EDB: Removal of EEU non-tariff barriers expected to raise Belarus' GDP by 2.8%
2015-03-17    The Center for Integration Studies of the Eurasian Development Bank (EDB) published the first comprehensive assessment of the impact of non-tariff barriers on mutual trade in the Eurasian Economic Union (EEU) and provided the recommendations on the ways of removing them, BelTA learned from the EDB press center

The report has been prepared based on a poll of 530 Russian, Kazakh and Belarusian exporters. “The report provides a number of scenarios as to how reduce non-tariff barriers. In the base scenario, Belarus will derive the highest benefits: its real GDP is expected to grow by 2.8% and welfare by an aggregate of 7.3%,” the press center informed.

In Kazakhstan, welfare will grow by 1.3% and real GDP by 0.7%. The effects for Russia will be less significant: welfare will improve by 0.5% cumulatively and real GDP 0.2%. “These differences are due to the greater size of its economy and the lower importance for Russia of trade inside the EEU, compared to trade with other countries,” specialists said. 

The research has shown that reductions in non-tariff barriers will be particularly important to the producers of machinery and equipment because the costs associated with non-tariff barriers are the highest in this sector. Pulp-and-paper and food enterprises, and also the producers of leather, footwear, resins and plastics will also see significant benefits.

The main barriers for Belarusian transport companies in the market of road freight transportation in Russia and Kazakhstan are the non-refundable VAT on fuel, the limited “green card” insurance (up to €3,000) in Russia, operational restrictions (for example, the standard axle load in Russia), restrictions on the transportation of large-size cargo (in Kazakhstan), and too many inspections (for example, of the drivers' rest time) and penalties. Belarusian transport companies believe that the removal of barriers and restrictions in the transport sector (in particular, the permit system) would make it possible to double freight traffic over three years and expand the vehicle fleet by 30-40% a year. Respondents from Kazakhstan believe that barriers and restrictions in Russia increase the cost of transport services by an average of 10-20%.

In the research paper non-tariff barriers are divided into two groups. The first group includes non-tariff barriers such as sanitary and phytosanitary measures, technical barriers to trade, quotas, prohibitions, and quantitative controls. The second group comprises price and competition controls (the institute of ‘special importers', sale restrictions, restrictions on public procurement, various subsidies). The second group of barriers is often referred to as “sand in the wheels,” because it hinders the movement of goods and in principle can be fully removed. The specialists from the Center for Integration Studies have come to a conclusion that this very group of barriers has the most negative impact on trade. 

On the whole, Belarusian exporters estimate non-tariff barriers in their trade with Russia and Kazakhstan at 15% of the value of their exports, Kazakh exporters at 16% for exports to Russia and 29% for exports to Belarus, and Russian exporters at about 25% for exports to each of the two other countries.

“Non-tariff barriers reduce the efficiency of the EEU single market. They hinder the development of, and cooperation between, high-tech sectors,” says Yevgeny Vinokurov, Director of the Center for Integration Studies. “The gradual unification and lifting of non-tariff barriers is one of the most important issues on the agenda of the Eurasian Economic Union in the following years,” he noted. 

The Eurasian Development Bank (EDB) is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth, and the expansion of mutual trade and other economic ties in its member states. The member states of the Bank are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, and the Republic of Tajikistan.

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