OECD trade barriers faced by the successor states of the Soviet Union

Using a comprehensive World Bank - UNCTAD data base on tariff barriers NTBs), the authors examine the incidence of Organization for Economic Cooperation and Development (OECD) trade barriers to exports of the former Soviet Union (FSU). OECD markets have grown steadily in importance in the past decade and now receive more than half of FSU exports. And additional trade could help the FSU republics make the transition to market economies. Overall OECD tariffs that the FSU republics face are 70 to 90 percent higher than the average paid on all goods imported, but their worst effect is the result of the margins of preference they give other (non-FSU) exporters. For example, because of a special EFTA-EC protocol, manufactures are traded duty-free between countries in these blocs, while similar (competing) FSU goods may face duties of 20 percent or more. No significant trade expansion will occur until nontariff barriers are liberalized in NTB-"ridden"products groups of interest to FSU exporters. Sectors in which NTBs are particularly important include fish, fruit, sugar, vegetables, beverages, textiles, clothing, and ferrous metals. OECD trade barriers on some FSU commodity exports provide high levels of"effective protection"that constrain the efforts of the newly independent states of the FSU (NISs) to increase domestic commodity processing. Although the United States has granted most-favored nation status to the NISs (excluding Azerbaijan), and the European Community recently signed the Agreements on Trade, Commercial, and Economic Cooperation with the Baltic states, these developments have not substantially improved their market access. Because of geographic proximity and the existing transportation network, the European market is the most important OECD market for most NISs. But under present EC arrangements, NIS products are subject to higher tariffs and more restrictive nontariff barriers than exports from EFTA members, Lome Convention signatories, or former European CMEA members (the Czech Republic, Hungary, Poland, Romania, and Slovakia). Lower wage rates in many NISs may not be sufficient to compensate for their generally lower productivity and the losses in value added (triggered by higher tariffs) that exportershave to absorb to compete in protected markets. Except for exports of energy and industrial raw materials trade opportunities for many products in which the newly independent states of the former Soviet Union might have a comparative advantage are greatly restricted by OECD tariffs and nontariff barriers.