Trade Integration in the CIS: Alternate Options, Economic Effects and Policy Implications for Belarus, Kazakhstan, Russia and Ukraine
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The BRK-CU largely eliminated the remaining non-tariff barriers in mutual trade and, upon the adoption of a Common External Tariff (CET) in 2010, unified the participating countries’ trade policies vis-à-vis third countries. As a result of CET adoption, the average (un-weighted) level of protection declined by about 2 p.p. in Russia and 1.3 p.p. in Belarus, but increased by around 2.5 p.p. in Kazakhstan. Available estimates of the economic effects of the BRK-CU differ by a wide margin. Our computable general equilibrium (CGE) estimation results suggest that joining the BRK-CU might potentially bring net GDP losses to Ukraine. BRK-CU membership appears to bring net GDP and welfare losses also to Kazakhstan whereas Belarus and Russia benefit in terms of GDP and labour income growth. There seems to be little (economic) justification for Russia prompting Ukraine to join the BRK-CU. Ukraine, on the other hand, is likely to have a significant increase in GDP and real labour income after implementing the DCFTA with the EU.
Keywords: foreign trade, integration, Customs Union, gravity and CGE modelling, Belarus, Kazakhstan, Russia, Ukraine
JEL classification: C5, F1, F5, P3
Research Areas: International Trade, Competitiveness and FDI