The Integration of Transition Economies into the World Trading System

Abstract

Transition economies are at different stages of integration into the world trading system. Most remaining reforms and adjustments must be initiated by the countries themselves. But the United States and the European Union can help by reviewing their policies toward nonmarket economies. Michalopoulos analyzes current trade policies and challenges faced by the transition economies - especially countries in the former Soviet Union - as they are integrated into the world trading system. With few exceptions, transition economies in Central and Eastern Europe, including the Baltics, have been well integrated into the multilateral trading system. Their trade regimes differ - and the main challenges they face involve their integration into the European Union. Integration into the multilateral trading system, including progress toward membership in the World Trade Organization (WTO), varies significantly among the other countries of the former Soviet Union. Armenia, Georgia, the Kyrgyz Republic, and Moldova have adopted relatively liberal trade regimes and are either already members of the WTO or are close to it. These four countries need to strengthen the capacity of broad market-based (especially trade-related) institutions, including customs, the financial sector, and institutions to facilitate trade. The momentum for market and trade reform appears to have stalled in some of the larger countries of the former Soviet Union: Kazakhstan, Russia, and Ukraine. Their trade regimes are not especially restrictive, but weak operations in fundamental market institutions inhibit their effective integration into the world trading system. These problems, together with persistent protective pressures, inhibit progress and accession to the WTO. The remaining countries in Central Asia, as well as Belarus, have far to go in introducing market-oriented reforms and institutions and the kind of trade liberalization needed for integration into international trade. The countries of the former Soviet Union must make most of the reform and adjustment effort, but WTO members must make changes as well - especially the United States and the European Union. Both need to review their policies toward nonmarket economies on antidumping practices and (in the European Union) on safeguards. Countries where market decisions prevail should not be subjected to nontransparent and arbitrary procedures. In particular, countries that have been judged to be market economies in the process of gaining access to the WTO should be excluded from procedures applied for antidumping and safeguard measures in nonmarket economies. This paper - a product of the Office of the Regional Vice President, Europe and Central Asia Regional Office - was presented at the Fifth Dubrovnik Conference on Transition Economies, Dubrovnik, Croatia, June 23-25, 1999. The author may be contacted at cmichalopoulos@worldbank.org.