Efficiency of trade integration in the Customs Union of the Eurasian Economic Community November 14-15, 2012 г Bishkek Prof. Bulat D. KHUSAINOV, Head of Department, Globalization and Regional Integration Studies, Institute of Economy, MES of RK Prof. Bulat D. KHUSAINOV, Head of Department, Globalization and Regional Integration Studies, Institute of Economy, MES of RK Regional conference: “Influence of Russia’s joining the World Trade Organization on the Central Asia”

Table 1 – Dynamics of the external trade change for the countries – members of the Customs Union, (in % to the previous year) Belarus Total100,0108,7125,7140,0108,6128,7125,9136,768,9120,6143,2 Kazakhstan100,0105,3126,1141,189,8126,1130,8131,168,5117,7138,8 Russia100,0184,1150,144,0523,453,2516,474,5101,5223,088,1 Kazakhstan Total100,0112,0134,1155,3138,7137,3124,8149,160,7131,9141,3 Belarus100,0129,4161,3150,8144,7151,5147,8108,074,4205,388,1 Russia100,087,0129,7145,7124,4134,6126,9123,162,362,4166,3 Russia Total100,0107,9124,9134,6132,3129,1125,7133,264,3137,3117,6 Belarus100,0107,7126,1141,889,4126,0130,7131,568,3119,0138,5 Kazakhstan100,090,7132,3140,6120,6131,2126,1121,865,2119,0129,4 Source: According to data of the UN COMTRADE database and National statistics services of the countries – members of the Customs Union.

Table 2 – Share of the external trade of the countries – members of the Customs Union, Share of Kazakhstan and Russia in trade with Belarus Kazakhstan0,190,320,380,120,570,240,970,530,161,440,89 Russia59,7457,8558,0558,5048,3847,3949,2447,2347,0145,9044,49 Share of Belarus and Russia in trade with Kazakhstan Belarus0,300,350,420,400,420,460,550,400,490,760,47 Russia27,0120,9720,2919,0317,0716,7317,0014,0414,406,818,02 Share of Belarus and Kazakhstan in trade with Russia Belarus6,48 6,536,884,654,544,724,674,964,305,06 Kazakhstan3,382,843,013,152,872,922,932,682,722,352,59 Source: According to data of the UN COMTRADE database and National statistics services of the countries – members of the Customs Union.

Table 3 – Level of trade integration of the countries – members of the Customs Union, Source: According to data of the UN COMTRADE database and National statistics services of the countries – members of the Customs Union. NOTE: Preference coefficient is calculated on the basis of the formula: К 1 = T i / T w, where T i – stare of trade partner in the trade with any state; T w – share of trade partner in international external trade Казахстан1,542,532,670,672,660,933,381,582,725,453,69 Россия3,143,043,063,082,552,492,592,492,472,422,34 Беларусь2,362,632,922,482,712,692,911,792,453,861,95 Россия23,717,916,113,710,69,268,646,227,633,203,72 Беларусь51,249,246,042,430,026,325,021,024,921,820,8 Казахстан2,972,422,392,271,771,621,491,191,441,111,20 Preference coefficients (K1) of Belarus in trade with Kazakhstan and Russia Preference coefficients (K2) of Kazakhstan in trade with Belarus and Russia Preference coefficients (K1) of Russia in trade with Belarus and Kazakhstan Kazakhstan Russia Belarus

Figure 1 – Mutual preference coefficients (К 2 ) in external trade for Belarus, Kazakhstan and Russia, 2001–2011 Source: According to data of the UN COMTRADE database and National statistics services of the countries – members of the Customs Union Belarus and KazakhstanKazakhstan and RussiaBelarus and Russia K2 = (average K 1 ij, K 1 ji ), where K1ij – preference coefficient of i-country for j-country, and K 1 ji - preference coefficient of j-country for i-country

Figure 2 – Timing difference between export per capita (on the basis of the purchasing power parity) in Kazakhstan and Russia, more than 11 years Index 150 In 2010, the Russia index in USD equivalent exceeded the Kazakhstan index by 150% In 2010, Kazakhstan fell behind Russia on the index “export per capita with regard to the purchasing power parity” by more than 11 years Source: Hereinafter, according to data of the UN COMTRADE database and National statistics services of the countries – members of the Customs Union. KazakhstanRussia TIME Constant dollars, 2000 – according to the purchasing power parity

Figure 3 – Timing difference between export per capita (on the basis of the purchasing power parity) in Kazakhstan and Belarus, In 2010, the Belarus index in USD equivalent exceeded the Kazakhstan index by 164% more than 13 years Index 164 In 2010, Kazakhstan fell behind Belarus on the index “export per capita with regard to the purchasing power parity” by more than 13 years Constant dollars, 2000 – according to the purchasing power parity TIME KazakhstanBelarus

Figure 4 – Timing difference between export per capita (on the basis of the purchasing power parity) in Kazakhstan and Russia, In 2020, Kazakhstan on “export per capita with regard to the purchasing power capacity” will fall behind Russia by more than 12 years. By 2030, retardation may exceed 16 years. More than 16 years Index 266 By 2030, excess of the Russia’s index in USD equivalent may increase in 2.66 times. Темп роста = 6,2% Growth rate = 3,2% Growth rate = 6,2% Constant dollars, 2000 – according to the purchasing power parity KazakhstanRussia TIME

Figure 5 – Timing difference between export per capita (on the basis of the purchasing power parity) in Kazakhstan and Belarus, At average annual growth rates of , by 2020 Kazakhstan will fall behind Belarus by more than 12 years on “export per capita with regard to the purchasing power capacity”. By 2030, retardation will exceed 17 years. More than 17 years Index 271 By 2030, excess of the Belarus index in USD equivalent may increase in 2.7 times. Growth rate = 5,8% Growth rate = 3,2% Constant dollars, 2000 – according to the purchasing power parity TIME BelarusKazakhstan

Conclusions and proposals 1)If in a long-term perspective Kazakhstan will maintain a low index of goods and services export per capita, then the level of citizens wellbeing will considerably lower as compared to Belarus and Russia; 2)At considerable differences between key parameters of national economies development, which are clearly testified by the detected timely retardation, Kazakhstan may become the satellite country of the existing and created regional integration associations – Customs Union, Single Economic Space and oncoming Eurasian Economic Union; 3) Kazakhstan may become in the situation, which occurred during the Soviet Union period, being a primary attachment to well-developed economies. As is known, such situation was typical for all republics of the Central Asia. It should also be noted that further growth of absolute and timely retardation of the key economic indices of Kazakhstan, as compared to Belarus and Russia, may cause enhancement of social strain, including anti-integration moods in the Kazakhstan society, and as a consequence, unpredictable effects; 4)Without serious change of the competitive positions structure in export of Kazakhstan, which mainly form the national economy structure, considerable growth of the goods and services export index per capita should not be expected. This provides the necessity in immediate development of efficient trade policy, including the national export program, aimed at elimination of the strained primary structure of Kazakhstan export. It should also include the national import program, reflecting factual needs of the national economy and reducing dependence on import of production, which may be produced on the territory of the country.

Conclusions and proposals 5) During development of the trade policy, it is necessary to make an emphasis on the mechanisms, providing balanced economic growth mainly due to export at simultaneous reduction of dependence on the foreign capital inflow. Also, it should be noted that the national export program should be developed with regard to application of new technologies by Kazakhstan’s companies as well as to consumer preferences, because statistically significant value of the export activity’s influence on innovation processes does not cause doubts and is confirmed by numerous researches. 6) Alongside with the trade policy, it is necessary to develop the national industrial policy, aimed at considerable change of the production structure, including considerable increase in the share of the processing sector of the industry. At that, trade and industrial policies should be associated and related to each other. 7) Within the framework of the Customs Union, it is necessary to develop the single foreign trade policy both within and beyond the integration formation, which may be based on principles of the single trade policy of the European Union, adjusted in accordance with peculiarities of three states. This will promote improvement of competitiveness of export potential on external markets both for the integration formation and for each country in particular. Solution of this objective lies in the sphere of political and legal decisions as well as goes beyond the scope of the present research. Economic aspects of development of the agreed trade policy by the countries – members of the Customs Union are based on the sphere of balanced usage of traditional instruments – customs and tariff regulation, efficient protectionism and liberalization of trade.

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