Trade Policy Issues of Oil-rich but Land-locked Country Case: Focusing on Kazakhstan Post-WTO Entry

Abstract

Purpose The economic recession of Kazakhstan coincided with its World Trade Organization (WTO) membership. Some experts claim that the membership exacerbated the recession further. This paper tries to assess whether the WTO entry hurt the economy of Kazakhstan. Design/Methodology/Approach The paper collects Kazakhstan’s tariff commitments to WTO members from the World Integrated Trade Solution (WITS) and WTO official websites. It then aggregates the data in terms of region and economic sectors. The Global Trade Analysis Project (GTAP) Computable General Equilibrium (CGE) model is employed to simulate the trade liberalization and the oil-price shock scenarios. Findings The economic modeling underlines that the WTO membership is not a cause for the economic recession of Kazakhstan. Instead, Kazakhstan’s GDP and welfare rose as a result of WTO entry. In contrast, the oil price plunge, as well as Kazakhstan’s involvement in Customs Union (CU), deteriorated the terms of trade and declined the economic growth. Research Implications This research is the first attempt to assess the effects of Kazakhstan’s WTO membership using the GTAP CGE model. It shows that Kazakhstan’s WTO entry was the right step toward global integration. It also signals that Kazakhstan should diversify its economy, export structure, and trade route in order not to face the next economic recession due to an unexpected energy price plunge.