The Customs Union in the CIS

Abstract

On the basis of data on trade among the Russian Federation, Belarus, and Kazakhstan, an attempt is made to assess the existing trends in trade before they formed the Customs Union within the Eurasian Economic Community and the very first results of the Customs Union activities. The removal of tariffs in mutual trade between Russia and Belarus, as our study shows, has not led to the development of mutual trade, although it helped Belarus to improve some of its macroeconomic indicators. Kazakhstan's accession to the Preferential Trade Agreement between Russia and Belarus stimulated the trade creation effect in some commodity groups (73 - articles of iron and steel). At the same time, in the overwhelming majority of trade sectors that showed a relatively high trade activity of the CU countries, a large share belongs to the EU countries; China also shows growing dynamics in trade with the CU countries. Using two options of the gravity model, we evaluated the Customs Union effects, which in their entirety confirmed that the Customs Union is dominated not by mutual trade but by trade with the countries from the rest of the world, including the Commonwealth of Independent States countries. Moreover, the extended option of the model, which takes into account the export of the basic product groups, has shown that the fuel group is the most important factor for the Customs Union countries in terms of export development. Mineral fuels belong to the product group 27 along with oils and distillation products.