MANILA, PHILIPPINES - The Central Asian republics (CARs) would reap considerable benefits from accession to the World Trade Organization (WTO) and regional cooperation in trade policy within the multilateral framework, combined with greater regional cooperation in transport and customs transit, a new ADB report says.
The report, which is part of ADB's study on Central Asia regional cooperation in trade, transport, and transit, aims to inform policymakers and contribute to the ongoing dialogue on regional economic cooperation in Central Asia.
It seeks to show how Azerbaijan, Kazakhstan, Kyrgyz Republic, Tajikistan, and Uzbekistan - five member countries of the Central Asia Regional Economic Cooperation (CAREC) Program referred to in the report as CARs - can increase the gains from participation in international trade through regional cooperation in trade policy, transport, and customs transit.
While the CARs have been able to expand trade considerably in recent years, they currently derive relatively little benefits from, and pay relatively high costs for, participation in international trade.
This is because their exports are dominated by a handful of primary commodities, they take very limited part in global production networks and related trade in manufactured products, and their trade is concentrated in a small number of countries.
The report blames the presence of numerous trade barriers related to trade policy, transport, and transit systems in the CARs, in their trading partners, and in transit countries for constraining the growth of trade in the CARs, skewing the structure of their exports towards primary commodities, and limiting their trade with countries in East and South Asia and Western Europe.
"Regional cooperation in trade policy, transport, and customs transit can help the CARs lower these trade barriers, increase the gains from participation in international trade, and reduce the associated costs," the report says.
However, the report adds that regional cooperation in trade policy in the form of preferential trade liberalization under regional trade agreements is unlikely to do so in itself, mainly due to poor design and lack of implementation.
"Therefore, the CARs need to prioritize accession to the WTO and pursue regional cooperation in trade policy within the multilateral framework. To fully realize the benefits of WTO membership, they also need to improve regional cooperation in transport and customs transit."
The report argues that increased regional cooperation in transport and customs transit would help the CARs reduce transport costs and make transport times shorter and more predictable for international shipments. This would in turn help the CARs expand trade, participate more in global production networks, and diversify trade in terms of both geographical distribution and commodity composition.
Quantitative estimates [or simulation results] presented in the report suggest that, if the estimated reductions in transport costs that would result from increased regional cooperation in transport and customs transit occurred in 2006, the cumulative increase in the Kyrgyz Republic's real GDP in 2006-2015 would be US$2.1 billion (at 2002 prices) greater or 112.3% (relative to 2005) higher than in the baseline ("no-change") scenario.