1. Kyrgyzstan’s Participation in Global and Regional Trade Agreements: “Spaghetti in the Bowl” is Perplexed more than Ever Roman Mogilevskii, University of Central Asia Almaty, 6 April 2016

2. Contents Parallel participation in different global and regional trade agreements Agrifood trade regime of Kyrgyzstan before and after accession to the EAEU Current status of Kyrgyzstan in WTO Macroeconomic and other shocks First results of the trade policy changes and the shocks

3. Participation in Trade Agreements Kyrgyzstan simultaneously participates in different trade agreements: - WTO since 1998 - CIS Free Trade Area (FTA) since 2011 - OEC’s Framework agreement on trade cooperation In the literature, this situation is called “spaghetti bowl” The above agreements are not contradictory In 2015, Kyrgyzstan acceded to the Eurasian Economic Union (EAEU) and accepted its trade regime – this contradicts to the country’s WTO commitments

4. Trade Regime before and after the EAEU Accession Average weighted MFN tariff rate for agrifood products: before – 10.0%, after – 45.6% Abolition of simplified regime of imports (mostly from China) for individuals with tariff rates about 1% and without VAT Free trade regime (zero tariffs) in trade with members of CIS FTA still in place No customs border with Kazakhstan anymore, but tightened customs control on EAEU external borders with China, Tajikistan and Uzbekistan

5. Trade Regime before and after the EAEU Accession (2) Administration of VAT on imports from EAEU Harmonization of legislation on technical regulation – transition period of 24 months for agrifood products Modernization of laboratories (Russian technical assistance of $200 million) No phytosanitary control on the Kyrgyz-Kazakh border anymore Veterinary system is subject to audit by EAEU countries

6. EAEU and WTO Four out of five EAEU members are also members of WTO They all have different WTO commitments

7. EAEU and WTO (2) Kyrgyzstan is to conduct negotiations with WTO members on the tariff change to the level of Unified Customs Tariff of EAEU (i.e. Russian commitments) However, at the end of 2015 Kazakhstan has joined WTO; the Kazakh government is not going to harmonize its WTO commitments with Russian ones – trade diversion risks for Kyrgyzstan Special import administration regime has been introduced in Kazakhstan – its effectiveness is yet to be proven Perhaps, it is better to align Kyrgyz tariff with the Kazakh one and not Russian?

8. Macroeconomic and Other Shocks Exchange rate Recession/ growth deceleration in Russia and Kazakhstan Sanctions World prices, good/bad harvest

9. Results of Trade in 2015 Dramatic decline in trade values in all directions Difficult to separate the effects of trade policy, exchange rate shocks, other events and methodological changes

10. Conclusions Accession of Kyrgyzstan to the EAEU retaining WTO membership resulted in a collision in the trade policy of the country The Kazakhstan’s accession to WTO on its own conditions additionally complicated the situation for Kyrgyzstan These trade policy changes encourage trade diversion/distortion Some additional opportunities for increase in exports to EAEU markets, but these are not going to materialize automatically Exchange rate shocks are more important than the trade policy changes

11. THANK YOU!