Was Kyrgyzstan's WTO accession a mistake?
I have not studied the issue deeply myself but as experts say, this makes up a significant amount.
There is an opinion that Kyrgystan's accession did not do any good. Many politicians and economists believe that if Kyrgyzstan have chosen to establish customs union with Russia, it would have been more beneficial. The Kyrgyz products have always been exported to Russia, which is the main foreign trade partner of the republic. Is it so? Was accession to WTO a mistake? The purpose of this article is to answer the question. Was WTO accession a mistake?Sapar Orozbakov, Director of Economic Analysis Center in BishkekI should confess that I was one of those who advocated WTO accession. Back in 1992, when I suppose not many knew about this organization, I published an article in the Respublika newspaper called "Measures to overcome crisis and to revitalize the national economy". The article included a proposal on accession of Kyrgyzstan to GATT, the name WTO had back then. My opinion has not change since those times. But, I also think that accession of our country to WTO did not justify our hopes. Despite this, I still believe Kyrgyzstan needed WTO accession. What is WTO? Roughly speaking, this is a free trade area on a global scale. The need for such an organization arises from the fact that many countries limit access of others to its markets in order to protect own domestic producers. For this purpose a state raises import duties, which make foreign products noncompetitive in the domestic market. This usually refers to large countries, which to some extent, can do without exchange of goods with others, consuming domestic products. Could Kyrgyzstan follow this model of economic development? Certainly not. Kyrgyzstan, being a small country with a very small market, will not survive without selling goods to other countries. This is evident from the fact that 54% of its GDP comes from export, while in Russia it makes up only 31% (data of 2006). Even if Kyrgyzstan have not joined WTO, it would still have opened its markets for other states. And this action gave new opportunities to Kyrgyzstan, as WTO member states began to impose lower tariffs on Kyrgyz products. I must say that Kyrgyzstan, even before accession to WTO, began to reduce its import and export tariffs and remove other barriers to movement of goods, which played a major role in that Kyrgyzstan surprisingly easy became WTO member. Question on impact of accession to WTO on the economy of our state needs revision. In general I agree that accession did not justify hopes, but I would not say that it did not bring benefit to Kyrgyzstan at all. This impact had positive impact. It is particularly evident in the so-called re-export. Kyrgyzstan has advantageous tax scheme for commercial transactions, as it is WTO and EurAsEC member. Some of EurAsEC economic entities trade with WTO member states through Kyrgyzstan paying taxes on its territory. In turn, WTO member states use territory of Kyrgyzstan to send their goods to EurAsEC states. I have not studied the issue deeply myself but as experts say, this makes up a significant amount. Therefore, we can only ask why accession to WTO did not stimulate development of production in Kyrgyzstan. And, in my opinion, we cannot blame WTO for this. WTO helps countries that are able to produce goods, but cannot sell them because other states set high tariffs. It can stimulate production only to the extent of demand, but it does not solve problems related to production. The thing is that we did not learn to produce and there is nothing we can offer other states. Why we did not learn is a different issue. In the support of my idea, I would like to add that if we had learnt to produce, we would not have so many imported goods. WTO does not eliminate tariffs. Prices for imported goods include transportation expenses and fees, and it would be hard for these products to compete with our domestic production. Worth to note, that with such inability to produce, creation of customs union with Russia would not help also. Should we complain about unfavorable attitude of WTO, when we cannot use the basic benefits it provides to its members? The matter is that all WTO member states should agree on accession of a new state. We had a great opportunity to recover a debt from Ukraine when it was joining WTO. Ukraine did not pay off the debt for a long time on various pretexts. However, our authorities decided that US$ 28 million is needless to the state and signed agreement on Ukraine's accession. It was said that Ukraine would compensate the debt in the form of humanitarian assistance, but it was another deception of the public. The document did not have any tool to make Ukraine pay off the debt. With such an attitude I doubt that we ever learn to benefit from WTO membership. Now, let us think what would happen if we joined customs union instead of WTO. Customs union is created to protect domestic producers, when they are weak and unable to withstand international competition. Several countries join to create isolated market when one is too weak to do that. They set the low charge rates on trading operations encouraging exchange of goods within the customs union. States that are not members of the Union have to pay higher tariff. This ensures isolation of the market. In the above-mentioned article, I was against creation of a customs union with Russia. I believe that the customs union is useful only if it includes countries with similar level of economic development. Otherwise, developed countries would develop further, whereas weaker countries would not. Our producers would not have withstood competition with Russian ones. My other argument against the customs union with Russia was Russia's inability to hold a coherent economic policy. I wrote that it would be a waste of time. Was not I right? Who can say that customs union and other regional economic and non-economic structures initiated by Russia became competitive? If they had been profitable, why would Ukraine and Georgia withdraw? I believe we should not abandon friendship with Russia, but we should not pin hopes on it as well. Russia has never considered customs union establishment seriously. Political motives dominated in its actions, which were manifested in imposition of only own interests without taking into account interests of other states. That is why this customs union has not yet been established. We also should not forget that Russia also wants to join WTO and conducts negotiations on this matter. It refers to customs union only when it feels insulted by the West. If it joins WTO, idea of customs union establishment will lose its relevance. I advise to wait until our neighbors accede to the organization. I understand why our politicians are so interested in Russia. Many are impressed with Russia's achievements. Nevertheless, I do not think that Russia is eager to "shelter us," as some think. For instance, Russia allowed our migrant workers to work on its territory only when it realized that it cannot do without additional labor. Moreover, I do not think that Russia has finally found its way of development, and bright future lies ahead of it. Rapid growth of Russia's economy is not a result of intelligent and purposeful actions and current leadership has little to do with it, as many believe. Global market conditions were favorable to it, just as during Brezhnev's leadership. But, Soviet rapid success was followed by sudden failure. Withdrawal from WTO and accession to customs union with Russia means to give ourselves up to Russia, which means linking our destiny with this state, difficulties that lies ahead it. Kyrgyzstan would not survive challenges that Russia would face due to its weaker economy system.
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