The history of Belarus applying to join the World Trade Organisation (WTO) is a story of unfulfilled promises to liberalise and privatise the economy. For many countries aspiration to become the WTO member often served as a motivation and explanation for introducing bold economic reforms. But not for the Belarusian authorities who have preferred to imitate engagement in the accession process.
Belarus remains one of the very few countries in the world that does not belong to the WTO. The overwhelming role of the state in the economy and its extensive agriculture subsidies are the clearest obstacles in Belarus’ negotiations with the WTO.
The whole world but Belarus
The WTO’s mission is to negotiate global trade rules, develop multilateral trade agreements and reduce trade barriers. To date, 162 countries, which account for over 98 per cent of global GDP and approximately the same value of global trade, have joined the WTO. Another 22 countries, including Belarus, are in the process of negotiating their accession. Only 14 states have shown no interest in cooperation with the WTO. Furthermore, no country has ever left the WTO.
Russia’s accession to the WTO in 2012 automatically forced other members in the Customs Union of Belarus, Russia and Kazakhstan to comply with trade liberalisation policies in accordance with Russia’s obligations to the WTO. Although the access to some, particularly sensitive for Russia, markets of goods and services has been covered by a transitional period, i.e. they are to be liberalized gradually over several years.
Therefore, Belarus has for three years experienced the negative impact of Russia’s membership in the WTO with no direct benefits to its own economy. Contrary to goods produced in Russia, those made in Belarus neither have easier access to foreign markets, nor does Belarus have the right to use the WTO’s protection regulations for litigation purposes. Yet, Russia’s accession to the WTO has raised the level of competition in the whole Customs Union (currently the Eurasian Economic Union) and squeezed out a number of Belarusian manufacturers from the market.
Unfulfilled promises of Belarusian authorities
Promises of Belarusian authorities should always be treated with certain scepticism, since they have rarely kept their word. Belarus started negotiations on entering the WTO in 1993. After 22 years its WTO membership still remains a distant prospect, though for other countries the accession process took from 3 years (Kyrgyzstan) to 19 years (Russia).
In over 20 years Belarus participated in numerous events to bring the national economy closer to the global organisation. The Working Party on the Accession of Belarus to the WTO, which is comprised of 41 countries, assesses the progress of Belarus in bringing national legislation into compliance with WTO agreements. To date, the Working Party has already held 7 formal meetings in 1997-2005 and five rounds of informal consultations between 2006-2013.
In 2008-2013 the UN Conference on Trade and Development (UNCTAD) and the United Nations Development Programme (UNDP) Country Offices in Belarus conducted a technical assistance project in support of Belarusian aspirations for the membership. The project consisted of many analytical studies, expert study tours, technical know-how exchange, seminars and round tables. Another minor project was implemented in 2013 by two independent think tanks, Warsaw-based CASE and IPM Research Center in Minsk. Last but not least in December 2014 the Russian government decreed it would spend USD 0.6 million on initiatives supporting Belarusian negotiations with the WTO.
However, Minsk has only been putting up a façade of deep concern about its quick accession to the WTO. Belarus’ application process is abound with numerous declarations by the Belarusian authorities to accelerate the process. Particularly, in 2005, 2010 and 2012 Minsk claimed that it would successfully wrap up negotiations in a year. Meanwhile, all of its neighbours and all of the current members of the Eurasian Economic Union have joined the WTO.
Stumbling blocks on the Belarus’s road to the WTO
Belarus does not have the slightest chance of joining the WTO, especially with the economy where state-owned enterprises produce about 70 per cent of GDP, according to the European Bank for Reconstruction and Development, many of which are subsidised, and private firms are discriminated. WTO membership requires that a candidate-country commits to liberalise its economy and reduce the role of the state. The WTO has never admitted a country with such a quasi-socialist economy. For instance, out of 29 post-socialist countries in Central and Eastern Europe and in Central Asia, 23 have successfully joined the WTO. In all of them the private sector, at the moment of accession, accounted for 50 to 75 per cent of GDP.
Even in the Chinese economy which had immensely greater power in negotiations with the WTO than Belarus the private sector share before the accession to the WTO in 2001 amounted to 60-70 per cent of GDP, i.e. over twice as much as in Belarus. The private sector share in the economy is not the only indicator of the progress in market reforms. However, for such an extreme case as Belarus, this measure clearly reflects the level of Belarusian transformation of the economy.
State support for the agricultural sector remains a particularly sensitive area of negotiations. Although its role in the economy has been diminishing over the last 25 years – from 23 per cent of GDP in 1990 to 7 per cent in 2013 (according to official government statistics), it still accounts for a rather significant part of the economy.
The agricultural sector in Belarus is comprised mainly of state-owned collective farms which would immediately go bankrupt without the state support. Several years ago the subsidies for agricultural sector amounted to 15-16 per cent of GDP (according to the Ministry of Agriculture). Only 10 per cent of agricultural farms could operate profitably without this support (according to a study published in December 2013 by the Economic Institute of the Ministry of Economy). Fortunately, Belarus has already begun decreasing the financing for agriculture, so that the total amount of subsidies in 2017 should not exceed 10 per cent of GDP.
If Belarus were to join the WTO, it would have to cut significantly its financial support to this sector down to several per cent of GDP. Without the prior liberalisation and privatisation of the agricultural sector, this will bring the whole sector to collapse.
On the other hand Belarus’s membership in the Eurasian Economic Union does not interfere with its aspiration of joining the WTO. On the contrary, since the customs policy in Belarus is the same as it is in the whole Eurasian Economic Union, and all other EAEU countries have already joined the WTO, it means that Belarus is generally ready to instate a WTO-compliant customs policy. In other words, Belarus and the WTO could rather easily find some compromise in negotiations on tariff and non-tariff regulations of market access for goods and services.
Keeping the status quo of the quasi-socialist economy
Though international competition defines growth in the long run, for an unreformed economy it poses a significant threat. The Belarusian authorities are aware of this, but remain reluctant to transform the economy. Hence, promises of Belarusian officials on quick WTO accession are nothing else but groundless speculations.
Without deep structural reforms Belarus neither has a chance to join the WTO nor will it receive the benefits from accession. After lack of decisive actions for so many years, the countries that form the Working Party on the Accession of Belarus to the WTO, particularly the US and the EU, no longer believe in the assurance of Belarusian governments to boost the liberalization. To accelerate the negotiations, Belarus has to show real reforms. For the sake of its own national interests Belarus should accelerate the economic transition towards a market economy, including small and large scale privatisation, and at a later point focus on the accession to the WTO.
The author is the Vice President at CASE Belarus and PhD candidate at the Warsaw School of Economics (SGH), an alumnus of the London School of Economics and SGH