Conference spotlights Kazakhstan’s fast-moving bid to join World Trade Organization

(EU trade project leader Marius Bordalba addresses the WTO conference in Astana.)

A lot of Kazakhs have expressed concern that the country’s quest to join two free-trade organizations — the Customs Union and the World Trade Organization – will backfire, damaging the domestic economy rather than helping it.

They argue that many domestic industries will be unable to compete against foreign companies doing business in Kazakhstan if the government eliminates protection mechanisms such as import tariffs and subsidies.

One of the speakers at a recent conference in Kazakhstan on the country’s drive toward WTO membership offered reassurances to local businesses, however.

Ali Mahmoud, a senior economic-integration specialist at the Islamic Development Bank, said Kazakhstan will benefit from the WTO over time. But membership “may not provide quick benefits,” he cautioned the audience in Kazakhstan’s capital of Astana. “It may take years.”

Ali Mahmoud
Ambassador Ali Mahmoud

The key to a winning WTO experience is opening domestic markets gradually, the former Sudanese ambassador advised. “If not done right, it could be harmful,” said Ali, who works at the Islamic Development Bank’s headquarters in Jeddah, Saudi Arabia.

Any country joining the WTO needs a “well-developed national strategy for improving (domestic) competitiveness,” Ali added.

Kazakhstan requires a five-year transition to the WTO to keep from harming its domestic industry, contended Rakhim Oshakbayev, first deputy CEO of Atameken, an umbrella group of chambers of commerce nationwide.

Ali and Oshakbayev were among scores of Kazakh and international experts at the conference who shed light on the country’s efforts to make economic and trade policies meet WTO mandates.

Kazakhstan reached an important milestone in September of 2011 with a bilateral WTO agreement with the world’s biggest economy, the United States.

The agreement allows U.S. companies “to continue to expand in Kazakhstan in sectors where the United States is a world leader, including energy, financial services, movies and television, express delivery, and computer services,” the Office of the U.S. Trade Representative noted.

Kazakhstan still needs to negotiate a bilateral agreement with the European Union, its biggest trading partner.

To help the country accelerate its entry into the WTO, the EU funded a project in June of 2010 to advise Kazakhstan on its trade-policy-realignment program. The conference in Astana on December 14 marked the end of the 2 ½-year project.

International trade is a complicated business, so a lot of themes surfaced during the day-long gathering. Here are highlights from conference presentations and interviews with participants:

  • A bright spot for Kazakhstan is that the country’s trade legislation “has been brought practically into full conformity with the relevant WTO agreements,” according to Anar Mammadov, a specialist in trade in  goods, services and commodities with the United Nations Conference on Trade and Development.
  • Another bright spot is that in the past two years Kazakhstan’s efforts to join the WTO have gone into overdrive, according to Marius Bordalba, team leader of the EU-funded advisory project for Kazakhstan.

Before 2011, Kazakhstan’s major trade-integration focus was forming the regional trade bloc known as the Customs Union with Russia and Belarus in January of 2010, Bordalba said.

Kazakhstan’s work on WTO membership has been particularly frenetic since December of 2011, when President Nursultan Nazarbayev called for a pick-up in the pace, Bordalba said. Kazakhstan had working-group meetings with WTO members in March, July, October and December of this year, said the Spaniard, who is an international-trade attorney.

Working-group meetings require days of preparation to respond to WTO members’ questions and comments, Bordalba said, so the pace that Kazakhstan’s trade team kept in 2012 was “very intense.”

U.S. Deputy Trade Representative Demetrios Marantis mentioned the sizzling pace when in September of 2011 he praised Minister of Economic Integration Zhanar Aitzhanova and her  team “for their tireless work over the last year to complete this (bilateral) negotiation process” with the United States.

— Kazakhstan continues to work on such WTO demands as lowering import and export duties, making agricultural subsidies conform to international norms, reviewing state-owned corporations’ role in the economy, implementing international standards on trade in plants and animals, and doing something about domestic-content rules, Bordalba said.

The main areas of Kazakhstan-WTO disagreement in the services sector are finance, telecommunications and foreigners’ difficulty gaining entry to Kazakhstan to work on short-term projects, said Mammadov, an Azeri national. He stressed that he was offering his insight as an individual and not in his United Nations capacity.

The WTO’s demand that Kazakhstan reconsider its domestic-content rules will upset many Kazakhs. The government issued its first domestic-content decree a decade ago in response to complaints that too few Kazakh businesses and individuals were sharing in the country’s economic progress. It has made the provisions more sweeping since then.

The rules require that a percentage of the goods and services awarded under state contracts go to Kazakhs. They also require international oil consortiums doing business in Kazakhstan to hire a certain percentage of locals. The rules have dismayed the consortiums, which complain that Kazakh petroleum-engineering graduates, for example, possess 30-year-old skills that are unusable in today’s industry environment.

— Kazakhstan’s membership in the Customs Union has made the country’s effort to join the WTO more difficult. Being a member of the regional bloc means that not only must Kazakhstan’s national trade policies conform to WTO requirements, but that Customs Union policies must conform as well.

Government leaders in Astana have the power to change Kazakhstan’s policy themselves, of course. But changes in Customs Union policy require the approval of Russia and Belarus, too.

At one time Kazakhstan thought it could achieve WTO membership before the end of 2012. The new target is a year from now — December of 2013.

— The European Union is the last of the big world economies that Kazakhstan has failed to negotiate a bilateral trade agreement with. A country seeking WTO membership must first conclude a bilateral trade agreement with each WTO member that requests one. After that, the applicant must negotiate multilateral agreements — pacts with several countries at once.

A bilateral agreement with the European Union is doubly important for Kazakhstan because the EU is its biggest trading partner and investor.  Forty percent of Kazakhstan’s trade is with the EU, according to Ruslan Sultanov of the government’s Center for Trade Policy Development. Twelve years ago, 20 percent of the country’s trade was with Russia. By 2010 that figure had fallen to 5.4 percent.

A major stumbling block to an EU-Kazakhstan agreement is the export duties that Kazakhstan levies on oil and minerals it sells abroad, Bordalba said. The European Union wants the duties cut back.

— Kazakhstan has brought an escalated tariff scheme to its bilateral negotiations with WTO members, according to Mammadov of the U.N. Conference on Trade and Development. That means it has asked for low tariffs on imported raw materials, higher tariffs on semi-finished imports and even higher duties on finished products.

(Writer Hal Foster appears here under a partnership with Tengrinews)