Kazakstan to Join Two Trade Groupings

A regional customs union planned by the Eurasian Economic Community, Eurasec, will create stiffer competition for Kazakstan, like any other country selling within the former Soviet market. However, Kazakstan’s domestic industries could be doubly hit if entry into Eurasec coincides with accession to the World Trade Organisation.



Despite delays in developing its legal foundations, the Eurasec customs union will be established in late 2007, according to a March 21 announcement by Russian foreign minister Sergei Lavrov. He told the Itar-Tass news agency that the documents underpinning the customs union were close to ready.



“Russia, Belarus and Kazakstan have agreed to go ahead with the union, while Ukraine can join the talks at any time,” he said.



NBCentralAsia experts say that Kazakstan could benefit from its membership of the customs union in terms of its metal and oil refining industries, especially if Russia and Belarus continue to squabble over fuel issues. In addition, Kazakstan consumers will benefit from reduced tariffs on imported goods from Russia and Belarus.



However, if the trade arrangements stipulated by the customs union come into effect at the same time as Kazakstan is joining the World Trade Organisation, WTO – and this too is supposed to happen in 2007 – many sectors of the economy could suffer from the impact of this twofold competition.



“The lion’s share of Kazak exports is raw materials or the primary products from processing them. These things will always be in demand on world markets without [membership of] the WTO or a custom union,” said political scientist Maksim Kaznacheev.



“But if Kazakstan’s domestic market is opened up to competition, unprofitable enterprises and entire sectors will be wiped out at a stroke.”



Economic analyst Petr Svoik takes a less pessimistic view, saying it is too early to predict such dire consequences.



“There is nothing really new about the customs union. It is a long drawn-out process,” he said. “There won’t be any radical changes, since the customs union has been under development for a long time now, and that will continue to be the case.”



Kaznacheev says the customs union will encourage all the former Soviet states which join it to fight hard to enter each others’ markets, and Russia will be a particularly strong player.



(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)