Will Belarus Ever Become a WTO Member?
Two weeks ago, Belarusian Deputy Foreign Minister Aliaksandr Hurjanau declared Belarus was planning to finish all of the necessary technical work for the country’s accession to the World Trade Organisation (WTO) in one year's time. However, exactly three years ago he also projected that Belarus would join the WTO by the end of 2013. Is this time going to be any different?
The history of Belarus applying to join the WTO is a story of unfulfilled promises to liberalise and privatise the economy. Instead of firmly declaring its aspirations to join the WTO by establishing its strong political commitment that could motivate it to introduce reforms, the Belarusian authorities have preferred to imitate engagement.
Belarus remains one of the very few countries in the world that does not belong to the WTO. To name but two issues, the overwhelming role of the state in the economy and its extensive agricultural subsidies are the clearest obstacles for Belarus' accession to the WTO.
Everyone but Belarus
The WTO's mission is to negotiate global rules for export-import relationships, developing multilateral trade agreements and reducing trade barriers. To date, 161 countries, which account for over 98 per cent of global GDP, have joined the WTO. Another 23 countries, including Belarus, are in the process of negotiating their accession, and only 14 states have shown no interest in joining. No country has ever left the WTO.
Russia's accession to the WTO in 2012 automatically forced other members of the Customs Union of Belarus, Kazakhstan, and Russia to comply with trade liberalisation policies in accordance with Russia’s obligations to the WTO.
Therefore, since 2012 Belarus has experienced the negative impact of Russia’s membership in the WTO with no direct benefits to its own economy. Goods 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 within the Customs Union and squeezed out a number Belarusian manufacturers from the market.
Unfulfilled Promises of Successive Governments
Belarus started negotiations on entering the WTO in 1993. After 22 years its WTO membership remains a distant prospect, though other countries in the world have a track record of between 3 years (Kyrgyzstan) to 19 years (Russia) in their attempts to join the organisation.
In 2014 the Russian government decreed it would spend $0.6m on initiatives supporting Belarus’ accession to the WTO Read more
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 Office in Belarus conducted a technical assistance project in support of reforms. The project consisted of many analytical studies, expert study tours, technical know-how exchange, seminars, and round tables. Two independent think tanks, Warsaw-based CASE and Minsk-based IPM, implemented another minor project in 2013. Last but not least, in December 2014 the Russian government decreed it would spend $0.6m on initiatives supporting Belarus’ accession to the WTO.
Minsk, however, has only been putting on a facade 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. 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 already joined the WTO (see the table below).
Stumbling Blocks for Belarus's Accession to the WTO
With an 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), Belarus does not have the slightest chance of joining the WTO.
WTO membership requires that candidate-country commits to liberalise their economy and reduce the role of the state. The WTO has never admitted a country with such a quasi-socialist economy. For instance, the private sector in all 22 (out of 29) post-socialist countries in Central and Eastern Europe and in Central Asia that have successfully joined the WTO accounted for 50 to 75 per cent of GDP at the moment of accession. The private sector's minor role in Belarus's GDP clearly reflects the scope of its lack of transition towards a market economy.
The agricultural sector would immediately go bankrupt without the support of state subsidies Read more
State support for the agricultural sector remains a particularly sensitive area of negotiations for Belarus’ potential accession to the WTO. Although its role in the economy has been diminishing over the last 25 years – from 23 per cent GDP in 1990 to 7 per cent in 2013, it still accounts for a rather significant part of the economy, employing 9.5 per cent of the total workforce according to the official government statistics.
The agricultural sector is comprised mainly of state-owned collective farms which would immediately go bankrupt without the support of state subsidies. Only 10 per cent of agricultural firms could operate profitably without this support according to a study published in December 2013 by the Economic Research Institute of the Ministry of Economy. If Belarus were to join the WTO, it would have to cut significantly its financial support to this sector. Without the prior liberalisation and privatisation of the agricultural sector, this would likely signal its collapse.
Yet, 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 the Eurasian Economic Union is the same for Belarus and all other member-countries that 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 Quasi-Socialist Economy Alive
Though international competition defines growth in the long run, for an unreformed economy it poses a significant threat. The Belarusian authorities are aware of all of this, but remain reluctant to transform the economy. This is precisely why they continue to stall on implementing their promises towards quickly gaining membership in the WTO.
Without deep structural reforms, Belarus neither has a chance of join the WTO nor will it receive the benefits from accession. For the sake of its own national interests Belarus should at first advance its economic transition towards a market economy, including small and large scale privatisation, and at a later point focus on further foreign trade liberalisation, including its accession to the WTO.
Belarus Discovers Its Eurasian Side
In July, Belarus launched a diplomatic offensive to build ties with regional superpowers like China, India and Brazil seeking to counterbalance the much-publicised overtures its has been making to the West.
The BRICS summit in Ufa, Russia, provided Lukashenka with a good opportunity to meet many leaders of the developing world.
Belarus also succeeded in upgrading its status in the Shanghai Cooperation Organisation, but will Belarus reinvigorate its cooperation with this Asian organisation by using its privileges of an observer?
BRICS and Belarus
On 9 July in Ufa, Alexander Lukashenka attended the traditional meeting of the BRICS leaders with the heads of states that are geographically and geopolitically close to the summit's chairing nation – which this time was Russia. He also met with the presidents of Afghanistan, Brazil, Iran, Mongolia and Russia.
The Belarusian leader rejoiced at the fact that "the BRICS countries do not tie cooperation and mutual assistance to any additional conditions". Indeed, gatherings like those of BRICS or the Shanghai Cooperation Organisation – a group that includes Russia, China and several Central and South Asian nations – have based their cooperation on a number of other issues they have in common, while sidestepping issues of rule of law, human rights or democracy.
Belarus has modest trade relations with most BRICS nations Read more
In Ufa, Lukashenka designated the members of BRICS "powerhouses" of economic development, which are "helping other countries to ensure their post-crisis recovery". However, most of them are far from being in perfect economic shape themselves as of late, as Russia and Brazil are both enduring a recession, and China and South Africa's economies have both slowed down.
The share of Belarus' trade with BRICS, excluding Russia, remains below a meager seven per cent of its total turnover. For example, trade with India – a South Asian giant – stands at $400m, while the turnover with the second-largest African economy – South Africa – is almost non-existent.
The government hopes that visits by the Chinese president Xi Jinping (10 – 12 May) and Indian president Pranab Mukherjee (3 – 4 July) to Minsk as well as Lukashenka's meeting with Brazilian president Dilma Rousseff in Ufa will give the much needed impetus to improve bilateral trade with BRICS members.
These bilateral efforts may indeed bring some results. However, it is doubtful that Lukashenka's pet idea of the "integration of integrations" as applied to cooperation between the Eurasian Economic Union and BRICS will advance beyond a catchy political slogan.
Who Stands to Gain?
Lately, the Russian public and its politicians have become concerned with Belarus' alleged "re-orientation" towards the West. Frequent meetings between Belarusian and European officials and Minsk's persistent engagement with the Eastern partnership, a project that Russian first deputy prime minister Igor Shuvalov labelled a "grave mistake", creates the impression with many in Moscow that Belarus may be taking the Ukrainian path.
Lukashenka even had to reassure Putin in Ufa, "we are now in the Shanghai Cooperation Organisation, and they will stop reproaching us that we are only looking towards the West". Minsk is avoiding alienating Russia at all costs as the presidential election approaches. Belarus needs Russian loans to support the ailing economy at this critical moment.
Beyond this, Lukashenka's government sincerely believes that Belarus' active participation in multilateral forums and the president's personal contacts with leaders of third-world countries may help significantly increase the country's exports to new markets.
For its part, Moscow sees Belarus' greater engagement in any Eurasian integration project as a means to lead it further away from the West. Minsk seems to be willing to play along while seeking both immediate and long-term economic benefits.
Is Belarus a Eurasian Country?
From Ufa, the Belarusian delegation returned with a long-sought prize – it received observer status in the Shanghai Cooperation Organisation. This Asian organisation, founded in 2001, currently includes Russia, China, four post-Soviet Central Asian countries (Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan) and, beginning this year, India and Pakistan.
A few days before the organisation's summit in Ufa, Belarus remained pessimistic about the possible outcome of its aspirations to become an observer. Speaking to the Russian news agency TASS on 6 July, deputy foreign minister Valentin Rybakov said that while most of the group's members supported Belarus in its application, Uzbekistan (for a non-disclosed reason) opposed it.
Back in 2006, even Russia doubted the validity of Belarus' claim to receive any status in the Shanghai Cooperation Organisation. Sergei Ivanov, Putin's close friend and Russia's deputy prime minister at that time, said, "[Belarus] is not an Asian country, in contrast to Russia, which is a Eurasian state". Finally, however, Belarus succeeded in proving him wrong and is reinventing itself with a decidedly Eurasian dimension to its image.
In 2010, Belarus received a lesser status as the organisation's "dialogue partner". In this capacity, it managed to attend many working-level events that are focused on the fight against arms and drug trafficking, terrorism, illegal migration, transports and culture.
On 8 July, Russia's president Vladimir Putin made the surprise announcement that Belarus would be elevated to observer status as the member countries had been able to come to an agreement on this issue.
Belarus offsets its open border with Russia by improving its multilateral cooperation with Asian countries Read more
The Belarusian foreign ministry, welcoming this decision in a special statement, stressed that Belarus as a country, which has an open border with Russia, remained "exposed to the same threats and effects as other SCO countries".
Indeed, a large share of illegal drugs, arms and migrants are making their way to Belarus via Russia from the organisation's other members. Illogically, instead of securing its border against such threats, Belarus hopes to overcome them by obtaining observer status in the Shanghai Cooperation Organisation.
In his interview with a domestic TV channel that aired on 12 July, Belarus' foreign minister Vladimir Makei claimed that Belarus remained "interested in projects in the areas of energy, agriculture, transportation, communications, telecommunications as well as some other projects". However, economic cooperation is not a priority for the organisation, as security cooperation dominates its agenda.
Belarus enjoys a well-established tradition of cooperation with all members of the Shanghai Cooperation Organisation on a bilateral basis. Its newly gained observer status has little chance of providing any real added value to such cooperation. It looks more like a tool used to sustain the thesis of the multi-vector standard of Belarusian foreign policy and even a means by which Lukashenka can meet with Asian leaders more often.