The country signed up to the trade bloc with Russia and Belarus on July 5, 2010. At the time the spin was that the removal of customs checks and tariffs will boost mutual trade and help economies thrive. Higher import tariffs adjusted to the level of Russia’s were also supposed to shelter producers from cheap Chinese (and other) imports.
But three years on, the results are very different. In Kazakhstan, the only industries that got a boost are those producing raw materials that mostly go to Russia. Anything with added value gets non-tariff barriers, like Russia’s notorious health and technical standards. The middle class got hit particularly hard. Consumers also suffered as prices for food and basic goods started to inch up.
Trade overall dipped this year in the whole of Customs Union. In five months of this year, the drop was 9.9 percent over the same period of last year, and Kazakhstan was hit the most, losing 15.8 percent of trade compared to last year.
At the same time, Russia’s trade share in the Customs Union has been on the rise, confirming the basic suspicion of many skeptics that this is an organization chiefly invented to protect and promote the interests of its main, and biggest, patron.
As the share of Russia’s goods in the structure of imports of both Belarus and Kazakhstan increased, imports from outside of Customs Union decreased as they became uncompetitive because of prohibitive tariffs. This has hit whole industries, most notably Kazakhstan’s growing agricultural sector, which ended up unable to replace and improve the stock of foreign-made equipment. Because of the high import tariff, its price grew by over a third virtually overnight.
And if that’s not enough, there is another industry on the up in Customs Union – illegal drug trafficking, which benefited from fewer checks and customs points.
So, the question is clear: Does Ukraine need this? The answer is probably even clearer.
While there are plenty of skeptics of the Deep and Comprehensive Free Trade Agreement offered to Ukraine, the deal still sounds better than the other option. That does not mean that Ukraine won’t have growing pains once the DCFTA comes into effect. But the growing will be very real (especially in the long term), and in many directions.
