On January 1, the World Trade Organization, responsible for 97 percent of world trade, celebrated its 20th anniversary. On its website the WTO defines its role as “the only global international organization dealing with the rules of trade between nations.” The WTO polices free trade agreements, settles trade disputes between governments and organizes trade negotiations and, most significantly, WTO decisions are absolute and every member must abide by its rulings.
Of the 15 independent nations that emerged from the breakup of the USSR in 1991, only Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan remain outside the WTO, a situation that Kazakhstan, the ninth largest country in the world, the second-biggest former Soviet republic and the largest economy in Central Asia, hopes to rectify later this year.
There are many yardsticks to evaluate Kazakhstan’s changes. When the USSR collapsed in December 1991, Kazakhstan inherited the fourth largest nuclear arsenal in the world after Russia, the United States and Ukraine as well as a centrally planned economy emphasizing armaments production, directed from Moscow. Kazakhstan’s government renounced nuclear weapons and by April 1995 had transferred all of its nuclear warheads to Russia, winning international plaudits. The nation’s efforts to move away from its inherited centrally planned economy to a free market model globally integrated have been no less impressive, if much less heralded, which membership in the WTO is intended to crown.
It has certainly been a long process, as Kazakhstan’s application to join the WTO was submitted on January 29, 1996, less than five years after achieving full independence from the Soviet Union. The WTO on February 6, 1996 established a Working Party for Kazakhstan’s admission to the organization.
But, 19 years after Kazakhstan expressed its desire to join the WTO, the country is still waiting to see its membership approved, while Kyrgyzstan (1998), Latvia (1999), Estonia (1999), Georgia (2000), Lithuania (2001), Moldova (2001), Armenia (2003), Ukraine (2008), Russia (2012) and Tajikistan (2013) have all joined the trade organization ahead of it.
Kazakhstan, along with Belarus and Uzbekistan, remain “Observer governments” with pending applications, leaving only Turkmenistan as the sole post-Soviet state uninterested in WTO membership. In contrast to Kazakhstan’s prolonged WTO application Kyrgyzstan, from WTO application to membership, took only two years and four months.
The Kazakh economy is rich in natural resources including oil, natural gas, and minerals. With its significant geopolitical location, Kazakhstan also serves as a strategic entry point to the rest of Central Asia and borders regional powers such as Russia and China.
Such opportunities would be welcome as the recent dramatic fall in global oil prices has inflicted substantial economic hardship. Kazakh Foreign Minister Erlan Idrissov has emphasized how important WTO membership is to Kazakhstan, remarking, “This is a balancer of our global economic relations. Through the WTO, we will get access to an extensive global trading system, to its standards, rules and regulations. These same rules and regulations will apply to Kazakhstan in its trade with other countries. So, for us the WTO is a signifier of growth, which we are consistently working towards.”
The Working Party on Kazakhstan’s accession to the WTO consists of 39 WTO member-states with the 28 European Union (EU) member states involved as a single entity. Kazakhstan has already signed bilateral trade protocols with 30 WTO member-states, including the U.S. and the EU and by the end of 2011 had completed bilateral negotiations with all of its Working Party members.
Since the WTO was created in 1995, the U.S. administration has used the Geneva-based group to help resolve a growing number of disputes, rather than attempting to impose sanctions unilaterally, an option that in many cases is illegal under WTO regulations. To become members, candidate countries must agree to cut tariffs and change their laws to guarantee the rights of importers and exporters under WTO rules.
Kazakh President Nursultan Nazarbayev has long been sanguine about what WTO membership would mean for Kazakhstan. Speaking on Feb. 27, 1999 about the World Trade Organization he commented about the aspirations of post-Soviet nations, “We are all holding talks, and we all want to join. But anyone who joins accepts certain conditions. He opens his own borders up fully and paves the way for a flood of Western goods into that country. In other words, regardless of whether we want to develop our own industries inside our own countries, Western goods will fill our markets up very cheaply, and our enterprises will stop producing. In that case, agreeing to open up fully — let anyone who wants to bring his goods into our country — threatens to cause unemployment and the shutdown of our enterprises.”
While a number of WTO members welcomed progress in Kazakhstan’s accession negotiations they still expressed serious concerns about the absence of inputs and progress in tariff adjustment, regulations and practices governing sanitary and phytosanitary (SPS) measures and WTO-inconsistent trade-related investment measures (TRIMS), including those in state-owned enterprises.
Another stumbling block for Kazakhstan’s WTO admission is its commitment to the Customs Union (CU) that it formed in 2010 with Russia and Belarus, which on January 1, 2015 became the Eurasian Economic Union (EEU). The CU led to a rise in some trade tariffs disputes with other nations, subsequently requiring new discussions about the conditions of its WTO entry. In June 2010 EU foreign policy chiefCatherine Ashton warned that the CU might harm international trade and pose “an additional barrier fencing Astana, Minsk and Moscow off from the WTO.”
It is difficult to see these objections as anything other than a stalling tactic, however, as the activities of other international regional trading entities, including the EU and the North American Free Trade Agreement (NAFTA) do not preclude or inhibit WTO activity. Despite this, seeing darker ulterior motives in the EEU beyond mere economics, a September 29, 2013 Washington Post editorial warned that the “Moscow-led customs union… would be an E.U. rival – and a means of realizing Mr. Putin’s dream of recreating something like the Soviet Union.”
More recently, objections have arisen among Kazakhstan Working Party members even though, in a rare display of bilateral accord in the wake of the Ukrainian crisis, both the U.S. and Russia support Kazakhstan’s accession as soon as possible, along with the EU and China. On a visit last month to northeastern Kazakhstan Deputy Prime Minister Bakytzhan Sagintayev remarked, “We have almost completed all the preparations and the negotiation processes for the accession into the WTO. But we still have some unresolved issues with Mongolia and Ukraine.” As a WTO Working Party has to make a unanimous recommendation to the General Council for admission, Kazakhstan’s admission is being sidetracked yet again.
These delays do not only impact Kazakhstan. Kazakhstan is situated in the heart of the Eurasian continent so it could serve as a transit route from East to West and from South to North and has spent billions on developing its railways and roads with the aim of Eurasia transit hub, which will benefit all of its neighbors – China, Russia, Kyrgyzstan, Uzbekistan and Turkmenistan, transforming the country from “land-locked” to “land-linked.” Looking at the future, Kazakhstan has launched its new Strategy 2050 to become one of the 30 most competitive nations in the world by 2050.
On November 25, 2014 WTO Director-General Roberto Azevêdo said that negotiations with Kazakhstan “are at an advanced stage of maturity and on the threshold of conclusion,” adding that a formal decision should be announced in early 2015. Given Azevêdo’s comments and the fact that it is now early 2015, Kazakhstan’s long effort to join the WTO seems on the verge of being fulfilled, an event that will not only benefit Kazakhstan, but all nations along the reviving Silk Road.
Dr. John C.K. Daly is a non-resident Senior Scholar at the Central Asia-Caucasus Institute, Johns Hopkins University School of Advanced International Studies in Washington DC.