EBRD

Transition Report 2012 INTEGRATION ACROSS BORDERS

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Chapter 4

Conclusion

Eurasian economic integration has the potential to bring multiple economic benefits through trade creation within the region, the facilitation of exports to the rest of the world and more efficient markets in goods and services. It also offers a unique opportunity to build stronger economic and political institutions. 

A common tariff policy is often the first step in economic integration and early evidence suggests that this has already had some impact on trade flows. Its introduction heralded an increase in tariffs for many imports to Kazakhstan and, to a lesser extent, Belarus, which led in turn to a reduction in imports from a number of trading partners outside of the Customs Union. In the case of Kazakhstan, this was also associated to some extent with an increase in imports from within the Union in a trade diversion effect. At the same time, the common external tariff seems to have had mostly trade-creating effects for Russia, as tariff reductions have outweighed tariff increases. But the magnitude of such effects is small.

In addition to a recovery effect from the 2009 collapse in trade and (limited) changes in trade flows in the wake of the common external tariff, the recent rapid trade growth within the Common Economic Space may also reflect a reduction in non-tariff barriers, and particularly obstacles relating to customs and trade regulations. To sustain the momentum of trade creation, it will be crucial to lower non-tariff barriers further and to improve market access for firms across the region, including in the service sectors. Cross-country analysis suggests that improvements in cross-border infrastructure, especially, have a much higher potential to increase trade than tariff measures. Regional integration can provide the necessary institutional framework for coordinating such improvements.

Regional economic integration can also act as a springboard for exports. Higher-value-added goods that are initially exported within the Customs Union can subsequently be exported elsewhere. Export patterns suggest that this effect may already be at work in Belarus and Russia. In contrast, regional production chains with vertical specialisation, which can similarly help countries leverage their respective comparative advantage, are as yet less present in the region.

International evidence suggests that the differences in quality of institutions tend to diminish over time in more deeply integrated regional unions. In some cases the presence of member countries with stronger institutions can facilitate regulatory improvements in institutionally weaker economies. The members of the Eurasian Economic Community, however, are similar in terms of institutional quality and much-needed improvements cannot merely rely on the forces of convergence. Instead, member states face the challenge of creating supranational structures with better governance capacity than national institutions, which may eventually help lift the overall institutional standard in the region. Some initial steps, such as the governance structure of the Eurasian Development Bank, are encouraging in this respect. 

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Annual Report 2012
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Financial Report 2012
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pdf Donor Report 2013

pdf Sustainability Report 2012