Belarus, Kazakhstan and Russia form Customs Union — but what will it bring?
November 27th, 2009 will join the other key dates regarding post-Soviet integration, alongside those of the establishment of the CIS and the Belarus-Russia Union State. Once again, Minsk is directly connected with this significant event…
The National Library (which traditionally hosts summits) has hosted a EurAsEC Interstate Council session, with the presidents of Belarus, Kazakhstan and Russia (three out of five member states) taking principal decisions ensuring that the Customs Union comes into force on January 1st, 2010. To be more correct, on January 1st, a single customs tariff is being introduced. The Customs Union Commission will be responsible for its formation and, on July 1st, the customs territory of the three countries will become operational. Leaving aside discussion of the significance of the Customs Union (although this would be an appropriate place to do so) we can look at what it is likely to achieve. Belarus, Kazakhstan and Russia have agreed to lift customs borders between themselves and trade with the rest of the world on equal terms.
The idea of their Customs Union has been debated since 1995 but never before have our countries come so close to implementation. Three years ago, Minsk, Astana and Moscow decided to facilitate the creation of the Customs Union. A year later, on October 6th, 2007, the heads of state signed fundamental documents at a EurAsEC session in Dushanbe. They agreed to establish a single customs territory and form a Customs Union, with a Customs Union Commission, coming into operation in 2010. Terms have been met, despite the economic crisis pushing most countries to focus on domestic affairs. The three states’ leaders have demonstrated great political will in achieving their target. Without this, even evidently profitable international projects remain in draft form only… as seen before in the CIS!
“We are on the threshold of seeing a union which will define the future of our own national economies and beyond,” stressed Alexander Lukashenko at his Minsk meeting. “What does the future hold for our national economies? On what terms are we creating the Customs Union and a single economic space?” The President noted that ‘a number of issues are quite sensitive for Belarus (and others) and aren’t positive in every aspect’. “However, we are consciously assenting as, in the long run, a balanced consideration of interests should lead to positive results for each country and for society overall,” he added. According to Mr. Lukashenko, the creation of the Customs Union will involve our countries in global economic and political processes, enhancing efficiency and the competitiveness of our national economies, leading to the creation of a single economic space and, eventually, improving standards of living.
Economic integration is multi-runged; the first involves the establishment of a free trade zone, where customs barriers are lifted but tariffs remain on trade with third countries. The EU has promised this to its Eastern Partnership members but is yet to apply this step. A free trade zone is already operational within the CIS.
Belarus, Russia and Kazakhstan are taking the next step by creating the Customs Union. Goods produced in Belarus, Kazakhstan and Russia will be distributed within these three states without hindrance. Imports subject to duties will only be charged once — on crossing the border into the Union — and such fees will be fairly distributed between Union members. The order governing the distribution of these fees comes into operation from April 1st, 2010. Talks are now underway, which should result in a clear system.
The Customs Union presupposes the establishment of supranational organs. Each state voluntarily parts with a share of its sovereignty — with decisions taken jointly by the three countries. Each will trade with other states under shared rules, so regulations must be decided. The Union Commission will define a single customs tariff and its decisions will become mandatory. The Russians will have a majority of votes but a number of ‘sensitive’ issues will require consensus. Of 1,141 products being traded, Belarus will have right of veto on 632 (among them, meat and dairy products, some metal products, chemical fibres and washing machines).
It’s generally accepted that a common market is the next stage of integration — bringing free movement of goods and services, capital, labour and information through the national borders. Only countries boasting absolute political trust can unite in this way. Mr. Lukashenko is convinced that a single economic space can be created quickly, if political will is present.
The European Union could act as an example of a common market which is already functioning. Moreover, it is now shifting towards the highest stage of integration — an economic and currency union. Strictly speaking, it’s now possible to talk about the formation of a single economic space.
“We should act quickly, without fuss. Our major final goal is the creation of a single economic space; the Customs Union is an important step towards this target,” the Belarusian President stressed. A single economic space will create a general energy market, providing equal working conditions for legal entities, forming a single transport space and solving many other topical issues. “Once this space is established, all those participating in the system of stable economic ties will benefit. Equal conditions for legal entities will be created, alongside competition,” Mr. Lukashenko emphasised, adding, “Everyone will be subject to equal conditions, including those relating to sensitive issues such as equally agreed prices for energy resources.”
The Belarusian President noted that certain barriers remain in the Customs Union — such as sanitary and technical. “In recent years, we’ve often witnessed the application of these elements for purposes which have nothing in common with fair trade. These should not exist and they won’t within the single economic space — as the presidents have agreed,” he said. “The single economic space is a fully reasoned, logical and finished form of economic integration in the post-Soviet space.”
Belarus has proposed legislation be laid out for the single economic space by 2011. The presidents have agreed to take a final decision on the issue in Kazakhstan, on December 18th.
How will Belarus benefit?
Belarus’ Deputy Prime Minister, Andrei Kobyakov, has been authorised by the President to conduct further talks on the Customs Union. He recently delivered a speech to parliamentarians, who must ratify international agreements regarding the Customs Union’s legal base. Mr. Kobyakov notes that higher tariffs will affect 6.7 percent of all products within the Union. Meanwhile, 74.6 percent of products will face no change and 18.7 percent will see reduced tariffs. “After the single customs territory is formed on July 1st, 2010, the abolition of trade barriers will be fixed by normative documents,” Mr. Kobyakov asserts. Belarus has managed to reserve the import of alcohol, tobacco, fish and fish products for licensed legal entities only.
The Customs Union will bring a shared system of restrictions regarding trade with third countries — a system not unlike that currently operational in Belarus. Mr. Kobyakov adds that licensing of imported medications is being introduced. Additionally, control is being tightened over importation of precious metals and stones.
The new single Customs Code differs little from existing Belarusian legislation. However, some aspects require clarification. One difference is that customs officials (agents, carriers and authorised economic operators) will have new powers. “Taking into consideration today’s crime situation regarding customs business — mainly in Russia and Kazakhstan — our Customs Union partners were keen to see high financial guarantees for payment of customs fees. We’ve managed to agree an extension of guarantee implementation until 2012 for Belarusian firms,” the Deputy Prime Minister notes.
Duties on passenger cars are among the most acute, leading to much debate. Mr. Kobyakov tells us that Belarus is adopting Russian duties from January 1st for legal entities (July 1st for ordinary citizens). The ‘package’ takes into consideration the introduction of protection for cargo, passenger and agricultural machinery.
“Initially, Russia and Kazakhstan did not support Belarus’ proposal to increase customs fees on haulers while keeping duties on second-hand buses and other machinery,” Mr. Kobyakov explains. Kazakhstan was not ready to introduce these radical changes but Belarus would not agree to raise duties on passenger cars. Eventually, a solution was found. The three countries have decided to join the WTO as a single block, which will be extremely profitable for Belarus. “This is what we have been insisting upon in recent years,” adds the official.
The co-ordination of customs rates regarding transport has been a very difficult issue to agree upon. The heads of the three states’ governments have decided that ‘at the initial stage of the Customs Union, all domestic production of machinery should receive adequate, serious tariff protection’.
For Belarus, new passenger car duties are the only rates which would seriously affect ordinary citizens. Meanwhile, Belarus is keen to cut customs fees on raw materials for the pharmaceutical and paint-and-varnish industry, caoutchouc and some kinds of technological equipment.
Our Government concludes that ‘the Customs Union is very profitable for Belarus, being advantageous for almost every basic domestic producer — including those working in machine building and the agro-industrial complex’. From July 1st, 2010, all Belarusian manufacturers will receive free access to the markets of Russia and Kazakhstan, irrespective of the origin, quantity and specific weight of raw materials used. This should considerably expand the possibilities for Belarus to realise is export potential of ‘an assembly workshop’ (in comparison to the present situation).
Mr. Kobyakov warns, “It’s impossible to assert that all problems relating to mutual trade will disappear — as if by magic. However, we do now have an instrument enabling us to solve these problems in a civilised fashion, without fuss or upset.”
The President of Kazakhstan, Nursultan Nazarbayev, has calculated that the Customs Union should enable Belarus, Kazakhstan and Russia to see GDP grow by an additional 15 percent by 2015. A huge market is emerging. The three countries’ cumulative reserves of oil total 90bn barrels. Meanwhile, they boast production of 12 percent of the planet’s wheat and a joint turnover of $900bn. Their GDP stands at $2 trillion. The scale of the new Union is impressive. Now, it’s vital for as many companies, businessmen and ordinary people as possible to feel the benefit.
By Igor Kolchenko
[b]Belarus, Kazakhstan and Russia form Customs Union — but what will it bring? [/b]November 27th, 2009 will join the other key dates regarding post-Soviet integration, alongside those of the establishment of the CIS and the Belarus-Russia Union State. Once again, Minsk is directly connected with this significant event…