Estimating the Economic Effects of Reducing Non-Tariff Barriers in the EEU

16 March 2015

The EDB Centre for Integration Studies publishes the first comprehensive assessment of the effects of non-tariff barriers on mutual trade in the EEU and provides recommendations as to how to remove them. The report has been prepared by the Centre for Integration Studies based on a poll of 530 Russian, Kazakh and Belarusian exporters.

In the research non-tariff barriers are divided into two groups. The first group includes non-tariff barriers such as sanitary and phytosanitary measures, technical barriers to trade, quotas, prohibitions, and quantitative controls. The second group comprises price and competition controls (the institute of ‘special importers’, sale restrictions, restrictions on public procurement, various subsidies). The second group of barriers is often referred to as «sand in the wheels,» because it hinders the movement of goods and in principle can be fully removed. The specialists from the Centre for Integration Studies have come to a conclusion that this very group of barriers possesses a more negative influence on trade. Therefore, the main policy efforts should be directed at removing «sand in the wheels» of mutual trade.

The report provides a number of scenarios as to how reduce non-tariff barriers. In the base scenario, Belarus will derive the highest benefits: its real GDP is expected to grow by 2.8% and welfare by an aggregate of 7.3%. In Kazakhstan, welfare will grow by 1.3% and real GDP by 0.7%. The effects for Russia will be less significant: welfare will improve by 0.5% cumulatively and real GDP 0.2%. These differences are due to the greater size of its economy and the lower importance for Russia of trade inside the EEU, compared to trade with other countries.

The research has shown that reductions in non-tariff barriers will be particularly important to the producers of machinery and equipment, because in this sector the costs associated with non-tariff barriers are the highest. Pulp-and-paper and food enterprises, as well as the producers of leather, shoes, resins and plastics will also see significant benefits.

In addition, high costs associated with the non-tariff regulation of trade are a problem for the exporters of chemicals (to Belarus and Russia), processed timber (to Kazakhstan and Russia), agricultural produce (to Belarus), as well as electrical, electronic and optical equipment (to Kazakhstan).

Assessing the Impact of Non-Tariff Barriers in the EEU: Results of Enterprise Surveys

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