More than a matter of quorum

[b]The signing of a package of documents for the Customs Union of Russia, Kazakhstan and Belarus is one of the most outstanding events of the last month and the year in general. How will this integration prove profitable and who will benefit?[/b] Foreign investors will clearly benefit. Opening factories, they can be sure that their manufactures will be freely sold in Belarus, Russia and Kazakhstan, without any restrictions. About 165 million reside within our three states, making it a really promising market. At the recent summit, it was estimated that our states will see an additional 15 percent GDP growth by 2015. We can now correlate this with already known facts.
The signing of a package of documents for the Customs Union of Russia, Kazakhstan and Belarus is one of the most outstanding events of the last month and the year in general. How will this integration prove profitable and who will benefit?

Foreign investors will clearly benefit. Opening factories, they can be sure that their manufactures will be freely sold in Belarus, Russia and Kazakhstan, without any restrictions. About 165 million reside within our three states, making it a really promising market.
At the recent summit, it was estimated that our states will see an additional 15 percent GDP growth by 2015. We can now correlate this with already known facts.
I suppose that only the discussions on the possible establishment of the Customs Union brought in more businessmen to the Belarus Investment Forum this year. We can’t but admit that, for European producers, the Belarusian part of the Union is of greatest interest, at least for two reasons.
Firstly, our geographical position and improved conditions for doing business are an asset. The creation of a single customs territory from Brest to Vladivostok, from Almaty to Semipalatinsk by July 1st should bring a boom in foreign investments into the Belarusian economy by late 2010.
Secondly, the Customs Union is profi-table for all those who trade with Union members and foreign states, especially the European Union. In 2008, Russia’s turnover with the EU stood at $280bn, Kazakhstan’s was $40bn and Belarus produced $23bn. Total commodity turnover reached almost $350bn but there is scope for significant expansion, especially between Asia and Europe. Belarus could become a warehouse for temporary storage, processing and collection of a wide range of products.
Belarus will find several advantages within the Customs Union. Owners of European cargoes would prefer to see customs clearance simplified to a single window — rather than having to declare goods twice on crossing the border e.g. into Ukraine. Of course, we’ll be competing with Finland and the Baltic States in this respect, so additional thought will be needed.
Thirdly, the transition to a single customs tariff will help strengthen the protection of Union members’ economies, enabling them to compete against imports. Before the crisis, Belarus’ customs fees for some imported products were too low. With this in mind, another advantage comes to the fore. When our countries join the WTO synchronically (or, even better, as a consolidated group), they’ll be able to soften conditions of access to their markets for third countries. Meanwhile, thinking of the short-term benefits for Union manufacturers, it’s important to continue attracting modern technologies from states outside the Customs Union.
Otherwise, we’ll be left, for example, driving only Russian-made cars. It’s an obvious area for focus.
Of course, the Customs Union Commission has some unique characteristics. For example, Belarus and Kazakhstan have jointly 47 percent of votes, while two-thirds are needed for a quorum. However, if interests coincide, it is easier for the two states to defend their position together (in comparison to, for example, the position within the Union State).
Russia should realise that the Customs Union will be strong, long-lasting and serve its geopolitical interests only if no significant exemptions are applied to single customs tariffs. Export duties on oil and gas (from Russia to Union partners) should be lifted. Kazakhstan and Belarus will face difficulties within the Customs Union if equal prices are not applied; how can they compete with factories boasting access to cheaper electricity? The early evolution of the Customs Union into a single economic space is especially vital and must remain the foundation of further talks.

By Prof. Mikhail Kovalev, Dean of the Belarusian State University’s Economics Department
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