Intra-regional and extra-regional trade within Europe and the CIS countries

6–7 March, 2014 David Gould, Lead Economist Chief Economist Office Europe and Central Asia Region The World Bank

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Summary � CIS countries have been expanding trade

outside their region, particularly with Europe

� Nonetheless, growth of trade as a share of GDP has been sluggish for CIS countries and mainly driven by commodity exports—internal structural reform is key, not just trade liberalization

� Measuring the trade restrictiveness of NTMs

by country and region is doable

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CIS is already trading less inside its region, EU intra-regional trade has been fairly constant

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Correcting for size bias, intra-regional is still highest for CIS, Sub-Saharan Africa, and Europe

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Moldova’s and Georgia’s Trade with the EU and ROW has been on the rise

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Belarus and Ukraine trade more within the CIS, but Ukraine’s trade is oil based imports

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Russia and Kazakhstan trade more outside CIS, but for Kazakhstan this is due to oil exports to EU

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Country   Rank   Top Exports Partners (2008-2012)   Share of Total Export (%)  

Rank   Top Imports Partners (2008-20

12)  

Share of Total Import (%)  

Armenia   1  Russia   20.76   1  Russia   13.15  

Armenia   2  Germany   17.03   2  China   9.70  

Armenia   3  United States   8.48   3  Ukraine   5.93  

Armenia   *  EU27   39.09   *  EU27   26.49  Azerbaijan   1  Turkey   1.88   1  Russia   16.61  Azerbaijan   2  Russia   1.58   2  Turkey   13.41  Azerbaijan   3  Kazakhstan   0.45   3  Germany   8.57  Azerbaijan   *  EU27   61.32   *  EU27   28.40  Belarus   1  Russia   44.79   1  Russia   21.16  

Belarus   2  Ukraine   4.64   2  Germany   6.46  Belarus   3  Brazil   3.72   3  Ukraine   4.59  Belarus   *  EU27   21.75   *  EU27   20.79  Georgia   1  Turkey   11.49   1  Turkey   16.73  Georgia   2  Bulgaria   8.23   2  Ukraine   8.97  

Georgia   3  United States   7.41   3  Germany   6.73  Georgia   *  EU27   35.15   *  EU27   28.96  Kazakhstan   1  Russia   10.07   1  Russia   25.44  Kazakhstan   2  China   8.51   2  China   14.06  Kazakhstan   3  Turkey   2.31   3  Germany   6.18  Kazakhstan   *  EU27   46.97   *  EU27   22.22  

Kyrgyz Republic   1  Russia   40.06   1  Russia   21.71  

Kyrgyz Republic   2  Kazakhstan   18.18   2  China   20.78  

Kyrgyz Republic   3  China   9.43   3  

Kazakhstan   7.77  

Kyrgyz Republic   *  EU27   11.57   *  EU27   11.16  

Moldova   1  Russia   22.97   1  Ukraine   11.33  

Moldova   2  Romania   13.11   2  Russia   9.32  

Moldova   3  Italy   11.39   3  China   7.62  

Moldova   *  EU27   50.62   *  EU27   43.75  Russia   1  Germany   3.96   1  China   15.17  

Russia   2  Turkey   3.83   2  Germany   12.15  Russia   3  China   3.10   3  Ukraine   5.51  Russia   *  EU27   51.21   *  EU27   42.16  Ukraine   1  Russia   22.49   1  Russia   11.72  

Ukraine   2  Turkey   6.53   2  Germany   8.08  Ukraine   3  Italy   4.27   3  China   7.58  Ukraine   *  EU27   28.02   *  EU27   32.11  

Country Rank Top  Exports  Partners  (2008-­‐2012) Share  of  Total  Export  (%)

RankTop  Imports  Partners  (2008-­‐2012)Share  of  Total  Import  (%)

Armenia 1 Russia 20.76 1 Russia 13.15Armenia 2 Germany 17.03 2 China 9.70Armenia 3 United  States 8.48 3 Ukraine 5.93Armenia * EU27 39.09 * EU27 26.49Azerbaijan 1 Turkey 1.88 1 Russia 16.61Azerbaijan 2 Russia 1.58 2 Turkey 13.41Azerbaijan 3 Kazakhstan 0.45 3 Germany 8.57Azerbaijan * EU27 61.32 * EU27 28.40Belarus 1 Russia 44.79 1 Russia 21.16Belarus 2 Ukraine 4.64 2 Germany 6.46Belarus 3 Brazil 3.72 3 Ukraine 4.59Belarus * EU27 21.75 * EU27 20.79Georgia 1 Turkey 11.49 1 Turkey 16.73Georgia 2 Bulgaria 8.23 2 Ukraine 8.97Georgia 3 United  States 7.41 3 Germany 6.73Georgia * EU27 35.15 * EU27 28.96Kazakhstan 1 Russia 10.07 1 Russia 25.44Kazakhstan 2 China 8.51 2 China 14.06Kazakhstan 3 Turkey 2.31 3 Germany 6.18Kazakhstan * EU27 46.97 * EU27 22.22Kyrgyz  Republic 1 Russia 40.06 1 Russia 21.71Kyrgyz  Republic 2 Kazakhstan 18.18 2 China 20.78Kyrgyz  Republic 3 China 9.43 3 Kazakhstan 7.77Kyrgyz  Republic * EU27 11.57 * EU27 11.16Moldova 1 Russia 22.97 1 Ukraine 11.33Moldova 2 Romania 13.11 2 Russia 9.32Moldova 3 Italy 11.39 3 China 7.62Moldova * EU27 50.62 * EU27 43.75Russia 1 Germany 3.96 1 China 15.17Russia 2 Turkey 3.83 2 Germany 12.15Russia 3 China 3.10 3 Ukraine 5.51Russia * EU27 51.21 * EU27 42.16Ukraine 1 Russia 22.49 1 Russia 11.72Ukraine 2 Turkey 6.53 2 Germany 8.08Ukraine 3 Italy 4.27 3 China 7.58Ukraine * EU27 28.02 * EU27 32.11

CIS trade primarily with Russia and EU

CIS: resources exports, manufacturing imports

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Country Rank Top  Exports  Products  (2008-­‐2012)Share  of  Total  

Export  (%)Rank Top  Imports  Products  (2008-­‐2012)

Share  of  Total  

Import  (%)Armenia 1 Beverages,  spirits  and  vinegar 14.36 1 Oils  &  products 18.22Armenia 2 Iron  and  steel 13.03 2 Boilers,  machinery  &  mechanical  appliances 9.29Armenia 3 Natural/cultured  pearls,  prec  stone 12.88 3 Electrical  mchy  equip  parts  thereof 6.74Azerbaijan 1 Oils  &  products 94.28 1 Boilers,  machinery  &  mechanical  appliances 20.90Azerbaijan 2 Edible  fruit  and  nuts;  peel  of  citr 0.74 2 Vehicles  o/t  railw/tramw  roll-­‐stock 9.81Azerbaijan 3 Articles  of  iron  or  steel 0.37 3 Electrical  mchy  equip  parts  thereof 9.42Belarus 1 Oils  &  products 23.44 1 Oils  &  products 37.75Belarus 2 Fertilisers 10.34 2 Boilers,  machinery  &  mechanical  appliances 10.57Belarus 3 Vehicles  o/t  railw/tramw  roll-­‐stock 4.18 3 Iron  and  steel 5.63Georgia 1 Oils  &  products 29.17 1 Oils  &  products 15.74Georgia 2 Iron  and  steel 18.68 2 Vehicles  o/t  railw/tramw  roll-­‐stock 9.97Georgia 3 Ores,  slag  and  ash 8.87 3 Boilers,  machinery  &  mechanical  appliances 9.10Kazakhstan 1 Oils  &  products 65.33 1 Boilers,  machinery  &  mechanical  appliances 16.94Kazakhstan 2 Iron  and  steel 5.77 2 Oils  &  products 11.08Kazakhstan 3 Copper  and  articles  thereof 4.73 3 Articles  of  iron  or  steel 9.40Kyrgyz  Republic 1 Edible  fruit  and  nuts;  peel  of  citr 13.34 1 Oils  &  products 15.90Kyrgyz  Republic 2 Art  of  apparel  &  clothing  access 13.16 2 Vehicles  o/t  railw/tramw  roll-­‐stock 8.42Kyrgyz  Republic 3 Edible  vegetables  and  certain  roots 11.16 3 Boilers,  machinery  &  mechanical  appliances 7.19Moldova 1 Iron  and  steel 14.03 1 Oils  &  products 17.49Moldova 2 Beverages,  spirits  and  vinegar 9.29 2 Boilers,  machinery  &  mechanical  appliances 7.56Moldova 3 Art  of  apparel  &  clothing  access 8.19 3 Electrical  mchy  equip  parts  thereof 7.50Russia 1 Oils  &  products 60.98 1 Boilers,  machinery  &  mechanical  appliances 16.99Russia 2 Iron  and  steel 5.14 2 Vehicles  o/t  railw/tramw  roll-­‐stock 12.98Russia 3 Fertilisers 2.29 3 Electrical  mchy  equip  parts  thereof 10.84Ukraine 1 Iron  and  steel 27.02 1 Oils  &  products 28.05Ukraine 2 Oils  &  products 6.15 2 Boilers,  machinery  &  mechanical  appliances 8.96Ukraine 3 Cereals 5.80 3 Vehicles  o/t  railw/tramw  roll-­‐stock 7.81

Overall CIS Trade flows as a share of GDP has increased since 1995…but less so since 2005

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Trade in the Balkans and EU is slightly more dynamic

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Resources dominate trade for Balkans but only dominates imports for EU

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Country Rank Top  Exports  Products  (2008-­‐2012)Share  of  

Total  Export  (%)

Rank Top  Imports  Products  (2008-­‐2012)Share  of  

Total  Import  (%)

Albania 1 Mineral  fuels,  oils  &  products 12.43 1 Mineral  fuels,  oils  &  products 15.94Albania 2 Footwear,  gaiters  and  the  like 11.03 2 Boilers,  machinery  &  mechanical  appliances 7.76Albania 3 Iron  and  steel 8.62 3 Electrical  mchy  equip  parts  thereof 6.65Bosnia  and  Herzegovina 1 Aluminium  and  articles  thereof 9.00 1 Mineral  fuels,  oils  &  products 18.66Bosnia  and  Herzegovina 2 Mineral  fuels,  oils  &  products 8.46 2 Boilers,  machinery  &  mechanical  appliances 8.25Bosnia  and  Herzegovina 3 Boilers,  machinery  &  mechanical  appliances 8.21 3 Vehicles  o/t  railw/tramw  roll-­‐stock 6.14Croatia 1 Mineral  fuels,  oils  &  products 12.78 1 Mineral  fuels,  oils  &  products 19.52Croatia 2 Electrical  mchy  equip  parts  thereof 10.10 2 Boilers,  machinery  &  mechanical  appliances 10.54Croatia 3 Boilers,  machinery  &  mechanical  appliances 8.69 3 Electrical  mchy  equip  parts  thereof 7.45EU27 1 Boilers,  machinery  &  mechanical  appliances 13.75 1 Mineral  fuels,  oils  &  products 14.89EU27 2 Vehicles  o/t  railw/tramw  roll-­‐stock 11.18 2 Boilers,  machinery  &  mechanical  appliances 10.98EU27 3 Electrical  mchy  equip  parts  thereof 8.93 3 Electrical  mchy  equip  parts  thereof 9.64Macedonia,  FYR 1 Iron  and  steel 23.46 1 Mineral  fuels,  oils  &  products 17.72Macedonia,  FYR 2 Art  of  apparel  &  clothing  access,  not  knitted 15.74 2 Iron  and  steel 8.00Macedonia,  FYR 3 Miscellaneous  chemical  products 8.41 3 Boilers,  machinery  &  mechanical  appliances 6.99Montenegro 1 Aluminium  and  articles  thereof 37.50 1 Mineral  fuels,  oils  &  products 15.25Montenegro 2 Mineral  fuels,  oils  &  products 11.83 2 Boilers,  machinery  &  mechanical  appliances 7.71Montenegro 3 Iron  and  steel 11.05 3 Vehicles  o/t  railw/tramw  roll-­‐stock 6.69Turkey 1 Vehicles  o/t  railw/tramw  roll-­‐stock 13.55 1 Mineral  fuels,  oils  &  products 11.91Turkey 2 Boilers,  machinery  &  mechanical  appliances 9.05 2 Boilers,  machinery  &  mechanical  appliances 11.38Turkey 3 Art  of  apparel  &  clothing  access,  knitted 8.13 3 Iron  and  steel 9.02Serbia 1 Iron  and  steel 10.46 1 Mineral  fuels,  oils  &  products 18.05Serbia 2 Electrical  mchy  equip  parts  thereof 7.18 2 Boilers,  machinery  &  mechanical  appliances 9.54Serbia 3 Boilers,  machinery  &  mechanical  appliances 5.55 3 Electrical  mchy  equip  parts  thereof 6.69

Major trading partners for Balkans and EU are the EU

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Country Rank Top  Exports  Partners  (2008-­‐2012) Share  of  Total  Export  (%)

Rank Top  Imports  Partners  (2008-­‐2012) Share  of  Total  Import  (%)

Albania 1 Italy 33.47 1 Italy 28.68Albania 2 Greece 5.37 2 Greece 12.61Albania 3 China 5.37 3 China 6.75Albania * EU27     53.72 * EU27     63.17Bosnia  and  Herzegovina 1 Croatia 15.63 1 Croatia 15.26Bosnia  and  Herzegovina 2 Italy 13.41 2 Germany 11.11Bosnia  and  Herzegovina 3 Serbia 12.60 3 Serbia 10.06Bosnia  and  Herzegovina * EU27     57.94 * EU27     47.00Croatia 1 Italy 17.05 1 Italy 16.30Croatia 2 Bosnia  and  Herzegovina 14.19 2 Germany 12.98Croatia 3 Slovenia 10.39 3 Russia 8.88Croatia * EU27     61.66 * EU27     62.45EU27     1 Germany 12.78 1 Germany 13.37EU27     2 France 7.47 2 China 7.29EU27     3 United  States 7.01 3 Netherlands 6.32EU27     * EU27     64.59 * EU27     58.23Macedonia,  FYR 1 Germany 24.57 1 Germany 10.18Macedonia,  FYR 2 Italy 9.24 2 Russia 9.79Macedonia,  FYR 3 Bulgaria 9.08 3 Greece 8.96Macedonia,  FYR * EU27     68.51 * EU27     53.24Montenegro 1 Serbia 28.51 1 Serbia 26.75Montenegro 2 Italy 14.41 2 Greece 7.37Montenegro 3 Greece 13.02 3 Germany 7.13Montenegro * EU27     51.94 * EU27     38.84Turkey 1 Germany 12.43 1 Russia 12.26Turkey 2 United  Kingdom 7.56 2 Germany 9.42Turkey 3 France 6.60 3 China 8.80Turkey * EU27     56.05 * EU27     38.03Serbia 1 Italy 11.17 1 Russia 13.05

What are the bilateral tariff and non-tariff barriers to trade? Methodology based on a study we did for South Asia (Kee, 2013)

What we did: �  Undertook a large survey in the 39 countries to

carefully account for all NTM barriers. Tariffs (for the most part) are easier to observe.

�  Utilizing global trade data (over 5000 goods) estimated the impact of tariff and non-tariff barriers on bilateral trade flows.

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Estimation of Ad Valorem Equivalent of NTMs �  Let mnij denote the quantity imported, then using the gravity model

mnij =exp(αnij+εnijtnij+βnijNTM1nij+ µnijNTM2nij+unij) (1) NTM1nij is a dummy on SPS and TBT measure, NTM2nij is a dummy on non-SPS and non-TBT measure, tnij are tariffs, and αnij is the standard gravity model variables: αnij = an+ an1 ln(GDPi)+an2ln(GDPj)+an3ln(distanceij)+ +an4common_borderij+ +an5landlocki+an6landlockj (2)

�  Then we can calculate the ad valorem equivalent of the NTMs as: AVE1nij=(exp(βnij)-1)/εnij (3)

AVE2nij=(exp(µnij)-1)/εnij (4) where εnij is the bilateral import elasticity of good n between country i and j

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Estimates of AVE of NTMs, and its Trade Impacts Country   NTM  

Coverage

Percent  of  Goods  with  Binding  NTM

Ad  valorem  equivalent  of  avg.  NTM

Average  estimated  NTM  ad  valorem  rate

NTM  Coverage

Percent  of  Goods  with  Binding  NTM

Ad  valorem  equivalent  of  avg.  NTM

Average  estimated  NTM  ad  valorem  rate

ARG 52.1 23.1 1.4 6.1 87.1 46.8 2.5 5.5CHL 37.8 18.0 1.2 7.4 15.3 8.5 0.5 5.2ECU 27.4 14.8 1.1 8.7 34.3 18.6 1.3 7.3EGY 93.4 35.9 1.7 4.8 43.7 19.5 1.4 6.8EUN 84.7 18.5 0.5 3.3 10.4 2.0 0.2 8.5GTM 23.0 10.9 0.8 8.0 95.6 60.3 2.7 5.0HND 95.6 53.7 2.0 4.3 95.6 64.4 3.1 5.6IDN 32.5 14.7 0.8 5.1 24.6 10.2 0.7 6.4JPN 39.0 13.2 0.3 2.7 8.7 3.4 0.1 3.6KAZ 40.6 19.2 1.1 7.1 33.0 18.5 0.7 4.1KEN 86.9 34.3 1.6 5.0 57.3 24.8 1.2 5.5KHM 14.8 6.1 0.4 6.6 29.4 17.0 0.8 5.3LBN 12.4 4.2 0.3 7.0 6.9 2.1 0.1 4.8MEX 43.1 17.6 0.9 3.8 34.9 16.4 0.9 5.2MUS 33.0 8.8 0.1 1.6 14.7 3.5 0.0 1.4NAM 49.4 28.0 1.3 5.7 49.7 32.0 1.8 7.3NIC 94.8 51.3 2.4 5.5 92.5 54.5 3.0 10.7PER 6.4 3.8 0.2 5.3 0.9 0.8 0.1 10.7UGA 95.0 53.3 2.2 4.3 94.9 65.1 3.5 6.2URY 6.9 3.9 0.4 8.3 0.2 0.3 0.0 4.1VEN 31.0 13.7 1.0 7.6 34.0 17.7 1.2 7.5AFG 17.6 8.9 1.0 20.5 25.3 9.9 0.5 4.4BGD 12.3 5.9 0.4 6.3 83.0 43.4 2.7 6.7IND 100.0 41.8 2.0 4.6 96.7 40.2 2.3 5.7LKA 96.7 39.0 1.7 4.6 96.7 49.0 2.7 6.2NPL 96.6 38.4 1.9 5.3 96.6 51.7 3.1 6.6PAK 36.0 17.2 1.2 6.4 96.6 51.7 3.0 6.1

Average 41.0 18.2 1.0 6.8 44.8 24.0 1.3 6.0

SPS  or  TBT  measure non-­‐SPS  or  non-­‐TBT  measure

Estimating OTRIs �  The OTRI captures the trade policy distortions that

each country imposes on its import bundle. �  It measures the uniform tariff equivalent of the country

tariff and non-tariff barriers (NTB) that would generate the same level of import value for the country in a given year and implicitly defined by:

𝑂𝑇𝑅𝐼↓𝑖 =∑𝑛↑▒𝑚↓𝑛𝑖 𝜀↓𝑛𝑖 𝑇↓𝑛𝑖  /∑𝑛↑▒𝑚↓𝑛𝑖 𝜀↓𝑛𝑖   (5)

where 𝑚↓𝑛𝑖  is the import value of good n in country i evaluated at exogenous world prices, 𝑇↓𝑛𝑖  is the overall level of protection that country i imposes on imports of good n, 𝜀↓𝑛𝑖  is the import demand elasticity.

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Estimates of OTRIs, and its Trade Impacts Country   Overall  Trade  Restr.  

IndexOTRI  of  the  AVE  of  

SPS  and  TBTOTRI  of  the  AVE  of  non-­‐

SPS  and  non-­‐TBTOTRI  based  on  

TariffARG 5.8 0.3 0.6 4.9CHL 6.2 0.1 0.0 6.0CHN 2.8 0.3 0.2 2.4COL 5.8 0.0 0.1 5.7CRI 2.3 0.4 0.2 1.7ECU 3.5 0.4 0.4 2.8EGY 5.4 1.3 0.5 3.6EUN 1.8 0.5 0.0 1.3GTM 5.4 0.6 1.6 3.2HND 9.4 0.9 1.8 6.6IDN 1.8 0.1 0.1 1.7JPN 0.9 0.3 0.1 0.5KAZ 4.5 0.8 0.4 3.3KEN 7.2 0.6 1.1 5.5KHM 8.7 0.0 0.3 8.4MDG 5.4 0.3 0.2 4.8MEX 2.4 0.1 0.1 2.2MUS 2.6 0.6 0.2 1.8NAM 3.3 0.3 0.9 2.0NIC 5.2 0.7 1.2 3.3URY 1.4 0.0 0.0 1.4VEN 4.0 0.1 0.1 3.8AFG 4.8 0.0 0.0 4.7IND 7.0 0.3 0.2 6.5LKA 6.3 0.4 1.0 4.9NPL 9.1 0.4 0.3 8.4PAK 6.6 0.1 0.5 6.0

Average 5.2 0.3 0.5 4.4

Thank You

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