Regional Trade Integration: Opportunities and Challenges for Central Asia Mario Apostolov, Regional Adviser UNECE Trade mario.apostolov@unece.org SPECA.

Regional Trade Integration: Opportunities and Challenges for

Central Asia

Mario Apostolov, Regional Adviser UNECE Trade mario.apostolov@unece.org

SPECA Aid-for-Trade Geneva, 10 July 2013

Opportunities created by trade liberalization

1. Lower barriers to trade – higher growth, more consumption

2. Lower cost of communication and transport

3. Global value chains to which producers and consumers in less developed transition economies can connect

4. Eurasian East-West Integration

5. Combine benefits from global and regional trade liberalization (art.XXIV of the GATT 1994)

Challenges for the SPECA countries1. Fallout from the world financial crisis / protectionism

2. Overly concentration on 1-2 commodities

3. Dutch disease (relationship between increase in exploitation of natural resources and a decline in the manufacturing sector)e.g. KZ oil exports → high revenue → importation of

manufactured goods produced at lower cost in China and South Asia → no stimulus for production

4. Low integration with regional and global value chains

5. No sense of regionalism & will for cooperation

6. Various schemes of cooperation with neighbours: EEC, CAREC, ECO, TRACECA

Eurasia: 3 trading blocs

Annual GDP growth rates in the SPECA region (in

%) 2000-09 2010 2011 2012 2013 2014 2015

Afghanistan .. 8.4 7.0 11.8 3.1 4.9 6.3

Azerbaijan 14.4 5.0 0.1 2.2 4.8 4.8 2.9

Kazakhstan 7.5 7.3 7.5 5.0 5.0 5.3 5.5

Kyrgyz Republic 4.2 -0.5 5.7 -0.9 7.4 7.5 5.3

Tajikistan 7.7 6.5 7.4 7.5 7.0 6.0 6.0

Uzbekistan 6.1 8.5 8.3 8.2 7.4 7.1 6.7

China 9.4 10.4 9.3 7.8 7.7 8.0 7.9

Russian Federation 4.4 4.3 4.3 3.4 2.3 3.5 3.9

Turkey 3.0 9.2 8.8 2.2 3.6 4.5 4.7

Source: Global Economic Outlook 2013

Gross average monthly wages by SPECA country (US$»at current

exchange rates)

Source: UNECE statistical data (http://w3.unece.org/pxweb/)

Risks:

Growth in wages and labour productivity in Eastern Europe and Central Asia, 2008–11

(%)

The way forward

1. Integrate with the global rules-based trading system

2. Plug into global and regional value chains / increase the value-added of your exports

3. Regional trade liberalization

4. Trade facilitation

Why regional trade liberalization

1. Need for modernization (CA development strategies)

2. Integrated regional market → attractive for investors

3. Investments bring new technologies, innovation, resources, jobs, linkages to the world economy…

4. Scope: Only Central Asian or broader integration with bigger neighbours?

5. ECE Analysis – FTAs have reduced tarriff barriers in Central Asia => need for trade facilitation

Source: WTO 2012, OECD 2012, WB DB Report 2013

Over 2000 trade facilitation (TF) reforms in the world in the last 8 years. Why?•From tariff barriers to non-tariff barriers•Emergence of global value chains•Need for more efficient, simple and transparent trade transactions•Evidence of benefits: •Expected WTO Agreement based on art. V, VIII, and X of WTO. A trade facilitation deal could give a $1 trillion boost to world economy – Pascal Lamy, 1 February 2013

Trade facilitation is high on the political agendaThe simplification, harmonization, standardization and automation of trade procedures and the accompanying flows of information. Benefits SMEs and LDCs

• Start with pre-Customs and Customs procedure reform

• Build interagency cooperation

• A Single Window/PCS – tools: elements of broader reform

• Change management

Sample strategy goals (over 5 years)• Cut time to export (a container) by 50%; cost by 20%

• Cut rate of physical/documentary checks (to EU best practice rates)

• Increase number of registered Authorised Economic Operators (e.g. to 50% of all traders)

• Create index on export competitiveness of companies in the country

National Trade Facilitation strategy“as is” situation “to be” situation

UNECE Instruments in 4 Areas of TTF

1. Streamlining trade information exchange (UNLK, codes, UNTDED, Single Window recommendations)

2. PPPs for trade facilitation (Recommendation 4)

3. Transit facilitation (TIR Convention)

4. Border-crossing facilitation

Trade Facilitation and inclusion in global value chainsData Pipeline: Future Customs and International Trade Systems (David Hesketh, Customs-UK & Frank Heijmann, Customs-NL)

Consignor or Exporter

Consignee or ImporterContainer/Carrier

Freight Forwarder or

3PL

Freight Forwarder or

3PL

EU Regulation

Country B

Port 1 Port 2

CARGO

3rd Country Regulation

Country ACARGO CARGO CARGO

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Value chains in the agri sector in CA• Agri-sector in CIS: a mixture of small and large producers

• 5 types of processing companies:– Large, vertically integrated holdings

– International manufacturers with headquarters in Moscow (eg.Danon)

– Russian companies with foreign participation (e.g. Baltika)

– Regional food companies from the Soviet times

– Small regional producers

• Integration and enlargement (following Western models); growing supply chain management sector

• Problem - low quality of materials (often due to slowdown in exports of fresh produce) and companies such as Danon close the manufacturing and supply chain

• Begin with Business Process Analysis

Dry fruit exports (apricots)

Tajikistan: 8.1% of export – dried apricotsKyrgyzstan: 3,1% of export

Exports into•Europe•Russia •USA

Countries producing dried apricots % of world export

Turkey 75

Iran 7

Pakistan 4

China 3

others 11

Exports into EU

Production / preparations for exportWhere to find information on Customs requirements?Customs number (TARIC code for dried apricots: 0813100000), tarriff rates and quotas, import requirements?

What inport limitations exist? Food safety limotations? What package and markings are required? What documents are needed for export?

• Invoice• Transport documents• Packing List• Insurance• Certificate of Origin and confirmation• Form A• Declaration of Customs Value• Import License, • Import Quota Declaration • Document on public control• Certtificates of inspection: sanitary, veterinary,

phytosanitary certificates, smoked wood certificate, etc.

Source: EU programme «Central Asia – Invest II»: http://www.namsb.tj

Form А

Safety and packing requirements

Thanks !

Mario ApostolovRegional Adviser UNECE Trade

Palais des Nations, Room 431CH-1211 Geneva 10, Switzerland

tel.: +41 22 9171134fax: +41 22 9170037

e-mail: mario.apostolov@unece.org

www.unece.org/trade & www.unece.org/cefact