Rehabilitation of Rural Areas Required to Ensure Country’s Competitiveness

International trade argues that prosperity has rarely, if ever, been achieved or sustained without trade. It also plays a role in many other domains, including jobs, the environment and the fight against poverty.  

In this regard, after nearly 20 years of negotiations the final step before Kazakhstan becomes a World Trade Organisation (WTO) member would be the ratification of the accession package by the nation’s Parliament by Oct. 31. The country will become a full-fledged member 30 days after it notifies the WTO of the ratification.

As part of the accession negotiations, Kazakhstan concluded 29 bilateral market access agreements on goods and 15 on services. On goods, the country has undertaken tariff concessions and commitments that bind tariff rates for all products on average at 6.1 percent. For agricultural products, the average is 7.6 percent; for non-agricultural products, 5.9 percent.

“The conclusion of Kazakhstan’s accession is a tribute to the untiring efforts of the government of Kazakhstan, as well as to the WTO and its members. The high quality of the accession package will accelerate Kazakhstan’s integration into the global trading system and provide a boost to Kazakhstan’s economy for years to come. I particularly want to congratulate President Nazarbayev and Minister Aitzhanova for their key roles in concluding these negotiations. As President Nazarbayev has said, it is an ‘historic’ moment. I look forward to welcoming Kazakhstan as a member of the WTO very soon,”said WTO Director-General Roberto Azevêdo.

On one hand, some can argue that under WTO rules , when trade is fully liberalised a number of our sectors with a low competitive edge will either cease to exist or be re-orientated. On the other hand, accession to WTO is one of the major priorities of the government’s policy aimed at full integration into the world economy through enhancing competitiveness and diversification of the national economy and making fair contribution to world economic welfare.

The public needs to be informed about the course and results of WTO negotiations, as well as about potential or existing problems. WTO rules will affect us all: consumers and producers, exporters and importers. The more the public is aware of WTO requirements, the more opportunities it will have to be ready for them.

The history of mankind is related to the evaluation of trade. International trade was limited to the most expensive commodities when transportation was difficult, although there was no limitation on theories and economic systems on supporting free trade since Adam Smith’s “Wealth of Nations.” Global trade is almost three times larger than the level in the early 1950s and the past few decades have experienced important changes that reshaped the global trade landscape.

The structure of trade has been characterised by a rising share of higher technology goods. This is another feature of the period. The contribution of high and medium-high technology exports such as machinery and transport equipment increased, whereas that of lower technology products such as textiles declined. Technology-intensive export structures generally offer better prospects for future economic growth. Trade in high-technology products tends to grow faster than average and has larger spillover effects on skills.
If the country is not in a position to offer higher technology goods, how can it take advantage of membership of the world global trade system? David Ricardo, one of the most influential of the classical economists, argued there is mutual national benefit from trade even if one country is more competitive in every area than its trading counterpart and that a nation should concentrate resources only on industries where it had a comparative advantage.

The advantages of Kazakhstan’s membership in WTO, however, are of a more distant, long-term nature and therefore are not very obvious, while the downsides will quickly and painfully affect the entire domestic economy. The possible negative consequences are a considerable downturn in production in a number of sectors, weighty financial losses such as a reduction in customs revenues to the budget, weakening of the financial and banking system due to low capitalisation, threats to national and food security due to loss of control over certain markets transferred to foreign companies, growth of unemployment and an influx of cheap foreign foodstuffs. Moreover, several vitally important sectors might be suffer from foreign competition if no protective measures are taken. These are agriculture, light and food industries, engineering and production of construction materials, among others. Let’s provide one sector as an example.

 Kazakhstan has passed a three-year programme for rehabilitating rural areas and this is a crucial step forward. Over 40 billion tenge (US$214.2 million) per year could make a considerable improvement to our agricultural situation. According to the Kazakh leader, today agriculture is one of the priority sectors of the country, which should be the “stable element of economic growth.” The government of Kazakhstan marked the three priorities for rural development: ensuring food self-sufficiency, increasing agricultural production for export and creating a “decent environment” in rural areas.

Taking into account all those measures, still the funds allocated by the state must grow, given that the material and technical base of this sector is in a poor state. The size of the state subsidies provided to the agricultural sector covers only 8 percent of the prime cost of farm produce. In Europe, this figure is five times higher. Therefore, there is a need to stipulate far greater state support for agriculture during the last couple of months before WTO membership. For example, the annual Russian subsidies to agriculture stand at around $1 billion and Russia is insisting on increasing the figure to $16 billion.

As trade barriers go down, exporters reduce prices, capturing a larger market share and increasing exports. Trade liberalisation via WTO should raise trade volumes by increasing both margins of trade. Kazakhstan’s membership in WTO should be as painless as possible and, what is most important, it should play a positive part in ensuring stable economic growth.

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