreement, September 1998. All the CIS countries (excluding the Russian Federation and Turkmenistan) along with Bulgaria, Romania, and Turkey, signed the agreement which provides for coordinated development of transport links between China and Europe, and the regulation of transport tariffs and custom procedures across the region.

References

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  • Bhagwati, J., 1993, “Regionalism and Multilateralism: An Overview,” in New Dimensions in Regional Integration, ed. by J. De Melo and A. Panagariya (New York: Cambridge University Press).

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  • Elborgh-Woytek, K., 2003, “On the Openness and Distance, CIS Trade Developments, 1993–2002,” IMF Working Paper No. 03/207 (Washington: International Monetary Fund).

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  • Francois, J., and K. Hall, 1997, “Partial Equilibrium Modeling,” in Applied Methods for Trade Policy Analysis: A Handbook, edited by J. Francois and K. Reinert (London: Cambridge University Press).

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  • Hoekman, B., F. Ng, and M. Olarreaga, 2002, “Eliminating Excessive Tariffs on Exports of Least Developed Countries,” World Bank Economic Review, Vol. 15(1), pp 1-21.

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  • Kee, H. L., A. Nicita, and M. Olarreaga, 2004, “Estimating Import Demand Elasticities,” (Washington, DC: The World Bank).

  • Krishna, P., 1998, “Regionalism and Multilateralism: A Political Economy Approach,” Quarterly Journal of Economics, Vol. 113 (No. 1, February).

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  • Krueger, A., 1995, “Free Trade Agreements Versus Customs Unions,” NBER Working Paper No. 5084 (Cambridge, MA: National Bureau of Economic Research).

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  • Krugman, P., 1991, “Is Bilateralism Bad?” in New Dimensions in Regional Integration, ed. by J. De Melo and A. Panagariya (New York: Cambridge University Press).

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  • Krugman, P., 1993, “Regionalism versus Multilateralism: Analytical Notes, Is Bilateralism Bad?” in International Trade and Trade Policy, ed. by E. Helpman and A. Razin (Cambridge, MA: MIT Press).

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  • Lissovolik, B., and L. Lissovolik, 2004, “Russia and the WTO: The Gravity of Outsider Status,” IMF Working Paper No. 04/159 (Washington: International Monetary Fund).

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  • Ludema, R., 1996, “On the Value of Preferential Trade Agreements in Multilateral Negotiations,” available via the Internet at: http://econwpa.wustl.edu/eps/it/papers/9802/9802003.pdf.

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  • Michalopoulos, C., and D. Tarr, 1997, “The Economics of Customs Unions in the Commonwealth of Independent States,” Post Soviet Geography and Economics, Vol. 38, No. 3.

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  • Michalopoulos, C., 2004, “The Integration of CIS-7 Countries into the World Trading System,” in The Low-Income Countries of the Commonwealth of Independent States: Progress and Challenges in Transition, ed. by C. Shiells and S. Sattar (Washington: International Monetary Fund and the World Bank).

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  • Panagariya, A., 1995, “Free Trade Area of the Americas: Good for Latina America?” in Developing and Newly Industrializing Countries, ed. by C. Milner, Volume I, (Chelentham, U.K.: Edward Elgar Publishing Limited), Chapter 17, pp. 375-405.

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  • Roberts, M., and Wehrheim, P., 2001, “Regional Trade Agreements and WTO Accession of CIS Countries,” Intereconomics, No. 6 (November-December), pp. 315-23.

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  • Schiff, M., and A. Winters, 2003, Regional Integration and Development, The World Bank.

  • Shiells, C., and S. Sattar, eds., 2004, The Low-Income Countries of the Commonwealth of Independent States. Progress and Challenges in Transition (Washington, DC: International Monetary Fund and the World Bank).

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  • Viner, J., 1950, The Custom Union Issue (New York: Carnegie Endowment for International Peace).

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1

The author wishes to thank Veronica Bacalu, Emanuele Baldacci, Nur Calika, Katrin Elborgh-Woytek, Jean-Jacques Hallaert, Alvin Hilaire, Etibar Jafarov, Natalia Koliadina, Hans Peter Lankes, Yaroslav Lissovolik, Brad McDonald, Costas Michalopoulos, Lynge Nielsen, Marcelo Olarreaga, Clint Shiells, David Tarr, Jerome Vandenbussche, and John Wakeman-Linn for their helpful comments, and Dustin Smith for his valuable input in elaborating EAEC countries’ tariff schedules. Mary Jo Marquez provided excellent administrative support. This paper was prepared in association with the work program of the Trade Policy Division/PDR.

2

As of end-2003, 193 regional trade agreements had been notified to the WTO and were in force. Another 70 were estimated to be operational but not yet notified to the WTO (WTO, 2004, and WTO Secretariat).

3

The CIS comprises Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, the Kyrgyz Republic, Moldova, the Russian Federation, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan.

4

This is specified in Article XXIV of the GATT/WTO and Article V of the GATS, subject to several requirements: mainly, that duties and other restrictive regulation of commerce should be eliminated on “substantially all trade” between the members. Also, the agreement should include a plan and a schedule for the formation of a free trade area, or a custom union, within 10 years.

5

This is the case of the EAEC.

6

Bhagwati (1993) and Panagariya (1995) argue that large countries may use their bargaining power in regional arrangements to obtain distorting concessions from small countries that they might not obtain in more balanced multilateral negotiations.

7

Large players tend to impose higher tariffs than small players, i.e., the temptation of the former to protect is higher because they have more monopoly power to exploit.

8

See Schiff and Winters (2003). Also, Ludema (1996) shows that customs unions might be effective bargainers in multilateral negotiations because of the customs union commitment to a CET unless there is heterogeneity among partners.

11

A recent exception is the EAEC, which has created regional institutions (see below) to regulate its implementation.

12

The CIS customs union was originally signed in early 1995 by Belarus and the Russian Federation, followed by Kazakhstan in late 1995, the Kyrgyz Republic in March 1996, and finally by Tajikistan in February 1999, but never entered into force.

13

The CET agreement came into force in 2000 for Belarus, the Kyrgyz Republic, the Russian Federation, and Tajikistan, and in 2001 for Kazakhstan.

14

Article 1 of the agreement defines sensitive goods as goods that are not produced, or are produced in insufficient quantities, in the member states and that are of social importance—i.e., necessary for the satisfaction of the population’s vital needs or national productionand also goods for which domestic producers need governmental support and protection from competition of like imported goods.

15

The CIS-5 comprises Armenia, Georgia, the Kyrgyz Republic, Moldova, and Tajikistan.

16

Elborgh-Woytek (2003). See Lissovolik and Lissovolik (2004) for a gravity model applied to the case of Russia.

17

For example, problems of transit trade include rail, roads, poor infrastructure and air transportation. Transport markets are fragmented, and therefore the CIS countries with the exception of Kazakhstan, Turkmenistan, and Russia, do not enjoy economies of scale in their operations. Despite its dominant position in gas exports to Europe, Russia still needs to rely on the Ukrainian transit route, while Kazakhstan depends on the Russian Transneft pipeline, and on Georgia, and Azerbaijan depends on Georgia as well.

18

The theoretical framework underlying this simplified model follows Francois and Hall (1997) as well as Hoekman, Ng, and Olarreaga (2002), modified to account for the impact of joining a customs union.

19

The parameter α varies across products.

20

See Michalopoulos and Tarr (1997) for an analytical discussion on the cost of implementing a customs union in the CIS.

21

Trade diversion would be less of an issue for free trade areas because each member would be allowed to decrease its import tariffs unilaterally and therefore switch imports to the most efficient supplier as long as it would be easy to enforce the rules of origin.

22

One of the conditions for minimizing trade diversion is that partners in a customs union are not to raise their trade barriers relative to the rest of the world after joining the customs union. The economic analysis of customs unions in terms of their trade creation and trade diversion effects dates back to the pioneering work of Viner (1950).

23

The model uses statutory rates to run the simulations. These rates are biased upward relative to the actual tariff rates due to the existence of exemptions, shuttle trade, and bilateral preference rules even outside of the EAEC member countries. Therefore, import duties used in the model in the base year may differ from actual collected tariff revenues.

24

The most recent example of parallel accession to the WTO and customs union membership is given by the Baltic countries membership in the EU. However, cases of sequencing that involve first WTO membership and then customs union membership are more numerous.

25

Coordination might also imply lower costs of finalizing the negotiations with the WTO for the poorer countries.

27

Indeed, the WTO terms negotiated by the Kyrgyz Republic provoked tensions with the other CIS countries who, in response, introduced some discriminatory measures against Kyrgyz agricultural products.

28

For example, if one EAEC member not yet a member of the WTO had imposed measures against the exports of another EAEC member already a member of the WTO, it would have been possible for the latter to extract concessions from the former within the WTO framework by sitting on the accession working party of the EAEC applicant country. See Roberts and Wehrheim (2001) for a discussion.

30

A WTO member can still benefit from joining a customs union, provided that its rate of protection does not increase as a result of it. Regional trade integration can serve as a vehicle for dialogue and coordination on regional issues that are not part of the multilateral agenda. These might include regulatory harmonization, infrastructure development, and collaboration among members to facilitate transit trade and transport which are particularly critical among the CIS members.

Regional Trade Integration and WTO Accession: Which Is the Right Sequencing? An Application to the CIS
Author: Ms. Patrizia Tumbarello