Trade Performance and Regional Integration of the CIS Countries (World Bank Working Papers)

" Trade Performance and Regional Integration of the CIS Countries is part of the World Bank Working Paper series. These papers are published to communicate the results of the Bank's ongoing research and to stimulate public discussion. This paper provides a detailed quantitative analysis, based on standard econometric models, of the trends and the configurations of trade of the CIS countries, with an emphasis on its low-income members. It also contains an analysis of the CIS countries? trade potential and its realization in a comparative perspective, as well as examination of the nature of the existing CIS intra-bloc trade. The study reveals no evidence that the CIS countries as a group under-perform significantly in terms of either trade openness or export levels when compared to the countries of similar per capita GDP and population size. However, the low-income economies in the CIS (CIS-7) have been performing on average just marginally better than other low-income countries and, overall, they have been falling behind the countries that benefit most from globalization. Overall, progress in the trade area was slower in the CIS-7 countries than in the higher income CIS members. This is reflected in: (i) lower overall export level and slower export growth; (ii) higher trade deficit; (iii) lower share of manufacturing exports; (iv) incomplete reorientation of trade flows; and (v) lower incidence of intra-industry trade. This report found that the CIS free trade area is, on balance, a beneficial, trade-facilitating bloc. There is no evidence so far that the CIS integration is of the 'South-South' type (harmful for some of its members). However, the potential benefits of CIS trade integration remain badly underutilized. The paper suggests several directions for strengthening the legal and administrative framework for intra-CIS trade arrangements." TABLE OF CONTENTS......Page 5 Abstract......Page 7 Preface......Page 9 Acronyms and Abbreviations......Page 11 Poor Quality of Trade Data or Trade Deflection?......Page 13 Table 1.2: Intra-CIS Exports Minus Imports......Page 17 Withering of Manufactured Trade......Page 21 Changing Geography of Trade......Page 23 Figure 1.2: Changes in the Merchandise Composition of Exports, 1996–2000......Page 26 Export Specialization of the CIS Countries......Page 30 Predominance of Inter-Industry Trade......Page 35 Trade Openness: How Open are the CIS Countries?......Page 39 The Gravity Model: Recent Adjustments in Direction of Trade......Page 43 CIS-7: Lagging Behind in Trade Diversification and Export Performance......Page 52 Conclusion......Page 54 Free Trade Agreements (FTAs)......Page 57 Standards......Page 61 Customs Cooperation......Page 62 The CIS Bloc and the South-South Integration......Page 63 Table 3.2: Average Import Tariffs......Page 64 4. Conclusions and Recommendations......Page 67 Annexes......Page 73 Table A1: Merchandise Composition of Exports......Page 74 Table A2: Merchandise Trade Deficit with Major Partners......Page 78 References......Page 79 Table 1.1: Quality of Trade Data, 2000......Page 15 Table 1.3: Trade Indices of the CIS Members (1993–100)......Page 18 Table 1.4: Trade Flows and Balances of the CIS Economies, 1988–2000......Page 20 Table 1.5: Export Composition by Sector......Page 22 Table 1.6: Geographical Composition of Exports and Imports......Page 24 Table 1.7: Merchandise Composition of CIS and Non-CIS Exports......Page 28 Table 1.8: Export Specialization Indices at the 1-digit SITC Level, 2000......Page 31 Table 1.9: Export Specialization Index at the 2-digit SITC Level......Page 32 Table 1.10: Shares in Employment and Exports, 2000......Page 34 Table 1.11: The Grubel-Lloyd Index......Page 36 Table 2.1: Trade Openness Models......Page 41 Table 2.2: CIS Actual vs Theoretical Openness......Page 42 Table 2.3: Potential and Realized Shares of Intra-CIS and EU Exports......Page 44 Table 2.4: Realization Ratios for the Gravity Model without the Bloc Effect......Page 47 Table 2.5: Realization Ratios for the Gravity Model with the Maximum Bloc Effect......Page 48 Table 2.6: FSU Trade with the EU......Page 50 Table 2.7: Average Trade Performance of Three Groups of the Former Soviet Republics CIS-7, Central CIS, and the Baltics......Page 53 Table 3.1: Bilateral Free Trade Agreements in the CIS......Page 58 Figure 1.1: Composition of the CIS Trade Flows, 2001......Page 16 Box 1.1: The UN COMTRADE Database......Page 14 Box 3.1: Russo-Ukrainian Trade Wars......Page 59 The study provides a detailed quantitative analysis, based on standard econometric models, of the trends and the configuration of trade of the CIS countries, with an emphasis on its low income members. It also contains an analysis of the CIS countries' trade potential and its realization in a comparative perspective, as well as examination of the nature of the existing CIS intra-bloc trade. The study revealed no evidence that the CIS countries as a group underperform significantly in terms of either trade openness or export levels when compared to the countries of similar per capita GDP and population size. This means, however, that the low-income economies in the CIS (CIS-7) have been performing on average just marginally better than other low-income countries and that, overall, they have been falling behind the countries that benefit most from globalization. Overall, progress in the trade area was slower in the CIS-7 countries than in the higher income CIS members. This is reflected in: (i) lower overall export levels and slower export growth in the second half of the 1990s; (ii) higher trade deficits; (iii) lower share of manufacturing exports; (iv) incomplete re-orientation of trade flows from the CIS to global markets; and (v) lower incidence of intra-industry trade. The study found that the CIS free trade area is, on balance, a beneficial, trade-facilitating bloc. It features a free trade regime, agreements on mutual recognition of standards, and non-restrictive rules of origin. There is no evidence so far that the CIS integration is of the "South-South" type and thus may be harmful for some of its members. However, the potential benefits of CIS trade integration remain badly underutilized. The study suggests several directions for strengthening the legal and administrative framework for intra-CIS trade arrangements Trade Performance and Regional Integration of the CIS Countries is part of the World Bank Working Paper series. These papers are published to communicate the results of the Bank's ongoing research and to stimulate public discussion. The CIS free trade area is, on balance, a beneficial, trade facilitating bloc. However, the potential benefits of CIS trade integration remain badly underutilized. Based on standard econometric models, the study provides a detailed quantitative analysis of the trends and the configuration of trade of the CIS countries.