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Research Report

KAZAKHSTAN AND THE WORLD ECONOMY:: An assessment of Kazakhstan’s trade policy and pending accession to the WTO

Brian Hindley
Copyright Date: Mar. 1, 2008
Pages: 56
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Table of Contents

  1. (pp. 5-5)

    KAZAKHSTAN APPLIED FOR membership of the World Trade Organization (WTO) in 1996. Twelve years later it is still not a member. Long accession negotiations are not unusual: it took 15 years for China to become a member, in 2001. Russia applied in 1993 and is still not a member. During the GATT years, accessions could usually be achieved more quickly. But the WTO covers more policy areas than the GATT, and extended accession negotiations are one consequence. Furthermore, the accession process has become more political: the issues subject to negotiation and reform are at the heart of domestic politics. Geopolitical...

  2. (pp. 6-11)

    THE ROLE AND economic significance of the countries of Central Asia have been transformed over the past decade. High oil and commodity prices have been a key factor in their impressive growth, but growth has also followed post-independence reforms in economic systems.

    Economic reform in Kazakhstan has been more comprehensive than in some other countries in the region. Underlying reform in Kazakhstan is a desire to integrate more deeply with the global economy and to establish Kazakhstan as a significant player in global markets. A closer look at what has actually been achieved so far, however, reveals a mixed picture...

  3. (pp. 11-16)

    ARTICLE XII OF the Marrakesh Agreement Establishing the World Trade Organization provides for accession to the WTO. The immediately relevant paragraphs of the article say that:

    “1. Any State or separate customs territory possessing full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement and the Multilateral Trade Agreements may accede to this Agreement, on terms to be agreed between it and the WTO. Such accession shall apply to this Agreement and the Multilateral Trade Agreements annexed thereto.

    “2. Decisions on accession shall be taken by the Ministerial Conference. The...

  4. (pp. 16-20)

    THIS CHAPTER DISCUSSES the current trade policy of Kazakhstan. It focuses on tariffs, non-tariff barriers, trade rules, trade-related regulatory standards, and barriers to investment. These are issues that will attract the attention of the accession working party.

    IN THE RECENT past, the trade policy of Kazakhstan had features that were problematic from the standpoint of WTO accession. The Asian Development Bank (ADB 2006, chapter 3), a source that invites credence, comments that: “Kazakhstan has a rather complex tariff schedule with a large number of tariff bands and a high maximum tariff rate, although its non-weighted average tariff is not high.”...

  5. (pp. 20-24)

    IN THE LAST decade, trade agreements have proliferated in every region of the world. Sometimes, though, trade agreements are a declaration of friendship or intent or ambition, without substantial economic consequences. The “rough neighbourhood” of Central Asia (CA) – as President Nazarbayev once called it – is no laggard when it comes to signing weak FTAs and RTAs and only half-heartedly implementing them. This chapter first gives an overview of the existing and proposed trade deals involving Kazakhstan. Then, the interplay of trade agreements and WTO accession is illustrated with the experience of Kyrgyzstan, which joined the WTO in 1998,...

  6. (pp. 24-27)

    AT MINIMUM, WTO accession will require Kazakhstan to bring its practices and policies into line with WTO rules. That applies to, and must be expected by, any entrant, though it may be possible to negotiate a period for adjustment.

    VARIOUS POSSIBLE DEVIATIONS of policy in Kazakhstan from the WTO rules have been noted in earlier chapters. Examples are different taxes for domestic goods and foreign goods; discriminatory freight charges for imports and exports; and discriminatory export taxes. Another possible example is the transaction passport.

    WTO accession would require Kazakhstan to do away with discriminatory excise taxes: they directly contravene Article...

  7. (pp. 27-31)

    TRANSITION FROM A planned economy to a market economy entails major changes in institutions and, probably, changes in the direction of trade flows. According to recent literature (Kurkharchuk&Maurel 2004; Rose 2005) improving the quality of institutions or belonging to a trading bloc can have substantial positive effects on trade. This chapter evaluates the potential benefit of the accession of Kazakhstan to the WTO. The idea is that accession to the WTO involves a short run benefit from further reducing tariff and non-tariff barriers, and a long-term strategy that involves institutional reforms.

    Economic reform in Kazakhstan began in the 1990’s, and...

  8. (pp. 31-39)

    ACCESSION TO THE WTO comes at a cost. The bar to entry has been raised much higher since the end of the Uruguay Round. The accession procedure is complicated; it consumes time and resources. Concessions demanded of applicants go wide and deep. They require considerable domestic adjustment, and can be politically difficult.

    Nevertheless, when trade – and associated inward investment – move closer to the heart of national economic activity and growth prospects, WTO membership becomes a higher priority. It guarantees access to export markets through unconditional and non-discriminatory Most-Favoured-Nation (MFN) status. Its rules provide members with rights against the...

  9. (pp. 39-47)

    KAZAKHSTAN APPLIED FOR WTO membership in 1996, following the application of Russia in 1993. The two countries are bound together by geography, by history, by sentiment, and, more recently, by a common declared interest in forming a customs union and an “economic space”, together with other members of the FSU. It has been commonly assumed that Russia would join the WTO first and that Kazakhstan would in due course follow. More recently, however, Russia’s enthusiasm for WTO entry has seemed to diminish. Whether Russia will accede to the WTO in the near future is now open to doubt. The question...

  10. (pp. 47-47)

    NON-ECONOMIC CONSIDERATIONS – in particular the importance Kazakhstan places on good relations with Russia – may play a major role in determining future events surrounding the application of Kazakhstan to join the WTO. Nevertheless, we focus here on economics.

    First, all of the evidence known to us suggests that WTO membership is a much better option for Kazakhstan, from an economic standpoint, than either the status quo (which includes, of course, the unconsummated customs unions that Kazakhstan has entered so freely) or a full-fledged customs union with Russia. The evidence suggests that Kazakhstan trades more with Russia than is optimal,...