Russian, White and Kazakh customs union set sail but disagreements remain

"International Financial Times Moscow," Russia, Belarus and Kazakhstan leaders in Monday to strengthen economic ties between the three countries have achieved gratifying results, announced the establishment of a Russian-centred customs union.　　They believe that the alliance will soon develop into a more ambitious common market.　　The agreement will partly open the trade market between Russia and Belarus, but has not completely eliminated all tariffs.　　Since the collapse of the Soviet Union in 1991, the three countries have yet to reach a consensus on accession to the World Trade Organization (WTO), and Russia has long struggled to advance the negotiations. The agreement has played a positive role in removing barriers to trade and investment between the three countries.　　This alone, analysts say, could boost the region's economic growth and, more importantly, enhance its competitiveness. The signing of the agreement is also a victory for Russia's leaders.　　For a variety of reasons, they have established a customs union, and Russia, the financial and Trade Centre of the Alliance, will be the biggest beneficiary.　　For Russia, however, the deal has also increased the risk of its entry into the WTO. Last summer, Russian Prime Minister Vladimir Putin said Russia would abandon its unilateral accession to the WTO and seek to establish a customs union with Belarus and Kazakhstan. This suggests that Russia has made other choices if the conditions for entry into the WTO are too onerous.　　Later, the Russian ministers withdrew the plan and said that Russia would enter into WTO negotiations unilaterally. But after the signing of the agreement in Monday, Kazakhstan's president, Sourdin?　　Nazarbayev reiterated that Russia, Kazakhstan and Belarus have agreed to join the WTO collectively. Russian First deputy Prime Minister Igor?　　Shuvalov (Igor I. Shuvalov) told reporters that the three countries remained divided over their entry into the WTO strategy, and he hoped to finish them in the coming weeks. Russian President Dmitry Medvedev said at the signing ceremony that by 2012, Russia and Belarus will try to fully open their economic market. The first step is to develop a unified customs law.　　Second, they will discuss the free flow of labour and capital. "While there is still a lot of work to do to build a common economic space," Mr Medvedev said. "But it is really a useful and interesting attempt, and I believe we can talk about it on any issue." "For Russia, the struggle to secure a free-trade agreement during the financial crisis will change its economic policy during the Soviet Union," he said.　　Russia later discovered that it had the advantage of stabilizing its foreign exchange reserves, when Western lenders were withdrawing from the region as a result of the financial crisis, reducing loans and fuel subsidies and turning to more comprehensive economic integration. "This is a very positive paradigm shift in Russia's handling of relations with neighboring countries," Yaroslav Lissovolik, chief economist at Deutsche Bank, said in a telephone interview. "Russia has always been there before, often in exchange for economic benefitsTake political advantage.　　"On the contrary, a free-trade agreement is an economic strategy that can boost the region's prospects, and Russia is at the heart of the Alliance." In the short term, Lissovolik said, Russian steel workers could face competition from Kazakhstan.　　But in the long run, open competition will help Russia diversify its reliance on natural resources and boost Moscow's role as the financial and commercial hub of the region.　　He said the bank of Russia was particularly interested in entering into a large, unchanged Soviet-style economic model in Belarus, which would require large sums of money to privatize major sectors that it would undertake during the global economic downturn.　　If Russia chooses to enter its domestic labour market, it will also have a strong appeal in persuading other former Soviet states to join the alliance. Although the country still faces a shrinking population, Russia is now the world's second-largest labour importer (after the US) because of rising oil wealth.　　Tajikistan and Kyrgyzstan are two countries heavily dependent on remittances from Russia for migrant workers, and the leaders of the two countries said in Monday that they were interested in joining the alliance.　　Ukrainian President Viktor Yanukovych (Viktor F. Yanukovich) has said the country is reluctant to join the alliance. Belarus has also been reluctant to become its trading partner. Although the agreement signed in Monday has officially entered into force on July 1.　　But in discussing tariffs, Belarus is fully responsible for the blockage of oil pipelines caused by the transfer of crude oil to Belarusian refineries last winter. The agreement was signed, but their differences seem to have not been fully resolved.　　A Belarusian official said the tariffs would soon be lifted, but Shuvalov said the creation of a common economic space treaty would be paramount. Author: ANDREW E. KRAMER Ms Lina Wong compilation