Debate in Kyrgyzstan: To Join or not to Join a Common Customs Border?

Would Kyrgyzstan’s membership in a regional economic bloc with Russia, Belarus, and Kazakhstan aid or undermine jobs, wages, and living standards for Kyrgyz workers? The Solidarity Center brought together some 70 government experts, union leaders, employers, researchers, and representatives of international organizations in Bishkek to discuss key concerns.

The Customs Union of Russia, Belarus, and Kazakhstan, established within the Eurasian Economic Community (EurAsEC), came into force on January 1, 2010. Tariffs on more than 11,000 products have already been adjusted. As of July 2011, the three countries have a common customs border.

Kyrgyzstan, officially the Kyrgyz Republic and also a EurAsEC member, is considering whether to join the Customs Union. Kyrgyz officials point to a number of benefits, including access to new markets, attraction for investors, reduced prices on Russian and Kazakh imports, the removal of trade barriers, adjustment of technical, sanitary, and veterinary regulations, and a possible decrease in prices of imported energy. Moreover, they contend, by remaining outside the Customs Union, Kyrgyzstan could lose its privileged access to the attractive markets of its richer northern neighbors.

By joining the Customs Union, however, Kyrgyzstan would lose its low import tariffs, a main benefit since it became a member of the World Trade Organization in 1998. As a result, the practice of transporting cargo to other Central Asian countries through Kyrgyzstan would likely end.

“If Kyrgyzstan loses its advantage of being able to import goods at lower prices, who will be interested in this small poor country, which has a huge gap between living standards and prices?” said Stanislaw Cieniuch, Solidarity Center country program director in Kyrgyzstan, who spoke at the conference. “Most Kyrgyz citizens will not be able to afford basic necessities such as medicines if drugs are no longer duty-free.”

Cieniuch pointed out that the Dordoi Market, a huge wholesale enterprise in Bishkek, is developing successfully thanks to international trade, providing thousands of Kyrgyz with jobs. In addition, the dynamic expansion of the garment industry (now a locomotive of the Kyrgyz economy) is based on a mixture of comparative advantages: cheap imported materials and machinery, low labor costs, talented entrepreneurs, creative fashion designers, and civilized industrial relations. “Many fear that the higher tariffs and other trade barriers of the Customs Union could ruin this Kyrgyz success story,” he said.

The conference, chaired by textile and light industry union President Ryskul Babayeva, received extensive media coverage and drew the public’s attention to the potential economic and political consequences of Customs Union membership. Under Babayeva’s leadership, participants drafted a resolution calling on the government to take working people’s concerns into account in negotiating the agreement. The resolution was delivered and negotiations are ongoing.