Chapter4 Bar

Chapter 4

Export potential and value-added chains From regional to global markets

One of the immediate benefits of regional economic integration is to provide producers with a larger market, which can in turn spur innovation and product development. Can it also then help firms to develop broader export capabilities and access more challenging world markets? The following analysis suggests that this is indeed the case, despite a common perception that the export markets of the CIS countries, in particular Belarus and Russia, are fairly fragmented.

It has been argued that countries such as Kazakhstan and Russia export lower-value-added goods closely linked to commodity input (for instance, semi-finished metal products or fertiliser) to the European Union and broader world markets, while higher-value-added products are exported mainly to CIS countries. Such differences in export composition are indeed apparent in some instances (for example, Belarusian exports of capital goods), but this is not generally the case, as the data on exports of individual goods confirm.

Chart 4.5 summarises the typical destinations of exports from the three Customs Union members, based on six-digit product lines where country export flows exceed at least US$ 1 million in value.28 The chart delineates overall exports from each country to other Customs Union members, to CIS countries outside the Union and to the rest of the world. It also shows overlaps between the three sets – and, in particular, the proportion of exports (in terms of product line numbers and export volumes) to Customs Union members and other countries. 


Source: International Trade Centre and authors’ calculations.
Note: Based on classification lines with recorded trade flows of at least US$ 1 million. Numbers in italics represent shares in volume terms.

The main insight from the chart is that goods exported within the Customs Union are also quite likely to be exported to destinations outside it. This is applicable to more than 50 per cent of Belarusian export products, about 45 per cent of Russia’s and 25 per cent of Kazakhstan’s. In value terms, these proportions are much higher, at 79 per cent, 93 per cent and 88 per cent, respectively. On average, fewer than 25 per cent of goods are exported solely within the Customs Union (in terms of the number of six-digit product lines, while in value terms the share is negligible), and there are virtually no goods exported to non-Customs Union CIS countries but not exported elsewhere. 

Belarus has the highest proportion of goods that are exported solely within the Customs Union, but these still only account for 29 per cent of export lines. Similarly, only 15-35 per cent of its goods are exported to the rest of the world but not to Customs Union or other CIS countries. For all three countries, there is a significant triple overlap of goods exported within the Union, to other CIS countries and to the rest of the world. The proportion is greatest for Russia, at around 25 per cent of product lines. Kazakhstan has a similarly large overlap between goods exported to CIS countries outside the Customs Union and the rest of the world (but not to Belarus or Russia). 

In Belarus and Russia the results are not driven by exports of commodities and commodities-linked products (although these account for a major slice of Kazakh and Russian trade, and a significant share of Belarusian exports in the case of potash fertiliser and petrochemicals). When all product lines are divided into three broad economic categories (primary goods/commodities, processed goods and capital and durable goods), strong overlaps between export destinations are evident in all of the groups, including higher-value-added goods from Belarus and Russia (see Chart 4.6).30

Source: International Trade Centre and authors’ calculations.
Note: Based on classification lines with recorded trade flows of at least US$ 1 million. CU is the Customs Union of Kazakhstan, Belarus and Russia.

In Kazakhstan, by contrast, the segmentation of export markets increases considerably by category (from commodities to processed goods to capital and durable goods). While around 40 per cent of product lines are exported to at least two major groups of trade partners, the proportion exported both within and outside the Customs Union falls to around 10 per cent. The picture is similar in volume terms.31 This segmentation may largely reflect the scarcity of Kazakhstan’s exports of capital and durable goods (with volumes over US$ 1 million accounting for only around 1 per cent of overall exports). This highlights the challenge of diversification of Kazakhstan’s exports away from commodities and resource-related manufacturing products.

Overall, the breakdown of Customs Union members’ exports suggests that the Common Economic Space has a potential to act as a springboard for exports, particularly for Belarus and Russia.32 Lower-value-added and higher-value-added goods exported within the Customs Union can also be exported elsewhere, and not only to other CIS markets. Kazakhstan seems to differ in this respect, insofar as very few of its products beyond the commodity sector that are exported to Belarus or Russia are also exported outside the Customs Union. 

28 This exclusion eliminates lines with very low export volumes, but affects less than 2 per cent of total exports for each country.

30 Classification is based on the BEC (broad economic categories) – HS (harmonised commodity description and coding systems) concordance provided by the United Nations Office of Statistics.

31 Where goods are exported to Customs Union countries, other CIS countries and the rest of the world, the volumes of respective exports largely reflect the relative sizes of the markets. One exception is Belarusian exports of durable and capital goods, where the CIS accounts for a higher share and the rest of the world for a lower share.

32 This is also consistent with the view that regional trade integration may be most beneficial for countries with a structure of comparative advantages closest to the world average (see Venables (2003) for a discussion). Within the Eurasian Economic Community, Kazakhstan’s economy has the highest degree of specialisation in natural resources (see Guriev et al., 2009). 


icon-pdfOther Reports

Annual Report 2012
pdf English
pdf French
pdf German
pdf Russian

Financial Report 2012
pdf English
pdf French
pdf German
pdf Russian

pdf Donor Report 2013

pdf Sustainability Report 2012