Postcard from Bishkek

On 30th October, 1947, The General Agreement on Tariffs and Trade (GATT), was founded … which became the foundation of the World Trade Organisation (WTO), which came into being on 1st January, 1995.

The World Trade Organization (WTO) is a global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments with the aim of helping producers of goods and services, exporters, and importers to conduct their business.

The WTO claims that it:

• is an organization for the opening of trade – seeking to remove barriers to trade;
• is a forum for governments to negotiate trade agreements;
• is a place for governments to settle trade disputes;
• operates a system of trade rules;

Above all, it is a place where the member governments try to sort out the trade problems they face with each other.

The organization claims that it’s agreements and operations are based on certain principles:

• Non-discrimination: either between its trading partners nor between it’s own and foreign products, services or nationals;
• Openness: for example, lowering customs tariffs and removing other barriers such as import bans or quotas, export subsidies and “dumping”;
• Stability – Predictability and Transparency: Foreign companies, investors and governments should be confident that trade barriers should not be raised arbitrarily. With stability and predictability, investment is encouraged, jobs are created and consumers can fully enjoy the benefits of competition — choice and lower prices;
• Competition: The WTO attempts to discourage ‘unfair’ practices by establishing rules to define what is fair or unfair … and how governments can respond to them in order to compensate for damage caused by unfair trade;
• To benefit “less developed countries”: over three quarters of WTO members are “developing” or “transition” economies, and the WTO agreements include special provisions, (such as transition periods), to help them adjust to their responsibilities;
• Environmental Protection: which includes measures to protect health, public, animal and plant health.

 

Although the organization’s overriding purpose is to help trade, (because this is seen as important for economic development and well-being), there is a proviso: that there are no undesirable side effects.

That partly means removing obstacles – which is, probably, what most people think of when they hear the three initials W,T,O.   However, it also means ensuring that individuals, companies and governments know what the trade rules are around the world, and giving them the confidence that there will be no sudden changes of policy.  In other words, the rules have to be ‘transparent’ and predictable.

Those rules, incidentally, aren’t just about “the ease of doing trade”, but they also address issues relating to consumer protection, intellectual property rights and/or the spread of disease.

One of the principles of the organization is that of negotiations between partners … the agreements reached between partners are not static but are subject to renegotiation over time, as the result of changing circumstances.  These take the form of “rounds” of discussions – the latest being known as the Doha round, because they are based on the Doha Development Agenda, (launched by WTO trade ministers in Doha, Qatar, as long ago as in November 2001).

Once agreements are reached, then they need to be monitored to ensure that they are being properly implemented. and this involves a periodic review by members of the organization’s secretariat.

If one country considers that there is an infringement of the rules then there are procedures in place for specially appointed independent experts to adjudicate and bring about a resolution to the trade dispute.

To try and help members fulfill their obligations of membership, the WTO also operates technical cooperation missions and training courses – in cooperation with the Wold Bank and International Monetary Fund.

Another aspect of the organization’s role and activities is to conduct c research and analysis: regular assessments of the global trade picture in its annual publications and research reports on specific topics are produced by the organization.

 

There are 159 member states – including Kyrgyzstan.

Kyrgyzstan formally joined the organization on 20th December, 1999.  It was the first of countries of the former Soviet Union to negotiate membership.

In that time:

• Kyrgyzstan has implemented a favourable regime for export operations, in which it is prohibited to establish restrictive measures that harm the interest of other WTO members;
• Kyrgyz legislation has been brought into conformity with international standards;
• Referral services were created for correlation with WTO regarding issues of development, adoption and application of technical regulations, standards, sanitary and phytosanitary measures;
• the USA repealed an amendment to the Section Law on Trade and Development with regard to Kyrgyzstan which related to the provision of credit programs, credit and investment guarantees and commercial agreements;
• the government claim that the experience of working with the WTO, has helped it implement economic and structural reforms.

Personally, I am not so sure that the “man on the street” is all that aware of the influence of the WTO has had on the economy …  it’s a complex and somewhat esoteric topic and for many people the questions of everyday life are more mundane.

Following Kyrgyzstan’s accession to the WTO, a rift opened with the Central Asian countries and members of the Commonwealth of Independent States, (CIS).    Since then, however, Georgia has joined (on 14th June, 2000), Moldova, (on 26th July, 2001), as have the Baltic States, the Ukraine  (on 16th May, 2008),  and the Russian Federation, (on 22nd August, 2012) … not forgetting China, (on 11th December, 2001).  In addition, Azerbaijan, Belarus, Kazakhstan and Uzbekistan, whilst not members, all have observer status. 

 

The big question at the moment concerns the plan to join the Customs Union of Belarus, Kazakhstan, and Russia which came into existence on 1st January, 2010.  It was launched as a first step towards forming a broader European Union-type economic alliance of former Soviet states. The member states are planning to continue with economic integration and were set to remove all customs borders between each other after July 2011. On 19 November 2011, the member states put together a joint commission on fostering closer economic ties, planning to create a Eurasian Union by 2015. Since January 1, 2012, the three countries form a single economic space with the Eurasian Economic Commission acting as the regulatory agency for the Customs Union and the Eurasian Economic Community.

Confused? … I am not surprised … it’s a complex web and I am not all that sure that the “man on the street” is any wiser about the issues than they are about the advantages of WTO membership.

Russia is looking to expand the CU and talks are already underway with Kyrgyzstan and Tajikistan along with some other former Soviet Republics considering their relationships with the organization … although I see a recent report suggests that Azerbaijan is less than keen on the prospect.

Discussions on a “road map” for Kyrgyzstan’s accession to the CU have been underway for some time.  Feelings seem to be divided between those who are convinced that the country’s best future lies with the Union and those who see it as a backward step … Certainly there are many who feel that Kyrgyzstan’s traditional, historical and cultural ties with its neighbours, (in particular, in this case, Russia and Kazakhstan), are stronger and more important than those with far away countries in what is seen as a Western orientated organization.

When accession to the CU was first mooted, there was considerable speculation about whether Kyrgyzstan’s membership of the WTO might preclude joining the CU … but it doesn’t.  Indeed, there are several similar “customs unions” that already work within the framework of the WTO – although, as I understand it, there is a complication in that the CU has members that are not members of the WTO.

The main problem facing the country is that the two organizations have different regulations – and more importantly, different customs tariffs – which are considerably higher in the CH than among the WTO countries.   For Kyrgyzstan to adopt the CU’s tariff regime, Bishkek would effectively have to double the rates on imports from other WTO members.

That could lead to disputes – and the possibility of Kyrgyzstan having to pay compensation … which could be considerable.

 

Tags: For_the_Record, Organizations