Russias WTO accession has reduced the Customs Union benefits for Belarus

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April 22, 2016 18:30

Belarusian exports to Russia in January-February 2013 increased by 7.6% over the same period of 2012.

Despite the increase in total exports to Russia within the Customs Union framework, some exports of some goods suffered considerable losses, mainly due to the Russian economy’s slowdown and increased competition in the Russian market after Russia’s WTO accession. Some Belarusian producers will experience further difficulties in retaining their market positions (particularly heavy-and agricultural machinery makers, and pork producers), since administrative measures have lost their effect.

Food stuffs supplies to the Russian market have traditionally been one of the main commodity groups in terms of value in bilateral trade between the two countries. In January-February 2013 dairy products exports alone earned USD 298.8 million or 12.2% of the total Belarusian exports to Russia. Growth over the same period in 2012 in value terms made almost 40%. All food stuffs make more than 26% in all exports to Russia. Sugar and dairy wars have not yet started, though there was a significant increase in supplies.

The most difficult situation is with exports of trucks and agricultural machinery. If heavy machinery producers experience export decline due to global economic slowdown and reduced demand for coal, agricultural machinery manufacturers suffer due to the lack of support programs for the procurement of agricultural machinery for Russian agriculture. Exports of harvesting and crops threshing machinery decreased in January-February 2013 by 26% over the same period in 2012 and Belarusian manufacturers are not optimistic about future performance in 2013. MAZ and MTZ experience similar problems with sales in the Russian market.

Machinery and equipment manufacturers’ failures in the Russian market are offset by refiners. Exports of petroleum products to Russia increased from USD 7 million (January-February 2012) to USD 131.3 million (January-February 2013). The counter supply of petroleum products to the Russian market provision enabled to expand the volume and range of Belarusian oil products supplied to the Russian market.

For some Belarusian manufacturers the situation has deteriorated situation following Russia’s WTO accession. Primarily, the impact was felt by the pork producers. The prices in the Russian market fell by one-third since August 2012. The same applies to poultry and beef, as well, canned meat demand is reducing. In January-February 2013 pork supplies fell by almost two-fold in value terms, meat –packing plants’ warehouses are packed, since Russian market was nearly the only one. Questions about feasibility of spending on pig farms construction in Belarus are raised, as well as about potential expansion by European pork producers on the Belarusian market through Customs Union’s transparent internal borders.

Thus, some Belarusian producers benefited from the Customs Union, such benefits are not definite. Competition in the Russian market due to Russia’s WTO accession will only increase, which places increased pressure on domestic producers to develop the ability to respond promptly to the changing external economic situation. It might be a real problem for Belarus, since its local “economic model” is not stimulating harsh and open competition at local enterprises: administrative tools dominate in the competition and the management level is frankly weak.

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