Preferential Trade Agreements and Trade Liberalization Efforts in the OIC Member States
With Special Emphasis on the TPS-OIC
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leading to a reduction of the external tariff. The common Customs Code has been in place since
mid-2010 and internal customs posts were abolished in mid-2011 enabling free internal flow
of most goods (USTR, 2013). Given that free trade agreements between the customs union
members were in place since 1990s the internal trade was largely duty free already prior to
customs union taking effect. This implies that the main change affecting members could be
related to the introduction of the common external tariff and potentially to customs union
affecting non-tariff measures, and trade facilitation.
As regards the former, adoption of the CET based on Russian tariff at the time implied a rise in
tariff levels for Kazakhstan. Calculations cited in World Bank (2012) suggest that the average
effective rate in Kazakhstan increased from 6.7% in 2009 to 11.1% in 2010 (see also table 26
showing an increase in simple average MFN rate from 5.1% in 2008 to 7.8% in 2012). The
World Bank (2012) used a computable general equilibrium model to assess the impact on
Kazakhstan to be a fall in real income per year in the range of 0.2%. This is explained by
increased protection leading to resources being shifted to less efficient production, with falling
real wages and declining real returns to capital. Trade diversion occurs with Kazakhstan
trading more with Russia and Belarus and less with the rest of the world including more
technologically advanced European Union. All this can be seen as a cost to Kazakhstan of
participating in the customs union that has been more recently reduced by Russia’s WTO
accession in mid-2012 and corresponding reduction of the customs union common external
tariff. The potential advantages from participation are related to the hope that trade
facilitation costs and non-tariff barriers to trade could be substantially reduced by the customs
union.
Table 26: Average MFN and Preferential Tariffs Applied by Kazakhstan, Belarus and Russia
Reporter Partner 2000 2008 2012
Belarus Kazakhstan /Russia (applied rate) 7.16/9.99 0 0
World (MFN) 9.95 9.11 8.08
World (applied tariff) 9.99 6.27 5.69
Kazakhstan Belarus /Russia (applied rate) 2.12/2.73 (2004) 0 0
World (MFN) 2.82 (2004) 5.07 7.81
World (applied tariff) 2.77 (2004) 3.56 4.82
Russia Belarus /Kazakhstan (applied rate) na / 9.59 (2001) na/ 0 0
World (MFN) 9.94 (2001) 8.77 8.08
World (applied rate) 9.89 (2001) 7.34 6.15
Sources: WITS (TRAINS database - aggregated from 6digit data)
The World Bank (2012) model estimation suggests that this could lead to substantial gains to
real income to the tune of 1.5% annually. The question whether customs union will provide a
mechanism to lower trade barriers between Kazakhstan and Russia (Belarus is not an
important trade partner of Kazakhstan) remains open.