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4. Read the text: european commission and kazakhstan’s accession to wto

Part 1

World Trade Organization membership involves both rights and obligations. The most important of them are probably best illustrated by its three main principles: non-discrimination, reciprocity, and transparency. Non-discrimination is the most important principle of the WTO. This is encapsulated in the well-known most favoured nation clause (MFN). The MFN ensures that any trade concessions offered to one country are extended to all WTO member states automatically in a non –discriminatory fashion.

There are exemptions to the MFN principle in the case of a free trade agreement (FTA) or a customs union. Reciprocity is introduced in order to avoid the free-rider problem under the MFN. It requires that any country receiving trade concessions from another country should offer something comparable in return. This requirement is not normally imposed in the case of developing countries, a status Kazakhstan will probably ask for within the context of WTO accession. Transparency refers to the use of different barrier to international trade.

The WTO regards tariffs as more transparent devices than non-tariff barriers (NTBs) such as quotas and voluntary export restrains (VERs). Therefore the most acceptable method of protection under the WTO is tariffs. The use of NTB should be prohibited wherever possible. The WTO has also established a Dispute Settlement Mechanism, whereby a member country can establish whether another member has been unfair in its trading practices in ways that harm that member.

The benefits of WTO membership are therefore potentially very substantial, even if attention is confined to the basic principles of MFN treatment. Developing countries commonly enjoy these preferences without having to offer the same range of concessions to other countries. This is also true for the Uruguay Round agreements covering agriculture and services, as developing countries have much longer transition periods than the developed countries. For countries in transition, accession to the WTO also means that they are able to enjoy important benefits which were not previously available to them.

But the WTO emphasizes that WTO membership is not only about rights, but also about obligations. Unless the acceding country is judged to be ready and capable of taking on the challenges and obligations of membership (possibly after an initial transition period), then it is unlikely to gain entry to the ‘club’.

WTO accession will provide the country with better market access and protection against unfair treatment. It will make it more attractive for FDI, and it will stimulate medium and long-term development of manufacturing. Anticipating WTO accession will also require legal amendments in a number of areas, including agriculture, finance, and intellectual property rights.

The fresh impetus of the last few years to the accession process in Kazakhstan can be explained in terms if idea of making accession a tool of the competitiveness strategy. It is a signal given to markets and investors, as well as to domestic economic interests, that competitive pressure will increase in the country. Governmental authorities responsible for policy planning for each industry sector need to understand and utilize the provisions of the relevant WTO Agreements and to plan appropriate policies for the revitalization of respective industries. At the same time, protection of domestic industries is also important. And it is essential to find an appropriate way of guiding domestic industries along the road to adaptation to the global economy.

The question of what is to be expected from WTO accession remains open, because the answer depends on the conditions of accession, on how the strategic issues will be managed in the discussion, and on the strategies of adaptation developed in each sector and the region of the economy. Three major policy areas will be transformed with accession: market access, export subsidies, and internal support (subsidization). In addition, technical barriers to trade (TBT-standards), and sanitary and phyto-sanitary regulations (SPS) and food security will have to be harmonized.

Economic opening-up and WTO accession are good for Kazakhstan because it already has rather low average tariffs, but it still facing some quantitative restrictions on the export of steel, etc. There are several reasons to think that in the short term the export effects of accession will be less important than the import and domestic policy effects. However, in the medium term, the basic principle of non-discrimination among countries is a very good lever for developing a market economy free from obstacles to fair competition.

In addition, as Russia and Ukraine are negotiating WTO accession, it is wise for Kazakhstan to do the same. All in all, competition is likely to become more intense for Kazakh products. This will foster economic restructuring, and some activities and regions will inevitably suffer from this. However, this could be a win-win process if it is well prepared and implemented.

The WTO is currently going through a difficult phase in its development, with implementation of the ‘Doha Development Round’ stalling repeatedly. Behind these difficulties lie a range of issues, including reluctance on the part of some leading developing countries to open up their economies further to trade with, and investment from, the developed countries.

The Government of Kazakhstan has made World Trade Organization (WTO) accession one of the priority objectives in its economic policy. Kazakhstan applied to the WTO in 1996. The negotiation process has clearly intensified since 2002 along with the increasing political emphasis on WTO accession in the Government’s discourse. As Kazakhstan is involved in a process of customs integration with the Russian Federation and Belarus (the Single Economic Space), it aims at entering the World Trade Organisation simultaneously with them or at least shortly after them.

President Nazarbayev decided, after his recent election victory, to launch ambitious new policies. He offered an upgraded economic blueprint with a longer view ahead, to make Kazakhstan one of world’s top 50 most competitive nations within the next 10 years. Kazakhstan is currently ranked 61st out of 117 economies of the world in the World Economic Forum’s Growth Competitiveness Index rating. The accession to the WTO is part of this strategy.

The process of harmonization with the WTO agreements is underway and significant progress is expected in the course of 2007, since the government is increasing human and financial resources in this area. The appointment of a Vice-Minister responsible only for WTO Accession (within the Ministry of Industry and Trade) as well as the gradual increase in the size of the Kazakh permanent delegation in Geneva are clear indications of the country’s commitment.

Part 2

The issues that Kazakhstan will have to deal with implementing WTO Agreements are the following: (1) to respect WTO principles and rules and domestic policies, (2) to participate in multilateral negotiations based on the analysis of its own industries and domestic policies, and (3) to prepare domestic laws which are consistent with WTO principles and rules. In this regard, it is essential for Kazakhstan to plan and undertake its national policy by having a good understanding of the present situation and future prospects on its own industries.

WTO Agreements cover a broad and wide array of areas, while Kazakhstan finds itself in a variety of situations. To be effective it is necessary to identify issues and needs with regard to each area to be supported. Governmental authorities responsible policy planning for each industry sector need to understand and utilize provisions of the relevant WTO Agreements and to plan policies for revitalization of respective industries. At the same time, protection of domestic industries is also important. And it is essential to find an appropriate way of guiding domestic industries to adapt to the global economy.

From on EU perspective, it is noteworthy that the WTO accession of Kazakhstan is one of the key objectives of bilateral cooperation, as reflected in the EU-Kazakhstan Partnership and Cooperation Agreement (the “PCA”), signed in 1999. The harmonization towards market economy principles, and in particular towards WTO core principles, shall however be done according to the EU legislative approach.

In this framework, the European Commission of the European Union has launched a 22-month project aimed at supporting WTO accession for Kazakhstan. It is being implemented in partnership with the Committee for Technical Regulation and Metrology of the Ministry of Industry and Trade and the Kazakhstan Institute for Standardization and Certification. The project team, consisting of four long-term legal and economic experts, are providing assistance to the Ministry of Industry and Trade of the Republic of Kazakhstan, in particular to the Committee for Technical Regulation and Metrology, the Kazakhstan Institute for Standardization and Certification and other relevant state organs.

The main goal of the project is to support WTO Agreement for Kazakhstan by harmonizing Kazakhstan’s legislation on technical regulation and standardization with the WTO Agreement on Technical Barriers to Trade, and with the corresponding EU legislation, and to provide support to the Government of Kazakhstan on the most effective implementation of measures in accordance with WTO requirements.

The specific objectives include bringing the present legal framework on technical regulation and standardization in compliance with the WTO TBT Agreement and corresponding EU legislation; upgrading the professional expertise of the staff of the Committee for Technical Regulation and Metrology, Kazakhstan Institute for Standardization, Department of WTO; building the capacity of the Information Centre (enquiry point) under the Committee; and promoting cooperation between Kazakhstani and European standards, accreditation, metrology and conformity assessment bodies. In addition, the project will run an extensive awareness raising campaign on WTO-related issues and the process of WTO accession for Kazakhstan.

The European Commission has allocated 1,000,000 euro for the project under the Action Program 2003 for Central Asia, which is designed to transfer European expertise to the region. The project will be implemented by a consortium of European consulting firms. 10% of this budget is dedicated to supplying of IT equipment to the Ministry of Industry of Trade, for the creation of an Information Centre under Kazakh Institute for Standardization. As of 1 July 2006, the Delegation of the European Commission is providing an additional two hundred thousand euro (€ 200,000) for a series of initiatives designed to help Kazakhstan prepare to help Kazakhstan to enter the World Trade Organization. This brings total funding for the Project to one million two thousand euro (€ 1,200,000).

The additional support is being used for:

  • a series of training seminars and events that provide high-level technical expertise concerning legislative harmonization, European Union Directives on key subjects, standardization, certification, and conformity assessment. So far this year, the Project has organized fifteen training seminars and events;

  • technical assistance and support for Kazakhstan’s participation in several international organizations that promote cooperation for product safety and the qualifications of entities that test products. These incline the European Committee for Standardization (CENELEC), the International Accreditation Forum, Inc. (IAF), and the International Laboratory Accreditation Cooperation (ILAC);

  • a Public Awareness Campaign, which will start during the Fall of 2006. In cooperation with its Partners, the Project Team will hold a series of events in different locations of Kazakhstan, and a number of brochures and publications. The events publications will provide important information for officials, industry representatives, and the public;

  • the review and utilization of harmonized and international standards in Kazakhstan, so that Kazakh products can be accepted and compete in the international marketplace.

The European Commission also finances support to the Government of Kazakhstan on preparing analysis of the economic consequences of WTO accession for the national economy of the Republic of Kazakhstan and the most effective measures to be implemented in order to achieve compliance with the requirements of WTO Agreements.

This project started early this year. The budget of this project is 200,000 euro, and its main beneficiary ix the Ministry of Economy and Budget Planning. The objectives of the project are the following:

  • to make an analysis of the current status of the selected sectors of the national economy with a view to their compliance with the relevant requirements of WTO Agreements;

  • to forecast the economic consequences of WTO accession for the selected sectors of the national economy including identification of the required measures to be taken to achieve their compliance with WTO requirements;

  • to make recommendations for medium-term planning of the possible development of the selected sectors of the national economy during the post-accession period.

The selected sectors where the European Commission will provide assistance to the Ministry of Economy and Budget Planning are: agriculture, transport and roads, and the issue of Local Content.