Staff Working Paper DERD-2002-02 April, 2002

World Trade Organization

Development and Economic Research Division
EFFECTS OF WTO ACCESSIO O PO!IC"-#A$I%
I SO&EREI% STATES'
Preliminary lessons from the recent experience of transition countries
Marc Bacchetta: WTO
Zdene Dra!e: WTO
Manuscript date: "pril# $%%$
Di()lai*er' This is a &orin' paper# and hence it represents research in pro'ress( This paper
represents the opinions of individual staff mem!ers or visitin' scholars# and is the product of
professional research( )t is not meant to represent the position or opinions of the WTO or its
Mem!ers# not the official position of any staff mem!ers( "ny errors are the fault of the authors(
*opies of &orin' papers can !e re+uested from the divisional secretariat !y &ritin' to: Development
and Economic Research Division# World Trade Or'ani,ation# Rue de -ausanne ./0# *12.$..
3en4ve $.# 5&it,erland( Please re+uest papers !y num!er and title(
A+STRACT'
The purpose of the paper is to discuss the effects of WTO accession on policy2main' and
institutional reforms in transition countries( This is done !y looin' at the experience of
those transition countries &hich are already Mem!ers of the WTO( We start !y examinin'
the effect of accession on trade policy and distin'uish !et&een the effects of accession
ne'otiations and those of autonomous policy initiatives( Other areas of domestic policy2
main' considered in the analysis include maret access# 'overnance# 'overnment !ud'et#
structural reforms# trade and investment arran'ements &ith re'ional partners and
macroeconomic mana'ement( We find that no precise !lueprint of accession conditions can
!e ascertained# that WTO played a role# al!eit not an exclusive one in the process of
li!erali,ation# that the costs of WTO Mem!ership are not ne'li'i!le# that the !enefits of WTO
Mem!ership are also si'nificant in terms of a !etter maret access# improved 'overnance
and a recourse to !etter economic policies(
$e, Word(' WTO "ccessions# Trade Policy# Transition *ountries
-E! Cla((ifi)ation o. 67.8 67.98
EFFECTS OF WTO ACCESSIO O PO!IC"-#A$I%
I SO&EREI% STATES'
Preli*inar, le((on( fro* t/e re)ent e0perien)e
of tran(ition )o1ntrie(
Marc Bacchetta
and
Zdene Dra!e
World Trade Or'ani,ation
3eneva
The views in this paper are strictly personal. They should not be attributed either to WTO
Members or the Secretariat. We are grateful for assistance to Indradeep Gosh.
I. INTRODUCTION
One of the most remarkable successes of the World Trade Organiation in recent years has
been the e!pansion of WTO Membership and the continued stream of applications of countries to
accede to the WTO. Of the "# countries that have applied to accede the WTO under $rticle %II since
&anuary '
st
'(()* appro!imately one half are countries in the process of transition from a planned to a
market economy. Ten of the '" countries that have already completed their accession process and
between ( and '# countries + depending on whether ,ast $sian countries are included or not + of the
-. countries negotiating their accession are transition countries. /learly* the WTO represents a
powerful attraction for countries in transition 0/IT1 which treat their WTO membership as a 2stamp of
approval2 of their policies and the admission into the international community 3 a feat 4uite important
for /IT that have been isolated from world markets for more )5 years.
The strong interest of /IT in the WTO Membership raises the obvious 4uestion about the
benefits to these countries from their accession to the WTO. It is clearly not enough to say that the
main benefits are their rights to participate in the proceedings of the WTO Working /ommittees*
Working 6arties or the /ouncil. What matters at the end of the day are the tangible benefits from
Membership. Only if they can point at such benefits will the governments of these countries be able to
convince their critics that the decision to 7oin the WTO is right. Only then will they be able to
demonstrate to their populations that the government policies are also on the right path.
The purpose of this paper is to discuss one particular aspect of WTO accession + the effects of
WTO accession on policy+making and institutional reforms in transition countries. We shall do so by
looking at the e!perience of those transition countries which are already WTO Members. We believe
that this will offer a useful picture of the forces that ultimately shape the economic performance of
these countries and in particular that it will show how economic performance has been affected by
WTO accession. $nne! Table ' shows the dates of application and membership of all /IT. Si! of
them + the /ech 8epublic* 9ungary* 6oland* 8omania* Slovakia and Slovenia 3 had signed G$TT by
'((". $s all other G$TT /ontracting 6arties* they became WTO members upon signing the new
WTO agreements. More recently these countries have been 7oined in the WTO by ten other /IT.
These ten new Members which are in the process of transition are* by order of accession* :ulgaria*
Mongolia* the ;yrgy 8epublic* <atvia* ,stonia* Georgia* $lbania* /roatia* <ithuania and Moldova.
The advantages of our approach are twofold. =irst* by drawing on the e!perience of these
countries we hope to shed more light on much debated issues such as the advantages of multilateral as
opposed to autonomous trade liberaliation. Second* given that the accession often raises high hopes
-
while in reality it also represents heavy commitments and costly ad7ustments to new legal and
institutional re4uirements* it is our aim to ob7ectively asses the costs and benefits of accession. The
economic transition of the kind undertaken by the former centrally+planned economies is not an easy
process and like all other transition countries* the new Members face specific transition related
problems.
In order to evaluate the effect of WTO accession on the /IT* we shall adopt the following
approach. We shall first ask how much of the trade policy reforms can be attributed to the accession
negotiations and how much they reflect autonomous policy initiatives. We shall* therefore* review the
policy reforms in the e!amined countries* identify the autonomous trade measures as well as those that
were not covered by the reform. The actual effects of accession on policy+making will then be
e!amined in the following areas> 0'1 market access* 0-1 governance* 0#1 government budget* 0"1
structural reforms* 0)1 trade and investment with regional partners* and 0?1 macroeconomic
management. These are areas which we believe are affected by WTO accession most. The /IT have
acceded under $rticle %II of G$TT* and we shall consider whether this $rticle or other rules have
constrained domestic policy+making and if so how. The idea is to identify factors that partly offset the
positive effect of accession.
Terms of accession are of a ma7or concern to every acceding country. Moreover* there is a
perception among some observers that accession conditions may vary among countries and that these
conditions may be in e!cess of measures that incumbents would be willing to take in their own
countries.
'
,ven though we shall make general comments on accession conditions* we do not intend to
discuss this issue in detail. This is 4uite a ma7or omission. The effects of accession must clearly be
dependent* inter alia* on the outcome of the negotiations* that is on the conditions which each country
is able to negotiate with the WTO Members. We have felt that the issue of accession conditions is so
important and* at the same time* comple! that it will need to be addressed in a separate paper.
The paper is divided into two parts. The following 6art II which includes three sections*
reviews the role of the WTO and its accession process and looks at the main features of the process.
Section $ shortly describes the @ew MembersA accession packages* and Section : provides an
assessment of the scope of autonomous trade policy reforms. The main benefits of 7oining the WTO
'
In reporting on discussions in the General /ouncil* @aray noted that 2.a number of developing
countries delegations recalled that in the accession process unreasonable conditions were required of, and
imposed on, applicants because developed country members had requested that acceding countries accept more
stringent conditions and a higher level of commitment than was required from members themselves ('WTOplus'
requirement!. "or e#ample, the requirement to adhere to several plurilateral agreements, to guarantee full
transparency and ob$ectivity and that mar%ets access commitments should be about the same as those made by
countries at similar level of development.& @aray 0-55'1* p.('.
#
are discussed in Section /. The subse4uent 6art III then looks at various aspects of economic policy+
making that we have been able to identify and that are affected by WTO accession. The areas have
been delineated above and they constitute the sub7ect of the seven sections of 6art III. We shall look at
the impact of accession on market access* governance* customs revenues* ad7ustment costs* regional
policies and stabiliation policies. The paper is concluded with a summary of the main findings and
some policy conclusions.
II. THE WTO ACCESSION PROCESS
$. T9, /O@T,@T O= $//,SSIO@ 6$/;$G,S
Only few WTO rules regulate the process of accession.
-
$ccession is governed by $rticle %II
of the Marrakesh $greement establishing the WTO* which defines in highly general terms the rules
for accession to the WTO. The specific terms of accession must be negotiated between the WTO
Members and the applicant country. :ecause each accession is a negotiation between the WTO
Members and a particular country with typically different economic conditions* each accession is
uni4ue. $s <anoska 0-55'1 put it > 2 'rticle ()) does not stipulate any membership criteria, and this
signals perhaps the most problematic legal aspect of the accession process. ...*o guidance is given on
the 'terms to be agreed', these being left to the negotiations between the WTO +embers and the
,andidate. "urthermore, 'rticle ()) does not identify any concrete steps nor does it provide any
advice when it comes to the procedures to be used for negotiating the terms of accession&.
-
To
streamline the e!amination of accession re4uests* though* WTO Members have designed
administrative procedures some of which are based on unwritten rules. In fact* the best that can be
said about the process is that the process is largely governed by unwritten rules derived from
precedents and previous rulings.
"
The main outcome of the accession negotiations are the terms of accession set out in the
protocol of accession. The protocol of accession includes all the commitments made by the acceding
country on trade and trade+related policies. Those commitments take the form of a general
commitment to abide by WTO rules* of a series of specific commitments referred to in the Working
6arty 8eport 3 for instance on transparency in the privatiation process or on price regulations* and of
tariff concessions and other commitments as listed in the countryAs Schedules. The lessons that can be
-
=or a detailed description of the procedures see* for e!ample* <anoska 0-55'1.
#
)bid. p. ).(.
"
)bid. p../0.
"
drawn from the e!amination of the negotiated terms of accession and of the length of the negotiation
process mainly concern the accession process itself.
Ideally* acceding countries should accede on terms that are broadly comparable both for
acceding countries among themselves and in comparison with incumbents. In practice* however* the
situation may evolve somewhat differently. In several areas acceding countries have made
commitments in e!cess of incumbent Members.
)
$cceding countries* for instance* are re4uired to bind
all tariffs while many developing countries still have relatively high shares of their non+agricultural
tariff lines unbound. Similarly* there is pressure on new Members to sign all plurilateral agreements.
The 4uestion whether this practice serves the interests of acceding countries or not is hotly debated.
$s already mentioned* we will not enter this discussion here e!cept noting the reason why differences
such as those noted arise. The reason is that $rticle %II* which governs the WTO accession process*
is limited in scope and lacks precision in terms of setting the specific operational procedures* as we
have already noted above. $s a result* countries accede to the WTO on 2the terms to be agreed by
negotiations.
?

$nother unwritten rule concerns the status of acceding countries. $ MemberAs status
determines whether it is entitled to use the Special and Bifferential 0SCB1 treatment provisions of the
WTO agreements. In general* there are no WTO definitions of DdevelopedE and DdevelopingE
countries. The general principle is the selection based on the principle of what can be called a 2self+
appointment2. $ country can present itself to the WTO as a 2developing nation2. Other Members*
however* may challenge the 2re4uest2* as it fre4uently happens in specific sub7ect areas of the WTO
$greements 3 in particular in the area of intellectual property. =or countries 7oining the WTO through
the accession process* their status largely depends* once again* on the terms agreed in each specific
area of the accessions negotiations. If there is no e!plicit mention of the status in the protocol of
accession* a new Member can designate itself as a developing country and even though there is very
little formal importance to this act. The actual commitments may restrict the scope for SCB treatment
provisions. =or instance* if an acceding country makes an e!plicit commitment to restrict its domestic
agricultural support at a level that is lower than what is allowed for developing countries* the
commitment would be binding even if the country self+appoints itself to the developing country status
)
See <anghammer and <Fcke 0'(((1* Michalopoulos 0-5551 or @aray 0-55'1. =or further details see
also footnote '.
?
The choice of the commitments of original Members with similar levels of GB6 per capita as a
benchmark for assessing the terms of accession was based on the idea of fairness* ie. treating 2similar2 countries
in a similar way. 9owever* accession terms could be also evaluated against other benchmarks such as* for
e!ample* the 2free trade package2. The package is based on the notion that the optimal policy is the one that
leads to the elimination of all trade restrictions. Get another benchmark could be cross+country comparisons in
which a countryAs 2package2 of accession conditions is compared to that of other country 0ies1. /learly* the main
problem is to define the optimal package* but the cross+country comparisons remain the most fre4uently used
benchmark in practice. See Michalopoulos 0-5551 or <anghammer and <Fcke 0'(((1.
)
or if it wanted to increase its agricultural support to the level allowed for 2developing countries2 at a
later stage.
H
In contrast* the rule is 4uite clear with respect to 2least+developed2 countries. The WTO
recognies as least developed countries those countries which have been designated as such by the
Inited @ations. There are currently forty nine least developed countries on the I@ list* of which thirty
are Members of the WTO as of end of -55' and nine are in the process of accession to the WTO.
.
The status issue is related to another issue 3 the right to transition periods to implement the
WTO $greements. $rticle %IJ.- of the WTO $greement states that a Member which accepts the
Marrakesh $greement after its entry into force shall implement those concessions and obligations in
the Multilateral Trade $greements that are to be implemented over a period of time starting with the
entry into force of this $greement as if it had accepted this $greement on the date of its entry into
force. Transition periods are thus by no means made automatically available to acceding governments.
$rticle %II on the other hand offers Members a margin of manoeuvre. In practice* Members have
made it clear that transition periods will only be granted if the applicant is successful in making a
strong enough case to prove that such a period is necessary.
$nother important* but this time a formal rule concerns the scope of acceding countries
commitments. $ccording to $rticle %IIK'* 20T1he accession shall apply to this $greement and the
Multilateral Trade $greements anne!ed thereto2. In other words* acceding countries are e!pected to
accept all the rules and conditions as specified in each of the WTO $greements. This rule is known as
the principle of single underta%ing.
It should also be noted that countries are 7oining the WTO under what may be called status
quo for the incumbent countries. The acceding countries cannot negotiate any change in the
incumbent countriesA commitments of market access nor can they negotiate any change in the rules of
the WTO $greements. The acceding country is 7oining the WTO under the e!isting commitments of
the Members. $s any new member of a 2club2 has to abide by the rules of the club heKshe wants to
7oin* countries acceding into the WTO must accept the terms and conditions of the WTO as they
stand. This is an unwritten but fully respected 2rule2 of accession.
H
The 2de minimis2 level for developing country Members is '5 percent while it is ) percent for
developed countries and certain categories of domestic support are e!empted from reduced commitments for
developing country Members. See $rticle JI of the $greement on $griculture.
.
The nine countries include :hutan* /ambodia* /ape Jerde* <ao 6eopleAs Bemocratic 8epublic*
@epal* Samoa* Sudan* Januatu and Gemen. =urthermore* ,thiopia and Sao Tome and 6rincipe are WTO
Observers.
?
:. $ITO@OMOIS O8 MI<TI<$T,8$< T8$B, <I:,8$<IL$TIO@M
In order to dispel any misunderstanding about the sub7ect of this section* it is important to
specify the framework of our discussion from the outset. The purpose of the section is not to discuss
the merits or pitfalls of one method of trade liberaliation as opposed to the other.
(
The aim is to
discuss the role of WTO accession in the reform process of transition countries. :ased on the idea that
trade agreements can play the role of e!ternal anchors and thereby facilitate trade policy reforms* it
may seem that WTO accession has played different roles in different countries. =or e!ample* in
transition countries that were already WTO Members before the start of their transition* regional
integration obviously played the leading role in facilitating the reform process. In other transition
countries* WTO accession and regional integration both played a role while in a third group of
countries* WTO accession most likely played the most important role. @evertheless* the WTO
disciplines are critical even for countries which may be more reliant on regional agreements since
these must typically be WTO consistent. In this section we briefly discuss the relevant e!perience of
four /entral ,uropean countries + the /ech 8epublic* Slovakia* 9ungary and 6oland.
In the four /entral ,uropean countries + all four G$TT /ontracting 6arties + trade policy
reform measures were taken largely autonomously in the first half of the '((5As* that is prior to the
conclusion of the Iruguay 8ound $greements. =ollowing the collapse of central planning* the
countries eliminated foreign trade monopolies and introduced competition into virtually all foreign
trade activities. They unified e!change rates and devalued their currencies. <icencing re4uirements
have only been retained for few foreign trade transactions such as trade in arms* drugs* goods of
historical or artistic value and other transactions normally permitted in international practices. 6rice
controls have been eliminated on all but a few non+tradeables* e!port and other trade+related subsidies
have been abolished. ,liminated were also all 4uotas 3 the pillar of trade policy under central
planning.
Thus* the countries were left with tariffs as the only instrument to control the flow of imports.
The tariff schedules were all inherited from the previous trade policy regime with a fairly low tariff
incidence. =or e!ample* the former /echoslovakia inherited a tariff schedule with about ) per cent
average tariff incidence 3 clearly one of the lowest in the world. The other two countries 3 9ungary
and 6oland + had a tariff incidence somewhat higher but even these two countries demonstrated a
fairly open foreign trade regime.
'5
Most of their tariffs were bound.
(
=or reasons why countries may be interested in 7oining international agreements see* for e!ample*
Staiger 0'(()1. The reasons for autonomous trade liberaliation have been discussed at length and constitute a
ma7or part of economic literature.
'5
=or more details* see Brabek and Smith 0'(()1.
H
The trend towards trade liberaliation was boosted by 8T$ negotiations with the ,uropean
Inion. In the early '((5As the countries began their negotiations of the $ssociation $greements* later
relabelled as the ,urope $greements. These were e!tremely important steps and they affected the
course of trade policy in each of these countries. The agreements provided for the establishment of a
free+trade area between the ,I and each of these four countries but the agreement e!tends far beyond
a simple free trade arrangement.
''
The agreements led to a radical opening of markets for foreign
investment 3 direct and portfolio 3 and they covered various other activities such as economic
cooperation* customs administration* labour issues* etc. They include provisions covering not only
manufactures but also agriculture and services. In addition to the ,urope $greements* these countries
have also signed other preferential trade agreements. =or e!ample* the /ech 8epublic has a customs
union agreement with SlovakiaN it has signed the /entral ,uropean =ree Trade $greement 0/,=T$1
with 9ungary* 6oland* Slovakia* and later with 8omania* Slovenia and :ulgariaN it has an agreement
with ,=T$ countriesN and it has put in place its own generalied system of preferences. The /ech
government has also signed doens of bilateral agreements on investment protection.
While the speed of liberaliation provided under the umbrella of the ,urope $greements was
4uite impressive* and so was their scope* the agreements have not gone as far the Iruguay 8ound
$greements in several areas. =or e!ample* in services the ,urope $greements only provided a
reference to the ongoing Iruguay 8ound $greements binding both the ,I and the countries
concerned to incorporate into the ,urope $greements the commitments of both parties made in the
Iruguay 8ound. Similarly* the Iruguay 8ound has gone further than the ,urope $greements in
specifying in detail the technical standards as well as sanitary and phytosanitary standards. ,!cluded
were also provisions concerning protection of intellectual property as well as trade+related investment
measures such as those covered under T8I6s and T8IMs respectively in the Iruguay 8ound.
Safeguards and anti+dumping measures were also refered to the WTO standards. In brief* the ,urope
$greements were the second important stimulus for trade liberaliation 3 in addition to the
governmentsA own commitments. 9owever* the $greements have not covered everything 3 several
topics were negotiated under the umbrella of the Iruguay 8ound.
In sum* the actual Iruguay 8ound negotiations have brought relatively little in terms of
further market opening and trade liberaliation in these transition countries. Most of the liberaliation
measures have been taken autonomously andKor as part of various 8T$s. $s a feature of trade policy+
making* the e!perience of transition countries is not uni4ueN it is a part of a general trend towards
''
In the case of /echoslovakia* the agreements were originally negotiated with the =ederal 8epublic
of /echoslovakia. $fter the breakup of the federation at the end of '((-* the agreements were negotiated and
signed separately with the /ech 8epublic and Slovakia respectively.
.
2new liberalism2 of the '(.5s and '((5s.
'-
The Iruguay 8ound $greements have supplemented the
e!isting reforms in some areas 3 especially in services* T8IMS* T8I6S as noted* and they have
brought disciplines into these countriesA trade regimes by adopting multilateral rules on safeguard*
anti+dumping and others.
/. 8,$SO@S =O8 &OI@I@G T9, WTO
,conomists have identified different reasons why countries might be interested in 7oining an
international trade agreement. These can be conveniently fitted into two categories 3 theoretical
arguments and practical considerations. In the first 0theoretical1 category is the argument stating that
governments may be in the position to pursue what is known as 2beggar+thy+neighbour2 policies and
that they will agree to sign international trade agreements as a way of mitigating the incentives to do
so. The countries can pursue the 2beggar+thy+neighbour2 policies by imposing e!ternalities on their
trade partners in the absence of an agreement* and the main mechanism through which a country can
do so is through changes in terms+of+trade. These changes are* of course* only possible due to the
countryAs large sie or its monopolistic position in the market. To put it differently* governments can
act in their own interest if they are in the position to impose optimal tariffs in order to ma!imie the
countryAs welfare. 9owever* other 0large1 countries can do the same* which could lead to trade wars
and an erosion of national welfare in each country. :y 7oining a trade agreement* large countries can
reach a higher level of national welfare by making their commitments to lower tariffs sub7ect to an
international agreement backed by sanctions.
'#

$ related theoretical argument concerns strategic interaction between governments and its
private sector. $s shown in the pioneering work of ;ydland and 6rescott 0'(HH1* the necessary
condition for economic policy to be timeconsistent is that governments pursue the first+best policies.
This is virtually never the case in the presence of trade interventions. The failure to pursue the best
policies will lead to a search for better alternatives and pressures for policy changes. $s a result the
credibility of government policies to the original commitments will be adversely affected. Once
again* an international agreement that locks in the original commitments will boost the government
credibility.
On practical level* the attractiveness of WTO has several dimensions. The first attraction of
the WTO is that governments are able to obtain an improved access to markets for their e!ports. The
'-
The policy changes are discussed and documented in Brabek and <aird 0'((.1.
'#
=ollowing on the original work of Scitowsky and his own recent work* these issues are reviewed by
Staiger 0'(()1. =or specific references to transition and vulnerable developing economies* see* for e!ample*
<anghammer and <ucke 0'(((1 and Michalopoulos 0-5551.
(
accession itself will not affect the M=@ rates of trade partners of the acceding countries. 9owever*
the latter will be able to benefit from all commitments made by signatories of the WTO $greements in
future trade negotiations
'"
. :y staying outside the WTO* the countriesA trade partners would be in the
position to apply discriminatory tariffs against non+members. In addition* non+member countries
would have to negotiate border measures with their partners bilaterally or regionally and may be
e!posed to undue negotiating strength of their partners. The multilateral trading system is* therefore*
particularly important for small countries which have a limited power to e!ploit their 0small1 sie to
improve their terms of trade. Their impact on terms of trade maybe enhanced if terms of trade 0and*
therefore* world prices1 are negotiated on a multilateral level.
The second practical reason why countries may be interested in 7oining the WTO+ one that has
been already noted above in the theoretical conte!t 3 is the beneficial effect of the WTO on the
credibility of government policies. Governments often face a 2credibility gap2 in trying to convince
foreign and domestic investors and the rest of the business community about their commitments to
particular policies. :y framing the countriesA concessions into legal commitments* the WTO
Membership provides powerful guarantees of governmentsA policy directions. Inlike in the case of
unilateral policy reforms* policy reforms supported by multilateral commitments are more credible* in
particular because of the strategic interaction between the government and the private sector which
makes the agreement attractive. In this setting* governments use international trade agreements to
enhance the credibility of their policy choices with respect to the private sector. The 2credibility gap2
is particularly important and present in the case of many if not most transition countries due their
history of central planning and political instability.
The third reason is the beneficial effect of the Membership on domestic policies and
institutions involved in the conduct of international trade. $cceding countries are re4uired to put in
place a set of norms and institutions* which support the liberaliation of markets and increase
transparency and promote the rule of law* contract enforcement and the evolution of an independent
7udicial system. In principle* nothing would prevent governments from putting in place these norms
and regulations on a unilateral basis. The role of the WTO in this process is to facilitate the
introduction of effective reforms not only by reinforcing the credibility of the governmentAs trade
policies but also help introduce the policies that are based on best+practices and that must be
harmonied.
'"
In practice* countries have often benefited from reductions of M=@ rates even if they remained
outside the G$TTKWTO. In such situations the main benefit of 7oining the WTO would be the certainty and
predictability of such benefits* which are by no means guaranteed for outsiders. We are discussing this issue
further below.
'5
The fourth reason why the WTO is considered to play an important and positive role is its
contribution to the predictability, security and transparency of market access. =or e!ample* one of
the ma7or motivations for the /hinese government to accede to the WTO was the uncertainty to
/hinese businesses and the government arising from the temporary nature of tariff provisions applied
against /hinese e!ports in the Inited States. These provisions have been sub7ect to annual reviews by
the IS /ongress. /hinaAs accession to the WTO abolishes this practice* removes the uncertainty and
thus reduce transaction costs of doing business and reduce distortions pertaining into investment
decisions.. Moreover* e!ports from countries which are considered by their partners as non+market
economies are often a main target of anti+dumping measures. Many transition countries could fall into
the category of non+market economies. In addition* not only are these measures used fre4uently but
they are usually more restrictive when applied against non+market economies. In sum* the issues of
importance are the e!tension of permanent and unconditional M=@ status* and the termination of the
designation of transition countries as 2non+market economies2 by ma7or trading partners such as the
IS and the ,I.
The fifth reason is tied to the WTOAs dispute settlement mechanism. The possibility of
resolving disputes through the dispute settlement mechanism may appear* in particular to smaller and
2weaker countries2* as one of the most tangible benefits from WTO accession. There are very few
effective vehicles to resolve international trading disputes outside commercial arbitration* and those
that e!ist can pity small trading nations against big ones. The WTO dispute settlement mechanism
provides a uni4uely fair* accessible and effective opportunity to each WTO Member 3 irrespective of
its sie and level of income.
=inally* the si!th reason is the opportunity for acceding countries to shape the future rules and
disciplines of the WTO. $cceding countries will undoubtedly be interested in participating actively in
subse4uent multilateral trade negotiations since only through direct negotiations rather than through
an oversight from sidelines may they hope of protecting their interests. WTO membership offers them
the most direct access to the forum where multilateral trade rules and disciplines are negotiated.
III. THE WTO AND POLICY-MAKING IN SOVEREIGN STATES: STYLISTIC
EVIDENCE ROM TRANSITION COUNTRIES
$ccession to the WTO has an important impact on the acceding country. In the rest of this
paper* we shall consider how accession affects policy 3making and domestic institutions. $ccession
implies the adoption of WTO disciplines* and this poses a number of challenges for the country
''
concerned. =irst* accession will affect the access of foreigners into the countryAs domestic markets*
and it is likely to facilitate the countryAs access to foreign markets. The challenge for the acceding
country is to ensure that its industries 0i.e. firms producing tradeables1 are sufficiently competitive in
the face of foreign competition. Second* accession will impose not only certain disciplines and rules
but it will also re4uire the establishment of those institutions and policies that are critical for the
enforcement of these disciplines. One area of particular importance is 2governance of public and
private institutions which will be affected by the WTO accession. Third* accession will also affect
government budgets since border measures constitute an element of government policies towards
budgetary revenues. =ourth* accession will also lead to various ad7ustment costs* and these can be
divided into two groups + the government 0public1 financial costs of implementing the WTO
disciplines and private costs of market ad7ustments due to changes in relative prices. =inally*
accession will affect the conduct of macroeconomic policy. $ll these issues will now be discussed in
turn.
$. M$8;,T $//,SS> <IMIT$TIO@S O= WTO /OMMITM,@TS
$rguably the most important and* undoubtedly* most visible effect of the WTO on policy+
making concerns border measures affecting the flow of e!ports and imports. These measures are
typically 2visible2 because they affect market access of acceding countries for their e!ports and the
access of foreign firms to the markets of acceding countries. Thus* the first type of 4uestions that one
can ask about the influence of the WTO on policy+making is the following> 29ow does the WTO
affect the e!tent to which markets of acceding countries have to be openedM $re the acceding
countries AforcedA to take unreasonable commitmentsM2 The second type of 4uestions concerns trade
policies of other countries and their effect on market access of acceding countries. In particular* are
trade policies of incumbent WTO Members affected by the accession of new MembersM Is market
access of acceding countries improved by the accessionM $ll of these 4uestions are* of course*
important for acceding countries because they affect the e!posure of these countries to foreign
competition and the opening of markets for their e!ports.
$n answer to the first type of 4uestions can be provided with the help of data presented Table
'. The table shows for a selected number of countries their bound and applied tariff rates on imports
of manufactured and agricultural goods. The distinction between bound and applied tariffs is
important because it demonstrates the degree of acceding countriesA commitments agreed in the WTO
0bound rates1 as opposed to the rates actually applied in practice. :ound rate is the critical
commitment in the WTO. $ bound rate higher than applied rate implies that the country in 4uestion is
actually pursuing more liberal policies towards imports than it was willing to concede under the terms
'-
of accession. Sometimes* of course* countries may not bind their tariff rates in the WTO and agree
with Members on a certain level of tariff without binding. This* by definition* gives them a greater
fle!ibility to change tariffs.
What the data in our Table ' suggest is that acceding transition countries have not been
e!posed in the WTO to unreasonable pressures to open up their markets. Many acceding countries
have liberalied their trade regimes unilaterally and have been able to negotiate the terms of their
WTO accession within the scope of measures already taken. $s a result* their WTO commitments are
less 2liberal2 than the measures actually applied. $s can be seen from the table* all countries in our
sample actually applied lower tariffs than those bound in the WTO. The only e!ceptions were the
/ech 8epublic* 9ungary and 6oland which essentially bound the rates at their actual levels.
9owever* the actual levels were already relatively low* especially in the case of the /ech 8epublic*
and the bindings constituted* therefore* these countriesA main concessions on market access. These
findings apply both to industrial goods and agriculture. Moreover* some countries were 2allowed2 to
bind their industrial and agricultural tariffs at fairly high levels* as the figures for :ulgaria and
8omania indicate. Their bound rates are not only high in absolute terms or relative to other countries
but they are also high relative to the corresponding actual rates.
INSERT NEW TA!LE ": !#$n% an% A&&'(e% Tar()) (n Se'ec*e% Trans(*(#n C#$n*r(es
The reply to the second type of 4uestions 3 how incumbent countries respond to accession of
other transition countries 3 which was brought up in the beginning of this section is relatively simple
and straight+forward. $s we have noted above* accession to the WTO does not re4uire any change in
the e!isting policies of the incumbent WTO Members. The 2rule2 also applies to market access
conditions for all incumbents including* of course* transition countries. When countries negotiate their
WTO accession* incumbent Members make no new concessions on access to their markets. The only
changes in their policies may be their commitment to maintain the actual market access conditions on
a permanent and thus more predictable basis. 1ari passu, we have no evidence at present to suggest
that any of the incumbent transition countries would have changed their trade or any other policies as
a result of accession of another country.
9owever* an issue that needs to be stated at this point is that the commitments of incumbents
are not necessarily granted to the acceding countries automatically. $n e!ample of this problem is the
recent e!perience of some transition countries with the provisions of the &ackson+Janik amendment in
the IS /ongress. WTO membership should in principle automatically confer new Members
'#
permanent and unconditional M=@ status. In practice* however* this has not always been the case. The
M=@ treatment e!tended by the Inited States to the ;yrgy 8epublic was still contingent at the time
of writing this paper 0-55'1 on the latter countryAs adherence to the provisions of the &ackson+Janik
amendment to the '(H" Trade $ct regarding freedom of emigration. The IS invoked the non+
application clause of $rticle %III of the Marrakesh $greement before the accession of the ;yrgy
8epublic. Without it* the IS would be in violation of their WTO obligation towards the ;yrgy
8epublic because of the latterAs M=@ status being sub7ect to the &ackson+Janik amendment. The
authority for the permanent e!tension of M=@ status to the ;yrgy 8epublic has been enacted but not
yet implemented.
Some of the newly acceded countries graduated from the &ackson+Janik provisions before
their accession* while others had to wait some e!tra time after their accession. The permanent M=@
status was e!tended to the :altic states in @ovember '(('. :ulgaria graduated from &ackson+Janik in
October '((?* three months before its formal accession to the WTO. :ut permanent M=@ status was
e!tended to Mongolia only in &uly '(((* that is more than - years after the date of accession.
')

6erhaps even a better e!ample of the importance of political factors on 2market access2 of
acceding countries is related to the 4uestion of 2non+market status2. In some WTO Member countries*
anti+dumping and* in some cases* safeguards procedures applied to the so called 2non+market
economies2 differ from those applied to other countries* as we have noted above. Transition countries
acceding to the WTO may have e!pected that their accession to the WTO would automatically entail
their 2graduation2 from the status of non+market to market economy. 9owever* these e!pectations
turned out to be overly optimistic. In -555* the ;yrgy 8epublic and Mongolia were still on the
,uropean InionAs list of non+market economies.
'?

')
The political conditionality may have at least two important implications for acceding countries.
=irst* the absence of guarantees regarding the application of the M=@ treatment restricts the benefits of WTO
accession to new Members. This element of uncertainty undermines the stability of market access conditions
that is conferred by WTO Membership. Given the importance that new Members attribute to the stability and
improvement of market access conditions resulting from WTO Membership* the presence of political
conditionality reduces the benefits from WTO Membership. 6olitical liberaliation is often linked to the
liberaliation of economic policy which *in turn* is likely to lead to the adoption of measures making the
economy more competitive * open and less+inward looking. ,!amples of countries are numerous* including the
8ussian 26erestroika2* the Jiet @amese 2oi +oi* the /hinese economic reform* the /ech 23elvet 4evolution&,
and others.
'?
The 2non+market status2 has been a ma7or cause of trade frictions between many transitions countries
on the one hand and the Inited states and the ,uropean Inion on the other. It is true that the WTO $greements
do not formally re4uire candidates for accession to have a market economy* even tough the $greements may be
interpreted as implying the condition for firms to operate on strict commercial principles and with prices formed
in competitive markets in order to avoid implicit ta!ation and subsidies. Without full transparency in price
policy* the current rules and disciplines of the WTO would be virtually unusable. e facto* therefore* the
incumbents tend to impose the 2market status2 re4uirement on acceding countries. =or this reason alone*
transition countries have a powerful incentive to introduce such measures that would have them removed from
the list of 2non+market economies2. Some observers argue that the WTO Membership already implies
'"
:. GOJ,8@$@/, $@B /O88I6TIO@
:eyond its direct impact on efficiency through import liberaliation* the most immediate
effect of WTO Membership should be its indirect impact on efficiency through improved governance.
/orruption and lack of transparency have large costs for economic development. There is a strong
evidence* based on cross country comparisons* that higher levels of corruption are correlated with
slower growth and lower levels of per capita income.
'H
/orruption is very costly. It undermines well+
functioning markets in five ways> as a ta!* as a barrier to entry* it leads to a loss of government
revenue* it disrupts the operation of markets* and it subverts the legitimacy of the state and its ability
to provide institutions that support markets.
'.
Membership in the WTO should help reduce incentives for corruption by providing countries
with what are perhaps the most powerful institutional checks and balances in the international
economic sphere. $ccession imposes changes both in institutions and policies. $s discussed above*
accession to the WTO provides* once fully implemented* a set of norms which should contribute to
the opening of the economy* enhance the transparency of policies* and promote the rule of law and the
evolution of an independent 7udicial system. Theory and evidence suggest that openness reduces
corruption.
'(
:inding market+access commitments* increased transparency* and market+based
institutions should further reduce rent+seeking behaviour and corruption. The adherence to
internationally acceptable rules for international trade and =BI imposes stricter disciplines on
governments and indirectly on firms.
$n assessment of the impact of WTO accession on institutional 4uality in the acceding
countries is difficult and can only be estimated or inferred from business surveys. In addition* many
other factors affect the 4uality of governance. $ccession to the WTO is only one of many measures
with effect on institutional 4uality and* most likely* its effect is conditional upon other policies.
Moreover* the causality may go in both directionsN a high level of institutional 4uality will facilitate
the accession while the accession promotes good institutional 4uality. $lso* it is not* of course*
demonstration of policies that are fundamentally market 3 driven These observers have suggested that the 2non+
market status2 should be terminated upon the countriesA accession to the WTO. See* for e!ample* Michalopoulos
0-5551.
'H
See ;aufmann et al. 0'(((b1.
'.
:y way of an e!ample* :ulgaria e!perienced in the second half of the '((5s corruption and problems
with border controls. This created severe bottlenecks in international trade* with effects similar to those resulting
from protectionist policies. It became evident that a radical customs reform was re4uired in order to improve the
border controls. Measures to address corruption have been now incorporated in many pro7ects of the World
:ank. =or a more general discussion* see World :ank 0-55'1.
'(
See :onaglia et al. 0-55'1* :roadman and 8ecanatini 0-5551 and Treisman 0-5551.
')
possible to trace the precise time pattern of the effect of accession. It is 4uite likely* for e!ample* that
the institutional 4uality may be affected long before the actual accession in view of the preparations
that the country in 4uestion may want to undertake in the anticipation of the actual conditions re4uired
by the WTO Membership.
:earing these limitations in mind* it may be interesting to compare the 4uality of institutions
across countries and over time. :y comparing institutional 4uality indices across countries focusing on
the differences between WTO Members and non+members* we can make a simple test of the effects of
WTO Membership. The information is summaried in Table - reproduced from a recent IM= study
0IM= -5551. The table provides two indicators of institutional 4uality.
-5
The first indicator 3 a
2narrow composite inde!2 of institutional 4uality + is an aggregate of four component indicators>
government effectiveness* regulatory burden* rule of law* and graft. The second indicator 3 a 2broad
composite inde!2 of institutional 4uality + is an aggregate of the same four components plus an
indicator for the e!tent of democracy 02Joice and accountability21 and one for political instability and
violence. The indices* as well as the component indicators* range from 3-) 0the lowest1 to -) 0the
highest1.
-5
$ll component indicators have been developed by ;aufmann et al. 0'(((a and '(((b1. They are
based on #55 separate indicators from two types of sources> ratings produced by commercial risk rating agencies
and other organiations* reflecting e!pert opinionsN and surveys of firms and households* compiled by
international organiations and other institutions. The aggregates are simple averages.
'?
+INSERT TA!LE ,: In%(ces #) Ins*(*$*(#na' -$a'(*y. "//0-"//12
The most striking feature of the data in Table - is the relatively low value of the institutional
inde! for all transition countries across the board. /learly* countries in transition0/IT1 generally face a
ma7or challenge of increasing the 4uality of their governance. @evertheless* the table also suggests
fairly significant differences. <imiting ourselves to the /ITs which acceded to the WTO before -555
0under $rticle %II1* ,stonia* <atvia* and Mongolia have been assessed as countries with a relatively
high level of institutional 4uality. The 4uality of ,stoniaAs institutions* measured with the narrowly
defined inde!* ranks third among the countries on the track to the ,I accession and Mongolia has a
higher 4uality than all /IS countries. The ;yrgy 8epublicAs institutional 4uality is among the best
compared to other members of the /IS. :ulgaria is lagging behind the other countries on the path to
the ,I accession with a value of the inde! that is still above the value of the inde! for /IS countries.
Overall* the table provides some evidence that WTO membership goes hand in hand with higher
institutional 4uality. :ulgaria did not achieve the same level of institutional 4uality as the /ech and
Slovak 8epublics* 9ungary* 6oland or Slovenia* but these countries acceded to the WTO long before
:ulgaria.
$t a more detailed level* the table reveals the second most striking feature + all of the /ITs
which acceded the WTO before -555 e!cept ,stonia have corruption as the origin of the low values of
the composite indices of institutional 4uality. /orruption turned out to be the main problem in
:ulgaria* <atvia* Mongolia as well as in the ;yrgy 8epublic. In the ;yrgy 8epublic* however* the
inde! of regulatory burden is as low as the graft inde!. Since assessments of corruption used by
different agencies may be affected by the methodology we have compared two different
methodologies which are also reported in Table -. The ranking of countries using different
methodologies comes out remarkably similar.
-'
This fits into the broader picture that corruption is
generally the main problem of governance in all transition countries* and that the ranking of transition
countries is not likely to be sub7ect to large random errors.
The positive change emerging from the studies of corruption over time is that the level of
corruption may be changing* and that WTO Membership might also have played some role. Three of
the five /ITs that have acceded to the WTO between '(() and -555* saw their corruption indices
improve over time even though for two of these countries* the perceived level of corruption has
remained a matter of serious concern. $s can be seen from Table #* ,stonia with its very low tariffs
has an impressively low corruption inde!* and <atvia is not lagging far behind. Mongolia has achieved
-'
The results are reported in the actual table. They show that the Spearman 8ank /oefficient was 5..(.
'H
a lower level of graft than all /IS countries. The 2outliers2 are :ulgaria and the ;yrgy 8epublic. The
relatively high corruption level in :ulgaria may be due to the fact that trade liberaliation
accompanied a prolonged recession which led to a dramatic reduction in real incomes and hence
stronger incentives to enter informal and illegal activities.
+INSERT Ta3'e 4: In%(ces #) C#rr$&*(#n. "///2
The case of the ;yrgy 8epublic is interesting. $ccording to :roadman and 8ecanatini
0-5551* the implementation of clear and effective regulations and policies must be paired with
effective steps to reduce corruption. This conclusion is confirmed by various other studies. The
;yrgy 8epublic* for e!ample* is fairly open and its customs tariff is transparent. 9owever* the
implementation of the customs tariff has been slowed down by the lack of a functioning
administration. $s a result* a widespread corruption has developed among customs officials.
Supporting evidence is provided by measures of administrative corruption based on the '((( :usiness
,nvironment and ,nterprise 6erformance Survey 0:,,6S1 taken from 9ellman et al. 0-5551.
--
These
authors have unbundled the concept of corruption and distinguished between 2administrative
corruption2* 2state capture2 and 2influence2. $dministrative corruption is defined as the e!tent to
which firms make illicit and non+transparent private payments to public officials in order to alter the
prescribed implementation of administrative regulations placed by the state on the firmsA activities.
The figures in Table " below show that the level of administrative corruption in ;yrgystan is the
second highest in the sample of more than -- transition countries. It is much higher than the overall
unweighted average and significantly higher than the /IS average. In general* the message coming
from these business surveys is very clear and strong 3 trade liberaliation and WTO Membership are
not sufficient to eradicate corruption 3 an effective implementation of trade policy measures plays a
critical role.
+INSERT Ta3'e 5: Meas$res #) A%6(n(s*ra*(7e C#rr$&*(#n2
Good governance is also e!tremely important as an incentive to attract foreign investment.
This is especially critical for transition countries and for all other countries that are dependent on
foreign investment inflows. WTO membership is seen as an important element of policies aimed at
attracting foreign investors by committing Members to apply open* transparent* and stable policies
and regulations. $s already noted above* WTO accession is only one of many factors that may
--
The '((( :,,6S* conducted by the World :ank and ,:8B* was designed to assess the 4uality of
governance across -5 countries of /entral and ,astern ,urope and the =ormer Soviet Inion from a firm level
perspective.
'.
influence the level of =BI inflows. 9owever* there is now new evidence emerging from the literature
that transparency and good governance 3 supported by WTO Membership + can be instrumental in
attracting new foreign direct investment. ,vidence provided by the ,:8B and others shows that
progress in the transition process* which includes effective establishment of market+oriented policies
and institutions* together with effective implementation of privatiation* trade linkages* political
stability* perceived risk and the predominant type of investment play a key role.
-#
$ similar message is
obtained from a cursory e!amination of the shares of =BI in GB6 in '(() and '((( in transition
countries presented in Table ). The fast reformers + which are also the more open countries + have
been relatively more successful in attracting =BI than the slow reformers. $mong the :altic countries*
,stonia and <atvia have a higher share than <ithuania and when compared to the non+oil e!porting
countries in the region* inflows into the ;yrgy 8epublic are relatively important. The same
conclusion has been reached in more rigorous studies in which the effects of governance and
transparency on =BI inflows has been tested in a formal model. /ontrolling for other economic
factors* Brabek and 6ayne 0-55-1 find a significantly positive statistical relationship between
governance and =BI inflows.
+INSERT TA!LE 8: In9ar% DI S*#c:s (n Trans(*(#n C#$n*r(es. "//8-"///2
/. /ISTOMS 8,J,@I,S
WTO accession may affect customs revenues which is often of an important source of
government revenues in countries with relatively low levels of income per capita. This concern is
linked to the importance of tariffs as a source of government revenue in many developing countries.
:ut the effect of WTO accession may differ from country to country* and the final outcome is
indeterminate a priori. To the e!tent that accession leads to a reduction of tariffs rates in the acceding
countries* this will tend to reduce tariff revenues. $t the same time* however* WTO accession may
broaden the ta! base. $ccession will lead to the elimination of 4uotas* which are on the WTO list of
prohibited trade policy instruments. Ouotas are typically replaced by tariffs in the acceding countries*
and this switch should add to the governmentsA capacity to generate revenue. The WTO $greement on
/ustoms Jaluation should also broaden the ta! base and thus contribute positively to tariff revenue as
customs authorities are more effectively able to register import transactions and collect tariffs. <ast
but not least* lower tariffs will stimulate in the long run economic activity* and thus the volume of
imports. This will have a positive impact on tariff revenue as well as on the base of other ta!es.
-#
The factor 2governance including corruption2 is only one of the variables affecting the =BI and it is
included in the ,:8B analyses under the term 2progress in transition2. See <ankes and Jenables 0'((?1 9olland
and 6ain 0'((.1* and 8esmini 0-5551.
'(
$uthorities in many transition countries have also been arguing that WTO accession may be
detrimental to their ability to mobilie resources since tariff reductions will result in a severe drop in
tariff revenue. :efore considering the evidence* it may be useful to make two general comments about
the impact of WTO membership on government revenues. The impact of the WTO is likely to be
greatly e!aggerated for at least two reasons. =irst* the argument about the adverse impact on
government revenues assumes that tariff revenue represents an important source of government
revenue. 9owever* most transition countries have acceded the WTO with tariff structures inherited
from central planning and these tariffs were relatively low
-"
. Second* several transition countries have
pursued unilateral trade liberaliation with most of their market opening taking place before their
accession to the WTO 0e.g. ,stonia1. Moreover* transition countries have tended to bind their tariffs
on industrial products at a relatively low level
-)
. =or all these reasons* there was a relatively less
pressure from WTO Members for additional tariff reductions.
,mpirical evidence on the evolution of collected tariff rates in transition countries is brought
together in Table ?. /ollected tariff rates are calculated as the share of tariff revenue in the respective
countryAs imports. =igures show that only in a limited number of countries collected rates were
relatively high in the first half of the nineties 0e.g. 9ungary* 6oland* Slovenia* Macedonia* /roatia and
8ussia1. Over time* the number of transition countries in which tariff revenue is an important source
of government budgets has considerably dropped. In 9ungary* 6oland and Slovenia* collected rates
fell steadily and dramatically during the nineties. In Macedonia* /roatia and 8ussia* the trend is less
clear as the most recent figures show a rebound. :y the end of the decade* however* only the South+
,astern ,uropean countries* together with 8omania* $erbai7an and 8ussia still collected custom
revenues at the rates above ) percent of imports. @evertheless* even in these countries the tariff
revenue shares are roughly at the level of non+O,/B countries.
-?
The data thus confirm that the
incidence of tariff protection has in general declined in transition countries during the nineties but they
also confirm that tariffs do not generally play a ma7or role in transition countries.
INSERT TA!LE ;: Tar()) Re7en$es (n Trans(*(#n C#$n*r(es. "//"-//
This raises the 4uestion of how much of the decline was brought about by the accession to the
WTOM The answer must be 3 very little* if at all. In 9ungary* 6oland and Slovenia* the three countries
which e!perienced the largest reduction of their collected rate* the changes in tariff revenue have
-"
The reason for the low tariff was their purely administrative character since trade flows were decided
by fiats. The e!ample with relatively low tariff include the /ech 8epublic* Slovakia and to a lesser e!tent also
9ungary and 6oland. =or more details* see Brabek and Smith 0'(()1.
-)
=or more details* see* for e!ample* Brabek and <aird 0'((.1 and ;ierkowski 0 0-5551.
-?
/ompare* for e!ample* with ,brill* et al.0-55'1.
-5
primarily reflected autonomous measures and the effects of the ,urope $greements. The latter have
tied the trade relations of the /entral and ,ast ,uropean countries closely with the ,uropean Inion.
The $greements have established* inter alia* free trade areas with tariffs eliminated over a period of
'5 years. The case of :ulgaria* which acceded the WTO in '((?* is similar. In :ulgaria* the collected
rate fell from its peak at H.? per cent in '((" to -.. percent of total imports in '(((. This reduction is
less significant than the reductions in 9ungary* 6oland* or Slovenia where the rates peaked at
respectively '#* ') and '' percent before falling to levels around -+# percent* but it reflects the same
influences. In the :altic countries* the peak was around three percent which does not leave much room
for WTO+induced reductions. @o clear downward trend can be observed in the South+,astern
,uropean countries up to '((( but /roatia only acceded by the end of the year -555. The evolution in
the /IS countries is not homogeneous either but* e!cept in one or two cases* the collected rate has
remained low during the nineties. The only country which e!perienced a significant reduction of its
collected rate + from H.' in '((- to 5." percent in '((. 3 and which might be related to its accession
to the WTO is Mongolia. 9owever* given that MongoliaAs average bound tariff on industrial products
is '. percent and that its average bound tariff on agricultural products is even above '( percent* the
drop in the collected rate is most likely not the conse4uence of the WTO bindings. @ote that in
Georgia* the collected rate dropped from " to - between '((. and '(((. Given that Georgia acceded
in -555* it is clearly too early to assess the effect of WTO accession but* as with Mongolia* the role of
WTO accession can only be limited as the bound rates on industrial products and agriculture were
respectively reduced to ? and '- percent.
While the specific reasons for the drop in the collected tariff rate should be investigated and
solutions found* we shall confine ourselves to identifying the countries in which a reduction in the
collected tariff revenue could potentially rose a serious budgetary problem. $s Table ? shows* in
some transition countries the share of international trade ta!es in total government revenue was not
negligible* even if it remained significantly lower than* for e!ample* in $frican countries where it
reaches #5 percent on average. Mongolia is the country for which the fiscal revenue problem
associated with a fall in tariff revenue may be most serious. The figures in Table H confirm that in
Mongolia international trade ta!es e!pressed as a share of total revenue dropped from a relatively high
level + more than ''." percent + in '((? to a relatively low level + less than one percent + in '((..
Similarly* in Georgia where tariffs accounted for about '- percent of government revenue in '((H and
'((.. :ased on the information at hand* only two other acceding transition countries had a high share
of international trade ta!es in total government revenue for e!tended periods of time during the
nineties> $erbai7an* and $lbania. In those two countries the fiscal aspect of liberaliation may also be
important.
-'
INSERT TA!LE 0: S<are #) In*erna*(#na' Tra%e Ta=es (n T#*a' G#7ern6en* Re7en$es
$mong the main causes of the decline in collected rates in Mongolia as well as in the other
countries are poor customs administration and smuggling. $ccording to press reports* for e!ample*
the effectiveness of the border control agencies in :ulgaria was well below par especially during the
mid+'((5As. /ustoms revenue collection fell short of targets* and smuggling became widespread. The
government authorities were painfully aware of the revenue losses resulting from the poor functioning
of its customs administration and invited* therefore* the ,I to help :ulgaria improve its customs* as
part of its pre+accession assistance. :ulgaria is also currently pursuing a budgetary reform with the
creation of a Inified 8evenue $gency which will consolidate the collection of ta!es and social
contributions under a single agency. In Georgia the government has been recently collecting 2perhaps
-5 per cent* may be even less than -5 per cent of the applicable customs duties* e!cise ta!es and
J$T.2
-H
The same observer noted that 2PIQ will be surprised if there is any single customs officer on
the line who understands* let alone applies the 0WTO1 customs valuation regulations.2
-.
The
implementation of the WTOAs /ustoms Jaluation $greement may contribute to increased
transparency and stability in customs collection.
Two conclusions stand out. =irst* in most transition countries* tariffs never contributed
significantly to government revenue during the last decade. Tariff reductions should* therefore* not
cause ma7or budgetary problems. This is not to say that transition countries may not face budgetary
constraints but the origin of these problems will most likely not be trade liberaliation. Second* the fall
in tariff revenue e!pressed as a share of imports observed in transition countries who 7oined the WTO
may not be entirely attributable to the lowering of tariff rates following the accession. The tariff
reductions are likely to be the conse4uence of the signing the ,urope and similar type of agreements
by the /entral and ,ast ,uropeans with the ,uropean Inion which has led to the creation of free trade
areas. In some cases* it may also be the conse4uence of weak customs administrations* a problem
which governments will be well advised to address. $n effective implementation of the customs
valuation agreement should help countries improve tariff collection and customs administration.
B. IM6<,M,@T$TIO@ /OSTS $@B :IBG,T$8G 6O<I/I,S.
The WTO accession poses another ma7or challenge for acceding countries 3 they will
typically have to carry out fairly significant changes in their policies and institutions to ensure full
-H
Ouoted from $llen Shinn* ,!ecutive Birector of I8IS /aucasus /entreN 8eport on seminar on
GeorgiaAs and ;yrgystanAs $ccession to the WTO* -- March -555* Tbilisi* funded under T$/IS.
-.
)bid. pp.-.+(.
--
compatibility of domestic legislation with that of the WTO and the e!istence of all institutions
re4uired for the implementation of the countriesA WTO commitments. This raises serious 4uestions for
governments of acceding countries. What are the implementation costs resulting from the accessionsM
While recogniing that the costs may differ among countries* can we identify the main elements of
these costsM 9ow high are these costsM /an they be fully and easily absorbed by the acceding
countryM If the implementation costs are high* should the country pursue its accession ob7ective by
taking all or* at least the bulk of the measures before the negotiations or can the measures be
introduced during the time of negotiationsM Would it be better for the country concerned to plan its
accession in such a way that the ad7ustment costs are minimiedM These are important 4uestions for
policy makers and negotiators. We shall not attempt to answer all of these 4uestions which would be
beyond the scope of this paper. 9owever* we shall address the first two issues + the main elements of
implementation costs and the orders of magnitude of these costs.
Implementation costs are a part of ad7ustment costs of WTO accession which* in turn* can be
divided into two broad categories + public and private costs. The former* in turn* typically includes
different types of costs resulting from the implementation of the WTO $greements* noted above. The
first important group includes costs that arise out of the harmoni5ation of the country's policy
instruments with those of the WTO. =or e!ample* under the G$TT and the WTO $rticle %I* 4uotas
must be replaced by tariff as the sole instrument of trade protection. The economic rationale for this
rule is to replace administrative instruments of protection by price+based policy tools. This is a
particularly important policy change for transition countries which had traditionally relied on e!plicit
and implicit 4uotas representing the governmentsA planning instruments. Thus* replacing the forbidden
policy instruments and moving from administrative to market+based instruments will be a radical step.
These switches of policy regimes can be complicated* disruptive as well as costly as it is documented
on the e!ample of Mongolia and its cashmere industry 0:o! '1. The changes must obviously be
handled carefully and only after thorough preparations.
The second important group of ad7ustment of costs includes the costs of institutional changes.
The implementation of the WTO agreements is not a simple matter of adopting new laws. =or
developing and transition countries* it typically involves the setting up of new administrative
capacities and substantial changes in technologies and new investment. =or e!ample* the $greement
on Sanitary and 6hytosanitary Measures* and on Technical :arriers to Trade re4uire the e!istence of
specific testing e4uipment* legal provisions for S6S and T:T norms* sufficient number of staff with
ade4uate and appropriate skills and so on. The implementation of $rticle JII of G$TT re4uires the
establishment of administrative capacity* the training of customs officers* the learning of commercial
practices* the development of risk analysis and audit systems. The implementation of the T8I6s
-#
$greement is e4ually investment+intensive and it also re4uires drafting new legislations* augmenting
the administration to review applications* build+up of computeried information systems* e!tensive
training* the setting up of enforcement agencies* etc.
These costs may be 4uite high. In their study of the World :ank and I@/T$B pro7ects in
support of the implementation of technical* sanitary* and phytosanitary standards and of the
intellectual property law* =inger and Schuller 0'((.1 concluded> 2)mplementing (such! reforms are
investment decisions in that implementation will require purchase of equipment, training of people,
establishment of systems of chec%s and balances, etc. This will cost money, and the amounts of money
are substantial. Those figures (of pro$ect costs! for $ust three of the si# 6ruguay 4ound 'greements
that involve restructuring of domestic regulations, come to 78-9 million. One hundred thirty million
dollars is more than the annual development budget for seven of the twelve least developed countries
for which we could find a figure for that part of the budget.&
:0

-(
See =inger and Schuler 0'((.1* abstract and p. -).
-"
!O> " - M#n?#'(a@s &#'(cy (n *<e cas<6ere sec*#r
Since the early '((5s* MongoliaAs cashmere sector has been going through important turbulences. World supply
of cashmere has increased considerably through the '((5s. Mongolia* whose share of the world market is
appro!imately one third* has contributed significantly to this increase. The breakup of the Soviet+era system left
herders free to e!pand the sie of their herds. The sie of the flock has increased from ) million heads in '(.(
to more than '' million in '((.. $t the same time* demand for raw cashmere has fallen partly as a result of
recession in &apan. The resulting fall in price has been partly offset by sustained purchases of raw cashmere by
the government of /hina* the worldAs largest producer and e!porter.
The Mongolian government has been trying to promote a domestic processing industry. Buring the last decade*
MongoliaAs processing capacities have increased significantly* from a handful of processing firms to nearly #5.
9owever* because /hinese processors pay higher prices and* unlike domestic buyers* most often pay in hard
cash* herders have increasingly been e!porting their raw cashmere to /hina. Of MongoliaAs total yield of -AH55
tons of cashmere in '((.* it is estimated that more than one third went to /hina. In order to help domestic
processors faced with a shortage of raw cashmere* in '((" the government of Mongolia introduced a ban on
e!ports of raw cashmere which has been in place until '((?.
In October '((?* as part of a series of reforms re4uested by WTO Members as conditions for MongoliaAs
accession* the government substituted the ban with an e!port duty at the rate of not more than #5 per cent ad
valorem to be phased out and eliminated within '5 years of the date of MongoliaAs accession to the WTO.
G$TT $rticle %I severely restricts the use of e!port 4uotas* while e!port ta!es are allowed. It is estimated that
of some 'A555 tons that were e!ported to /hina* all but '? tons were smuggled across the border* escaping ta!es.
The processing industry* which according to specialists is not competitive* complains about the high prices and
the shortage of raw cashmere. The herders* whose income had declined by )5 percent as a result of the ban*
continue to be heavily penalied by the e!port ta! and seek the higher prices paid by /hinese processors.
The e!port ta! did not achieve its ob7ective mainly because of implementation problems. :ut even if it indeed
restricted e!ports* it would still have involved a dead+weight loss and large transfers from the herders to the
processors* without helping the herders. @either the ban nor the e!port ta! were the panacea to the industryAs
problems. The way out of the present crisis re4uires a thorough analysis of the industryAs problems at each
stage. One of such studies revealed* for e!ample* that the main reason for the processorsA low competitiveness
compared to that of their /hinese competitors is their difficulty to access credits.
The e!perience of transition countries has been similar 3 the costs of implementing the
institutional reforms appear also 4uite high. This is documented in Table . which provides details on
costs of the World :ank pro7ects related to the implementation of three agreements 3 on customs
valuation* T:T and S6S.
#5
,ven though the costs can be* and in practice they indeed are spread over
several years* they still force governments to make difficult choices. Moreover* since these pro7ects
are not automatically self+financing 0like* say* borrowings against the future stream of income in an
industrial pro7ect1 and they are funded by a foreign currency debt instrument 0e.g. I:8B loan1* they
increase e!ternal indebtedness of what may already be vulnerable economies.
#'
=ull costs of the legal
#5
=or more details see 4eport on ,); Wor%shop on WTO 'ccession* Moscow* May 'H+'.* -555 under
the T$/IS programme. See also discussion in Section II.) below.
#'
=or more details see the World :ank web+site.
-)
and institutional harmoniation with WTO standards and re4uirements are much higher.
#-
We shall
return to these 4uestions further below.
INSERT Ta3'e 1: C#s*s #) W#r'% !an: Pr#Aec*s Re'a*e% *# *<e I6&'e6en*a*(#n #) T<ree WTO
A?ree6en*s
The e!perience of transition economies in the area of T8IMs is also interesting. Only
8omania has notified its use of trade+related investment measures and has re4uested a delay in the
implementation of its T8IMs commitments. In order to provide some empirical evidence with regard
to T8I6s* we have reviewed all reports concerning transition countries prepared by the WTO under
the T68M provisions and the degree of success in implementing the T8I6s $greement. The results
are summaried in :o! -. $s can be seen from the case studies under review* compliance with the
T8I6s $greement has also run into implementation problems in the transition countries. =urthermore*
according to the International Intellectual 6roperty $lliance* a private sector coalition formed to
represent the IS copyright based industries* there is a lack of effective intellectual property rights
enforcement in :ulgaria* ,stonia and <atvia.
##
$nti+piracy resources are thin and 7udicial enforcement
is almost non+e!istent. ,stonia* for instance* is alleged to have an ineffective copyright enforcement
on almost all levels> criminal* civil* administrative and border operations. ,nforcement is also
hampered because the appropriate officials do not know the proper procedures to take on piracy cases.
!#= , I6&'e6en*a*(#n #) TRIPs A?ree6en* (n Se'ec*e% Trans(*(#n C#$n*r(es
9ungary
Signatory to most multilateral agreements protecting intellectual property
6atent and trademark laws have been harmonied with ,I legislation
9ungaryAs legislation is now more stringent than the minimum standard laid down by the T8I6s $greement
$ substantial unofficial economy persists* making the sale of pirated and counterfeit goods a continuing
0though declining1 problem.
6oland
Signatory to most international agreements protecting intellectual property and member of WI6O
9owever* serious effort re4uired to improve protection of intellectual property to match the ,I* especially
in the sphere of enforcement.
Jery high piracy rates and a history of la! enforcement led the International Intellectual 6roperty $lliance
in -555 to recommend that 6oland be placed on the 2priority #5' watch list2 by the IST8.
8omania
Signatory in recent years to a large number of multilateral conventions on the protection of I68s.
Insufficient enforcement at the border remains an outstanding gap in the protection of copyright.
;ources< WTO T68M 8eports for 9ungary '((.* 6oland -555 and 8omania '(((.
#-
$lthough not e!actly comparable* the costs associated with accession of transition countries to the
,uropean Inion provide some indications of the sie of problem. The /ech authorities estimate that adoption
of the ,I environmental legislation alone will cost the government #)5 billion ;/* or about ISR '5 billion.
##
II6$ -55' Special #5' 8eport on ,stonia* II6$ -55' Special #5' 8eport on <atvia and II6$ '(((
Special #5' 8eport on :ulgaria.
-?
The implementation of S6S and T:T $greements has run into similar problems* and their
origins were typically the same + budgetary constraints. =or e!ample* a study of implementation of
the WTO measures in :ulgaria related to the implementation of the S6S and T:T measures concluded
that the main implementation problems lie in the poor financial situation of these countries and in the
small scale of production. The study distinguished between two types of regulations> those which
re4uire substantial changes in the production process and those that do not. The authors conclude that
the main problem with the implementation of those agreements which do not re4uire any changes is
the shortage of financial resources. The problem with the implementation of the second group of
measures is that they re4uire ma7or changes in fi!ed assets and technologies* and thus 3 once again +
heavy investment.
#"
8egulations of the second type are mainly related to the <aw on $nimal :reeding
and regulations issued under the relevant law.
In sum* the budgetary implications of the WTO $greements cannot be underestimated. The
financial burden may vary from country to country but the full implementation costs of accession are
never negligible. 9owever* the 4uestion still has to be asked how these costs compare with benefits
which WTO accession is likely to generate for acceding and incumbent countries* an issue to which
we shall return in the ne!t section when we discuss another element of ad7ustment costs 3 those
related to changes in relative prices.
,. $B&ISTM,@T /OSTS $@B 6O<I/G 8,S6O@S,
The second* and arguably the most controversial cost of accession are ad7ustment costs
resulting from changes in relative prices and competitive conditions following the accession to the
WTO. <iberaliation of the countryAs trade regime will change the domestic relative prices of goods
and services* which* in turn* will lead to increased competitive pressures on industries that had been
until now protected by tariffs 0or 4uotas1. This* in turn* will create incentives for resources 3 capital
and labour 3 to move into sectors which are more profitable and efficient. This process of resource re+
allocation is not without costs as labour is retrenched and must move and be re+trained 0or the
opportunity costs of unemployed labour must be imputed into the calculations of ad7ustment costs1.
/apital is more mobile than labour but investors will also compute their ad7ustment costs and take into
account* inter alia* the sunk costs of capital.
These ad7ustment costs are principally private costs but they are also likely to have profound
implications for economic policy. It would be very rare indeed that the private costs of ad7ustment
would be fully financed by private individuals or firms. More common is for governments to share in
#"
See Ivanova and Georgieva 0-5551.
-H
financing the costs in order to facilitate the ad7ustments. The relevant measures include* for e!ample*
measures towards labour retraining* unemployment support* etc.* all of which force governments to
organie their business differently than before.
The e!perience of transition economies is again illustrative of these ad7ustment problems. The
price liberaliation in the early '((5s led to dramatic changes in relative prices due to deep+rooted
price distortions e!isting under central planning. 6rivatiation of state assets was typically constrained
by severe li4uidity shortages. This together with the lack of managerial skills* 4uestionable banking
practices* corruption* poor financial supervision* under+capitaliation of banks and bank balance
sheets containing a high share of non+performing assets together with other market distortions
produced economic results that at best can be 7udged as highly disruptive. The level of output
dropped precipitously and well below the pre+'((5 level and remained in many transition countries
below that level a decade later. Inemployment reached levels unprecedented in these countries* and
all of these countries struggled with dangerous bouts of inflation. It is* therefore* not surprising that
many of these countries perceive the market disruptions as the ma7or impediment to trade
liberaliation 0See :o! #1. Given the depth of recession* the sie of unutilised resources and the
collapse of all traditional foreign trade links* economic theory offers no solution as to the optimal
conduct of trade policy under these circumstances.
!O> 4 B Mar:e* D(sr$&*(#ns (n M#'%#7a
2The government of Moldova has been deeply concerned about the future of its agricultural sector. The
agricultural sector has been going through a radical restructuring process. The former collective agricultural
enterprises are being transformed into thousands of small private farms with sie ranging from between ' to #
hectares. The operation of these farms are far from optimal* with 2new2 farmers lacking a proper understanding
of the basic concepts such as enterprise management* efficiency* price policy* product policy* development and
new e4uipment implementation* competition* etc.
The restructuring process of the agricultural sector is being accompanied by a drastic fall in output. Overall
agricultural output dropped to #.5' billion lei in '(((* which is )).)S less than in '((#. Bue to the loss of
subsidies by the former collective agricultural enterprises and the lack of resources of the newly privatised
farmers less land is cultivated. The lack of inputs and of investment funds has also forced farmers to switch
from high+value to low+value crops* even though in normal market conditions high value crops would be more
competitive. The result has been a dramatic and unacceptable fall in rural income.2
;ource> Statement of Moldovan representative to T$/IS+sponsored conference on the WTO accession*
Moscow -555.
The response of governments to changes in domestic market conditions critically depend on
the impact of these changes on production* employment* price level and welfare. While in the long+
run the scope for positive gains from trade is well understood* countries may face ad7ustment costs in
-.
the short+run. We have not been able to collect full information on policy responses of governments
in transition countries following or 7ust preceding their WTO accession which would be beyond the
scope of this paper.
#)
It is clear* however* that the responses will vary. 9ow governments respond in
such situations will be determined by a variety of factors such as the depth of disruptions* availability
of resources* legal provisions for government interventions 0e.g. to provide assistance to ailing
industries1* etc.
$ complicating factor for the assessment of government responses is the negative perception
of some governments and observers about the value of WTO $greements. The $greements have been
sub7ect to two kinds of criticism. The first criticism concerns the effects of welfare and the distribution
of benefits from the T8I6s and T8IMs among countries. The argument is that these agreements
primarily serve the interests of developed countries and do not bring the corresponding benefits for
developing and transition countries. On T8I6s* for e!ample* 6anagarya 0'(((1 constructed a
theoretical case to suggest that the $greement is a welfare reducing instrument for developing
countries as well as for the world as a whole.
#?
Similarly* two World :ank economists =inger and
Schuler 0'((.1 argued that 3 in establishing the content of the obligations imposed by the WTO
agreements on intellectual property rights 0and customs valuation and S6S1 3 the developed countries
have essentially imposed their standards. In their view* the T8I6 agreement does not for this reason
alone protect indigenous technology nor does it encourage innovation.
#H
The criticism of the T8IMs $greement is based on the perception that trade+related
investment measures are useful as the second+best policy instrument to stem restrictive business
practices of multinational enterprises or to offset distortions due to tariffs. The view is re7ected by the
critics of T8IMs who argue that these measures introduce new distortions which tend to increase the
countriesA import costs* worsen their balance+of+payments positions* fail to generate e!port earnings
and to transfer modern technology to developing countries. In their view* the specific measures T la
T8IMs that target any of the above distortions will be welfare reducing for the country imposing
T8IMs. In brief* the critics dismiss T8IMs both on theoretical grounds + pointing to the inefficiencies
of these instruments 3 and on empirical grounds demonstrating their general failure in countries in
which were used.
#.
#)
,conomic liberaliation has posed a variety of serious allocative problems in transition countries in
the wake and following their accession to WTO. =or a fuller and more detailed discussion* see Gang 0'(((1.
#?
=or a more comprehensive discussion of the issues see Maskus 0'((.1.
#H
See* for e!ample* =inger and Schuler 0'((.1* p.-#. The criticism of T8I6s is* however* much wider
and it includes such issues as e4uitable sharing of benefits arising from the utilisation of genetic resources*
transfer of technology* conservation and sustainable use of biological diversity.
#.
The popularity of T8IMs has been 4uite widely shared among politicians of developing countries
even though they no longer attract much interest among economists. The literature on T8IMs and related
instruments is vast* and the debate was mainly conducted during the '(H5s and '(.5s in the conte!t of the
related sub7ect 3 infant industry protection. See* for e!ample* 8odrik 0'(.H1. The literature is briefly reviewed
-(
These views sharply contrast with the general assessments of gains to countries from their
accession to the WTO. =or e!ample* in a recent econometric study based on a nine commodity by
twelve regions version of the GT$6 model* Gang 0'(((1 estimated the welfare effects of the WTO
accession by /hina* Taiwan and the countries of the former Soviet Inion both on the acceding
countries themselves as well as on different regions of the world. 9e found that the accession is likely
to bring substantial welfare benefits for the acceding countries and other $sian countries. Welfare
gains are found to be much more dubious for other regions and critically depend on the level of
agricultural subsidies in the O,/B countries. 9owever* if all dynamic factors of globaliation were to
be included in the analysis* which could not be captured by the model itself* the overall welfare gains
become even more widespread and evident.
#(
In summary* WTO accession can lead to significant budgetary and other ad7ustment costs.
,ven though benefits of accession most likely far outweigh the costs in the long+run* the short+run
costs are likely to be high enough to put governments in sensitive situations in which they will be
e!pected to respond in order to ease the burden of implementation of WTO $greements and the costs
of ad7ustment.
=. IM6$/T O@ 8,GIO@$< $88$@G,M,@TS
$ccession to the WTO may sometimes complicate the relations of countries with some of
their e!isting trading partners. 6roblems have indeed arisen as a result of conflicts between obligations
imposed by regional agreements on the one hand and the WTO on the other. 8egional trade
arrangements may in turn complicate the countryAs negotiations for accession to the WTO which
specifies in $rticle %%IJ of G$TT the precise conditions under which preferential trade
arrangements are acceptable in the WTO.
Several e!amples of conflicts between the regional and multilateral integration processes
involving transition countries have been documented. $s noted above* regional integration pro7ects
may affect the countryAs negotiated terms of accession. The prospect of 7oining the ,I* for instance*
provides a strong incentive for a WTO acceding country to adopt a trade policy regime that is less
open than that of the ,I. The more open a countryAs trade policy and WTO commitments compared to
in :ora et al.0-5551. ,!amples of more recent economic papers are Morrisey and 8ai 0'(()1 and by
:alasubramanyan 0'(('1 both of which take a strong pro+T8IMs position.
#(
The author recognied that his model e!cluded* for e!ample* a treatment of better access to market
for services* the effects of increased transparency* better protection of intellectual property rights* etc. See Gang
0'(((1* p )-?. 9is findings are broadly consistent with those of other researchers whose work is reviewed in his
paper.
#5
that of the ,I* the higher the compensation that the country concerned will have to pay to third
countries upon the countryAs accession* and the higher the welfare cost of the adoption of the common
e!ternal tariff to the new ,I Member.
"5
This is presumably one of the main reasons why ,stonia set
its applied tariffs at ero but its bound rates are higher because of its prospective accession to the
,I.
"'
Ipon its accession to the ,I* ,stonia will thus have to replace its current free trade regime by
the ,IAs common foreign trade policy. This will lead to an increase in tariffs and thus to a welfare
loss. ,stonians e!pect* however* that these trade diversion costs will be limited because a large share
of ,stoniaAs trade is already with the ,I. Moreover* the level of ,I protection on raw materials* the
main import from non+,I members* is relatively low. ,stonia will have to implement the ,IAs
contingent protection measures including its anti+dumping rules but these are WTO consistent.
$nother e!ample of the conflicts between regional and multilateral commitments is 9ungaryAs
resignation from the /airns group of agricultural e!porters. One of the main reasons for this decision
was the fear that the membership in the group may be incompatible with ,I membership.
$nother observation is that regional or bilateral liberaliation may not necessarily spill+over to
arrangements with non+preferential trading partners. The signing of ,urope $greements and similar
bilateral agreements with other ,ast ,uropean countries led to liberaliation of trade and investment
between parties without simultaneous alignment of M=@ rates of the /entral and ,ast ,uropean
countries. This observation has been made by ;aminski 0'(((1 concerning four other /entral
,uropean countries. 9e notes that while in view of the countriesA interest to accede to the ,I the best
tariff policy action would have been an alignment of M=@ applied duties on industrial products with
the ,I post+I8 rates* not a single country has chosen to follow this path at the time. Similarly* the
:altic countries have also chosen to wait. <atvia* for e!ample* has made no attempt to 2converge2 to
the ,I trade regime in advance of accession despite the fact that <atvia is openly committed to the
full adoption of ,I trade policy following its accession to the ,I.
"-
It should be pointed out* however*
that all of these transition countries will have to align their M=@ rates to the ,I as the condition of
the accession. The case of ,stonia is not representative in the sense that ,stonia pursued a more liberal
trade policy than the ,IAs.
The case of the ;yrgy 8epublic illustrates how multilateral commitments can create tensions
with trading partners* in particular if they are not WTO Members. Most ;yrgy trading partners are
still not members of the WTO. This significantly limits the immediate benefits from accession. On the
other hand* its own WTO Membership allows ;yrgystan to participate in the Working 6arties for the
"5
In its accession negotiations* /roatia faced conflicting demands from the ,I and from other WTO
Members on liberaliation of audiovisual services. This was also the case of <atvia* <ithuania* ,stonia* Moldova
and :ulgaria.
"'
6ur7u 0-5551* p..
"-
See Muravskaya et al. 0-5551.
#'
accessions of its trading partners. ;yrgystanAs WTO commitments were also affected by its regional
integration pro7ects. The ;yrgy 8epublic had introduced a flat '5 percent tariff on all products before
its accession to the WTO but tariffs were not bound at this level possibly because of the customs
union agreement signed with :elarus* ;aakstan* and 8ussia in '((?. =ollowing the ;yrgy accession
to the WTO* 8ussia and ;aakstan have complained that the ;yrgy 8epublicAs WTO commitments
violated its commitments to its customs union partners + despite the fact that* for the time being* a free
trade arrangement rather than a customs union seems to be in place + and would cause a trade
deflection* given the weak customs controls between ;aakstan and the ;yrgy 8epublic. Thus* in
'((. and '(((* first ;aakhstan and then Ibekistan imposed significant impediments to ;yrgy
e!ports* including very high tariffs* 4uotas and other trade restrictions. In brief* the WTO disciplines
do not shield the WTO Members from trade+restrictive measures if they are taken by non+members.
It must be emphasied that regional integration among transition countries does not
necessarily conflict with the multilateral trading system. Jarious studies presented at the recent
O,/BAs roundtable on 2Ten years of trade liberaliation in transition economies2 provide interesting
illustrations of the complementarity of the regional and multilateral trade liberaliation approaches.
On the one hand* countries on the accession track to the ,I often see the WTO accession as a useful
preparation. 6ur7u 0-5551* for instance* suggests that maybe the most important benefit of the WTO
accession for ,stonia was the need to respond to the wide range of 4uestions that were raised in the
WTO negotiations and that prepared the government and the private sector for the negotiations with
the ,uropean Inion. Buring the negotiations* ,stonia was able to address many issues that are likely
to arise in the negotiations with the ,I. On the other hand* the harmoniation of rules and policies
with the ,I is helping the ,I+candidate countries to more effectively implement their WTO
commitments. =or e!ample* Tsvetkovska 0-5551 believes that :ulgariaAs implementation of the WTO
disciplines is facilitated by the fact that the economy has to harmonie its national legislation with that
of the ,I. $long the same line* Muravskaya et al. 0-5551 point out that the negotiations of the :altic
=ree Trade $greement and of the ,urope $greement have provided an opportunity to ac4uire
e!perience and e!pertise in international trade policy+making.
G. :$<$@/,+O=+6$GM,@TS M$@$G,M,@T
In Section B above* we have already discussed the effect of WTO Membership on countriesA
internal policies* policy instruments and institutions. $mong these effects* perhaps the least familiar
but e4ually important is the effect of the WTO disciplines on macroeconomic policy in the presence of
balance+of+payments dise4uilibrium. To repeat* this issue is perhaps the most understated in the whole
debate about the WTO and its impact on the Member countries. The reason for this understatement is
#-
partly historical given the perception of the G$TT and the WTO as an e!clusive domain of trade
policy. 9owever* as we shall argue below* trade policy is intermittently tied with domestic
macroeconomic and structural policies.
The importance of the broader linkages of trade policy stem from the economic relationship
between the current account in balance+of+payments and domestic aggregate variables for savings and
investment. This relationship* which is known under the heading of 2fundamental identity2* links
domestic investment e!penditures 0relative to savings 1 to net imports 0or net e!ports1. $n e!cess of
domestic spending over national savings can only happen if the e!cess is 2funded2 through imports
and vice versa. $n e!cess of national savings over domestic investment can only happen if the
corresponding amount is withdrawn from the domestic economy in the form of net e!ports.
These linkages have been well understood by the original G$TT negotiators. The G$TT
$rticles %II and %JIII make special provisions for countries with balance+of+payments difficulties*
and allow these countries to impose import restrictions to ease domestic ad7ustment and to facilitate
the financing of current account deficits. One of the important provisions of these $rticles is the
temporary nature of the restrictions. The restrictions must not be imposed 2permanently2 which means
that the long+term financing of current account deficits can only be achieved through domestic
ad7ustment which in turn will call for appropriate changes in macroeconomic and structural policies.
$nother provision specifies that the restriction can only be taken in the form of a uniform import
surcharge. Thus* the restrictions must not be selective and sub7ect to different rates of surcharge. In
other words* the restrictions must provide uniform protection from imports.
"#
The critical effect of these provisions is to help introduce a stronger discipline into domestic
policy+making 3 both on the macroeconomic and structural level. $nother reason is to avoid frictions
in international trade relations. =or e!ample* Members conducting inflationary policies which lead to
current account deficits are most likely to run into difficulties with their trading partners if they seek
aggressively to depreciate their currencies or restrict imports. While these policies may be seen by the
countries that apply them as the first best policy* this is not the case when one takes into account the
likely reactions of trade partners. Ouite apart from the fact that tariffs are never the first+best policy to
correct balance+of+payments dise4uilibria* both measures can be seen as the 2beggar+thy+neighbour2
policies. =or this reason alone* the policies will be often resisted by the countries that are directly
"#
Strictly speaking* the uniform rates of import surcharge do not necessarily provide uniform import
protection. In theory* this will only happen if production functions are identical in each industry. Otherwise* the
governments would have to apply uniform rates of effective tariffs or some other* more sophisticated measures
of import restrictions.
##
affected by them. The WTO $greements have nothing to say about the former* but as we have seen
above* they are 4uite e!plicit about the latter.
Transition countries provide interesting e!amples of the discipline that has been imposed by
the WTO $greements. Buring the period of '(() 3 -55' there were seven out of fourteen transition
countries 3 WTO Members that invoked e!emptions under $rticle %JIII of G$TT 3 :ulgaria* the
/ech 8epublic* 9ungary* 6oland* Slovak 8epublic* 8omania and Gugoslavia 0prior to '(()1. In
other words* the list has covered one half of all transition countries that were WTO Members at the
end of the second half of the '((5s. What is particularly important in this respect is the fact that by
mid+-55' there was no transition country still invoking the e!emptions. $ll of these countries have
taken measures to abandon their restrictive trade policies and met their WTO obligations.
The e!ample of the /ech 8epublic is interesting for another reason 3 the countryAs use of a
wrong policy instrument. When the /ech government decided to invoke the e!emption on the
grounds of a rapidly deteriorating balance+of+payments situation in '((? it chose to restrict imports by
re4uiring importers to make an advance foreign e!change deposit calculated as a percentage of the
import bill. The measure was challenged by several trading partners as WTO illegal since the WTO
re4uires that the restrictions can only be made in the form of a uniform import surcharge. The /ech
government realied its mistake and shortly* after the notification* it withdrew the import deposit
re4uirement.
The WTO disciplines help strengthen the balance+of+payments management of countries that
run into balance+of+payments difficulties. This does not mean* however* that countries eliminate all
origins of financial instability. The balance+of+payments difficulties may arise for a variety of reasons
including* for e!ample* unstable capital movements* deterioration in terms of trade* loss creditorsA
confidence* a sharp increase in foreign interest rates and so on. The temporary import restrictions
address none of these factors and do not* therefore* eliminate the true origins of the balance+of+
payments crisis. What they do provide* however* is the time necessary to take domestic measures to
ad7ust to the changed international environment.

IV. CONCLUSIONS
=ive main conclusions come out of our e!amination of the post+accession e!perience of the
transition countries. "irst, there is no precise blueprint of conditions of accession for new acceding
countries. The acceding countries are e!pected to sign on all WTO $greements but the detailed
#"
conditions of accession may still vary from country to country as a result of negotiations. Thus* the
terms and conditions of accession will critically depend on the outcome of the negotiations which* in
turn* depend on the negotiating power of the country concerned* negotiating skills* and the countryAs
readiness to agree to and implement the whole range of the WTO disciplines. ;econd, over the last
decade most transition countries have made an e!ceptionally profound effort to liberalie their trade
and investment regimes. $ccession to the WTO has played an important albeit not e!clusive role in
this process of liberaliation. The accession has been seen as critical for some countries such as /hina.
In other countries* the autonomous measures taken by these countries have been more important in
terms of the degree of liberaliation. Third* the costs of the WTO Membership are not negligible. The
Membership re4uires fairly large investment into the moderniation and harmoniation of various
institutions directly involved in the conduct of foreign trade and investment. In addition* WTO
commitments also imply for some transition countries significant changes in the conduct of foreign
investment policies and in the protection of intellectual property rights. The 2switch+over2 from
central planning to market+based policy instruments may be* therefore* painful but highly valuable as
we have tried to document in this paper.
"ourth, WTO Membership brings several important benefits to the Members but there are
limits how far and how much the $greements can help. The $greements can help in terms of a better
market access and in terms of the recourse to better policy instruments and institutions. The
$greements cannot address problems originating in poor domestic supply response* terms of trade
changes or e!ogenous shocks. The accession itself may not even open up new markets for the
acceding countries because the incumbents are not e!pected to provide new concessions to them. In
addition* the ad7ustment costs following the WTO accession* + the Membership 2fee2 3 may also be
fairly important but they should be more than offset by efficiency gains* growth of trade and inflow of
foreign capital. "ifth* the WTO e!perience of transition countries must be seen by and large as
positive. The $greements significantly improve the stability of market access* they help eradicate
corruption and improve governance without significant losses to government revenues. Moreover* the
WTO has also played a positive role in strengthening domestic policies to better manage balance+of+
payments crises.
The difficulties that arise as a result of WTO Membership lead to the logical 4uestion whether
countries in transition should not receive a special treatment in their 4uest for WTO Membership. The
answer to this 4uestion partially depends on the actual terms of accession* and these were not sub7ect
of this paper. $s a general comment* however* one could say that there is a case to be made for
allowing transition countries to fully benefit from the same treatment as countries with similar levels
of per capita income. This would allow some of the transition countries to make the re4uired
#)
investments over a longer period of time. The case is arguably more evident than the one which would
call for a special and differential treatment based on the specifics of these countries as transition
economies.
#?
Re)erences
:alasubramanyam* J.@. 0'(('1> 6utting T8IMs to Good IseN World 2evelopment, Jol. '(*0'(('1*
@o. (* pp.'-')+-".
:onaglia* =.* &. :raga de Macedo and M. :ussolo 0-55'1> 9ow Globaliation Improves Governance*
/,68 Biscussion 6aper* @o -((-* -55'.
:ora* :.* 6. &. <loyd and M. 6angestu 0-5551> )ndustrial 1olicy and the WTO= @ew Gork and Geneva>
Inited @ations* I@/T$B* 6olicy Issues in International Trade and /ommodities Series* @o. ?* -555.
:roadman* 9.G. and =. 8ecanatini 0-5551> Seeds of /orruption> Bo Market Institutions MatterM
Washington* B/> World :ank 6olicy 8esearch Working 6aper* @o -#?.* -555.
Brabek* L. 0-5551> The Transition /ountries at the /rossroad of Globaliation and 8egionalismN
4ussian and >ast >uropean "inance and TradeN Jol. #?* 0MarchK$pril -5551N @o. -.
Brabek* L. and S. <aird 0'((.1> The @ew <iberalism> Trade 6olicy Bevelopments in ,merging
MarketsN ?ournal of World Trade, 3ol.-:,(October 800/!, *o.., pp.:@@A0.
Brabek* L. and W. 6ayne* 0-55-1> The Impact of Transparency on =oreign Birect InvestmentN Geneva>
WTO* ,8$B* Working 6aper @o. ((+5-* forthcoming in ?ournal of >conomic )ntegration, -55-.
Brabek* L. and $. Smith* 0'(()1> Trade 6erformance and Trade 6olicy in /entral and ,astern ,uropeN
<ondon> /enter for ,conomic 6olicy 8esearch 0/,681* Biscussion 6aper Series* @o. ''.-* May
'(().
,:8B 0-5551> Transition 4eportN <ondon> ,uropean :ank for 8econstruction and Bevelopment*
-555.
,brill* <.* &.Skotsky and Gropp 0-55'1> 8evenue Implications of Trade <iberaliationN
Washington*B/> International Monetary =und* Occasional 6aper @o.'.5* -55'.
=inger* &. M.* and 6. Schuler 0'((.1> Implementation of Iruguay 8ound /ommitments> The
Bevelopment /hallengeN Washington* B/> The World :ank* 8esearch Bepartment* mimeo, '((..
9ellman* &.S.* G. &ones and B. ;aufmann* 0-5551> Seie the State* Seie the Bay> State /apture*
/orruption and Influence in TransitionN Washington*B/> World :ank 6olicy 8esearch Working
6aper* @o. -"""* -555.
9olland* B. and @. 6ain 0'((.1> The Biffusion of Innovations in /entral and ,astern ,urope> $
Study of the Beterminants and Impact of =BI* manuscript* @ational Institute of ,conomics and Social
8esearch* <ondon.
International Monetary =und 0-5551> World >conomic Outloo%* =ocus on Transition ,conomies*
October -555.
Ivanova* @. and M. Georgieva 0-5551> @on Tariff Trade Measures in :ulgaria and Their Impact on
Trade* prepared for the 2Global =orum on $griculture2* -555.
;aminski* :. 0'(((1> The ,I =actor in Trade 6olicies of /entral ,uropean /ountriesN Washington*
B/> World :ank 6olicy 8esearch Working 6aper* @o. --#(* '(((.
#H
;aufmann* B.* $. ;raay and 6. Loido+<obaton 0'(((a1> $ggregating Governance IndicatorsN
Washington* B./.> World :ank 6olicy 8esearch Working 6aper* @o. -'()* '(((.
;aufmann* B.* $. ;raay and 6. Loido+<obaton 0'(((b1> Governance MattersN Washington* B/>
World :ank 6olicy 8esearch Working 6aper* @o. -'(?.
;ierkowski* 9. 0-5551> /hallenges of GlobaliationN in Brabek 0-5551* pp..+"'.
;ydland* =.,. and ,./. 6rescott 0'(HH1> 8ules 8ather Than BiscretionN The Inconsistency of Optimal
6lansN ?ournal of 1olitical >conomy, Jol. .)* pp."H#+('.
<anghammer* 8.&. and M. <Fcke 0'(((1> WTO $ccession Issues* World >conomy* --0?1* pp. .#H+
.H#.
<ankes* 9.+6. and $.&. Jenables 0'((?1> =oreign Birect Investment in ,conomic Transition> the
/hanging 6attern of Investments* >conomics of Transition* vol. "0-1* pp. ##'+"H* '((?.
<anoska* $. 0-55'1> The World Trade Organiation $ccession 6rocessN @egotiating 6articipation in
a Globaliing ,conomyN ?ournal of World Trade* Jol. #)* 0-55'1* @o. "* pp. )H)+?5-.
Maskus* ;. 0'((.1> The International 8egulation of Intellectual 6roperty* Weltwirtschaftliches 'rchiv*
Jol. '#"* 0'((.1* @o.-* pp.'.?+-5..
Michalopoulos* /. 0-5551> World Trade Organiation $ccession for Transition ,conomiesN in Brabek
0-5551* pp.?#+.?.
Morrisey* O. and G. 8ai 0'(()1> The G$TT $greement on Trade+8elated Investment Measures>
Implications for Beveloping /ountries and Their 8elationship with Transnational /orporationsN The
?ournal of 2evelopment ;tudies* Jol.#'* 0&une '(()1* @o.)* pp.H5-+-".
Muravskaya* T.* ,. Sumilo and $. Janags 0-5551> <atviaAs ,!perience with 8egional IntegrationN
6aper presented at the 8ound Table on 2Ten Gears of Trade <iberaliation in Transition ,conomies2
organied by the O,/B* 6aris 0&uly -5551.
@aray* 6. 0-55'1> 4ussia and the World Trade Organi5ation= :asingstoke> 6algrave* -55'.
6anagariya* $. 0'(((1> T8I6s and the WTO> $n Ineasy MarriageN Geneva> 6aper presented at the
WTO Seminar* -5 &uly '(((.
6ur7u* $. 0-5551> ,stoniaAs ,!perience with Trade <iberaliationN 6aper presented at the 8ound Table
on 2Ten Gears of Trade <iberaliation in Transition ,conomies2 organied by the O,/B* 6aris 0&uly
-5551.
8esmini* <. 0-5551> The Beterminants of =oreign Birect Investment in the /,,/s 3 @ew ,vidence
from Sectoral 6atterns* >conomics of Transition* vol. .0#1* pp. ??)+.(* -555.
8odrik* B. 0'(.H1> The ,conomics of ,!port 6erformance 8e4uirements= Buarterly ?ournal of
>conomics* Jol. '5-* 0'(.H1* pp. ?##+)5.
Staiger* 8.W. 0'(()1> International rules and institutions for trade policy in Grossman* G. and ;.
8ogoff 0eds.1 Candboo% of )nternational >conomics* vol. III* ,lsevier Science* '(().
Treisman* B. 0-5551> The /auses of /orruption> a /ross @ational Study* ?ournal of 1ublic
>conomics* vol.H?* -555* pp. #((+")H.
#.
Tsvetkovska M. 0-5551> :ulgariaAs ,!perience with Trade <iberaliationN 6aper presented at the
8ound Table on 2Ten Gears of Trade <iberaliation in Transition ,conomies2 organied by the
O,/B* 6aris 0&uly -5551.
World :ank 0-55'1> World 2evelopment 4eport :99:< Duilding )nstitutions for +ar%ets< Washington
B./.
Gang* G. 0'(((1> /ompleting the WTO $ccession @egotiations> Issues and /hallenges, World
>conomy, --0"1* 0'(((1 pp. )'#+)#".
#(
Ta3'e ": !#$n% an% A&&'(e% I6&#r* Tar())s (n Se'ec*e% Trans(*(#n Ec#n#6(es
S(6&'e A7era?e !#$n% Tar())
S(6&'e A7era?e A&&'(e% Tar())
Agricultural
Products
Industrial
Products
Agricultural
Products
Industrial
Products
A'3an(a '5.? ?.5 '5.H 05'1 H.5 05'1
!$'?ar(a "?.H -#.. -H.- 0(H1 ').) 0(H1
-?.. 0(.1 ').# 0(.1
-#.? 0((1 '-.? 0((1
-#.- 0551 ''.5 0551
-'.( 05'1 '5.5 05'1
Cr#a*(a '5." ).- '#.. 05'1 ).' 05'1
CCec< Re&$3'(c ".# ).? 0(?1
).# 0(H1
).5 0(.1
".) 0551
Es*#n(a -'.- H.' 5.5 0(?1 5.' 0(?1
5.5 0(H1 5.' 0(H1
5.5 0(.1 5.5 0(.1
5.5 0((1 5.5 0((1
'#.. 0551 5.5 0551
'#.. 05'1 5.5 05'1
H$n?ary H." ..H 0(?1
..- 0(H1
H.. 0(.1
H." 0((1
H.# 0551
H.' 05'1
La*7(a ##.# (." '?." 0(.1 -.H 0(.1
'".5 0((1 -.? 0((1
P#'an% '5." '5.) 0551
R#6an(a #5.. 'H.) 0((1
Sources> WTO Secretariat* based on 6rotocols of $ccession.
@ote> The figures in brackets refer to dates. The data in the first two columns may not be fully comparable due
to different methodologies applied in the computations.
"5
Ta3'e ,: In%(ces #) Ins*(*$*(#na' -$a'(*y. "//0-"//1
G#7ern6en* Re?$'a*#ry R$'e Ins*(*$*(#na' V#(ce an% P#'(*(ca' Ins*(*$*(#na'
E))ec*(7eness !$r%en #) La9 Gra)* D$a'(*y Acc#$n*a3('(*y Ins*a3('(*y D$a'(*y
Enarr#9F an% V(#'ence E3r#a%F
EU access(#n c#$n*r(es
Ee=c'$%(n? !a'*(csF
:ulgaria +..' ).- +'.) +).? +-.) ? ".# 5.'
/ech 8epublic ).( ).H )." #.. ).- '- ..' ?..
9ungary ?.' ..) H.' ?.' H.5 '- '-.) ..H
6oland ?.H ).? )." ".( ).H '5.H .." H
8omania +).H - +5.( +".? +-.# ".' 5.- +5..
Slovak 8epublic +5.# '.H '.# 5.# 5.. H." ?.) -..
Slovenia ).H ).# ..# '5.- H." '5.H '5.( ..)
!a'*(c c#$n*r(es
,stonia -.? H." ).' ).( ).# H.( H.( ?.'
<atvia 5.H ).' '.) +-.? '.- ?.- ".? -.?
<ithuania '.# 5.( '.. 5.# '.' H.H #.) -.?
O*<er s#$*<eas*ern
E$r#&ean c#$n*r(es
$lbania +?.) +H +(.- +(.( +..- +5.' +'5 +H.'
:osnia and 9eregovina +''.' +'-.? +''.' +#.) +(.? +(.H +''.? +(.(
/roatia '.) -." '.) +".? 5.- +#.- ".' 5.#
Macedonia* =G8 +).. +#.' +-.? +).- +".- 5.( +" +#.#
C#66#n9ea'*< #)
In%e&en%en* S*a*es
$rmenia +?.) +).H +'.) +. +)." 5.- +".) +"."
$erbai7an +..# +'5 +).? +'5 +..) +(.- +#.? +H..
:elarus +?.? +'".H +... +?.) +(.- +).- +#.H +H.?
Georgia +).' +..) +".( +H." +?.) +-.( +H.? +?.'
;aakhstan +..- +" +).( +..H +?.H +H.' -.- +).#
;yrgy 8epublic +).. +H.? +".H +H.? +?." +-.) #.- +".-
Moldova +".? +-.. +5.- +#.( +-.( '.? +- +-
Mongolia 5.- '.H 5." +'.) 5.- .." #.H -.-
8ussia +).( +# +H.- +?.- +).? +#.' +?.( +)."
Ta7ikistan +'".- +').- +'#.# +'#.- +'".5 +').? +'..? +')
Turkmenistan +'-.) +'(.# +(.H +'-.( +'#.? +'".) 5 +''.)
Ikraine +..( +H.- +H.' +..( +..5 +5.' +-." +)..
Ibekistan +'# +'" +..H +(.? +''.# +'#." +#.# +'5."
Eas* As(a
/ambodia ... +5." +-.# ... +(.' ... +#.(
/hina 5.- +5.H +5." +-.( +'.5 +'# ".. +-
<ao 6eopleAs Bem. 8ep. ... +'..- +'- ... +'5.) +'#.?
Jiet @am +# +".? +"." +#.# +#.. +'".- ?.) +#..
;ource< :ased on IM= 0-5551.
"'
Ta3'e 4 - In%(ces #) C#rr$&*(#n. "///
C#rr$&*(#n &erce&*(#n
(n%e=
"
Gra)*
,
0'(((1 0'(((1
#
EU access(#n c#$n*r(es Ee=c'. !a'*(csF
:ulgaria #.# +).?
/ech 8epublic ".? #..
9ungary ).- ?.'
6oland ".- ".(
8omania #.# +".?
Slovak 8epublic #.H 5.#
Slovenia ? '5.-
!a'*(c c#$n*r(es
,stonia ).H ).(
<atvia #." +-.?
<ithuania #.. 5.#
O*<er s#$*<eas*ern E$r#&ean c#$n*r(es
$lbania -.# +(.(
:osnia and 9eregovina n.a. +#.)
/roatia -.H +".?
Macedonia #.# +).-
C#66#n9ea'*< #) In%e&en%en* S*a*es
$rmenia -.) +..5
$erbai7an '.H +'5
:elarus #." +?.)
Georgia -.# +H."
;aakhstan -.# +..H
;yrgy 8epublic -.- +H.?
Moldova -.? +#.(
Mongolia n.a. +'.)
8ussia -." +?.-
Ta7ikistan n.a. +'#.-
Turkmenistan n.a. +'-.(
Ikraine -.? +..(
Ibekistan '.. +(.?
'
Source> Transparency International 0'(((1. The inde! ranges from 5 0highly corrupted1 to '5.
-
Source> ;aufmann et al. 0'(((a1 and 0'(((b1. The inde! ranges from 3-) to -)* with higher values
corresponding to lower corruption.
#
'((. for Mongolia.
"-
Ta3'e 5 - Meas$res #) A%6(n(s*ra*(7e C#rr$&*(#n
C#$n*ry A%6(n(s*ra*(7e S*an%ar% err#r
C#rr$&*(#n
$lbania ".5 05."1
:ulgaria -.' 05."1
/roatia '.' 05.-1
/ech 8epublic -.) 05."1
,stonia '.? 05.-1
9ungary '.H 05.#1
<atvia '." 05.#1
<ithuania -.. 05.)1
6oland '.? 05.-1
8omania #.- 05."1
Slovak 8epublic -.) 05."1
Slovenia '." 05.#1
$verage /,, -.-
$rmenia ".? 05.H1
$erbai7an ).H 05.H1
:elarus '.# 05."1
Georgia ".# 05.?1
;aakhstan #.' 05.)1
;yrgystan ).# 05.?1
Moldova ".5 05.?1
8ussia -.. 05.-1
Ikraine "." 05."1
Ibekistan "." 05.?1
$verage /IS #.H
Overall 0unweighted average1 #.5
Source> 9ellman et al. 0-5551.
@ote> =irms were asked* on average* what percent of revenues do firms like theirs typically pay per annum in unofficial
payments to public officials and identify the percentage in the following ranges> 5S + less than 'SN ' + '.((SN - + (.((SN '5
+ '-SN '# + -)SN Over -)S. The categories were imputed at M ' SN M ?SN '' SN l(SN -)S and the mean calculated.
The 4uestion was posed in terms of firm revenues rather that profits since estimates of revenues are more reliable. In addition
the 4uestion was posed indirectly in terms of 2firms like yours2 to reassure respondents that their responses would not be
attributable directly to their firm. The authors then take total payments as a pro!y for administrative corruption since the
available evidence suggests that the ma7ority of bribe payments were for this purpose. This measure of administrative
corruption differs from the 2bribe ta!2 presented in ,:8B 0'(((1* although both were based on the same source. The
measure used in 9elmanAs paper includes the responses of all firms* whereas the measure presented in ,:8B 0'(((1 presents
the average bribes as a share of revenues among firms that reported paying bribes.
"#
Ta3'e 8 - In9ar% DI S*#c:s (n Trans(*(#n C#$n*r(es. "//8-"///
0as a percentage of GB61
"//8 "///
EU access(#n c#$n*r(es
Ee=c'.!a'*(csF :ulgaria #." '(.(
/ech 8epublic '".) ##.5
9ungary --." #(.(
6oland ?.? 'H.-
8omania #.- '?.'
Slovak 8epublic H.# '".?
Slovenia (." '#.5
!a'*(c c#$n*r(es
,stonia '..? "H.(
<atvia '#.. -?.(
<ithuania ).. '(.H
O*<er s#$*<eas*ern E$r#&ean
c#$n*r(es
$lbania ..# '?.5
/roatia -.? -5.-
Macedonia* =G8 '.? ?.'
C#66#n9ea'*< #) In%e&en%en*
S*a*es
$rmenia '.- -#.'
$erbai7an '".? .'."
:elarus 5.# ..#
Georgia '.' H.5
;aakhstan '".? )'.(
;yrgy 8epublic (.H -#.'
Moldova ?.? -...
Mongolia #.( '".'
8ussia '.? "."
Ta7ikistan #.( '5."
Turkmenistan ".? #'.(
Ikraine -.) '5.)
Ibekistan -.) ?.5
Eas* As(a
/ambodia 'H.5 '(."
/hina '(.? #5.(
<ao 6eopleAs Bem. 8ep. ''.( "-..
Jiet @am #'.' )).?
;ource< World :ank World Investment 8eport -555.
""
Ta3'e ; - Tar()) Re7en$es (n Trans(*(#n C#$n*r(es. "//"-"///
0in percentage of imports1
"//" "//, "//4 "//5 "//8 "//; "//0 "//1 "///
EU access(#n c#$n*r(es
Ee=c'$%(n? !a'*(csF
:ulgaria -.- ".) H.- H.? H.# ".? ".. ).) -..
/ech 8epublic n.a. n.a. #.) #.) -.? -.? '.H '.) '.-
9ungary (.' ''.. '-.5 '-.? '-.( (.? ".5 -.? -."
6oland '-.H '".? ').5 '-.5 (.? H." ).? ".5 #."
8omania ?.' ".( ?.? ?.5 ".( ".- ".5 ).( ).)
Slovak 8epublic n.a. -.? -.# #." #.# -.( #.# -.? -.H
Slovenia ''.5 ?.H H.# H.5 H.' ?.- ".5 -.( -.?
!a'*(c c#$n*r(es
,stonia n.a. n.a. 5.( 5.( 5.- 5.5 5.5 5.5 5.5
<atvia n.a. n.a. -.( #.- '.. '.) '." '.' 5.(
<ithuania n.a. n.a. '.' #.- '." '.- '.# '.' n.a.
O*<er s#$*<eas*ern
E$r#&ean c#$n*r(es
$lbania
:osnia C 9eregovina n.a. n.a. n.a. n.a. n.a. '5.) ..? (.- n.a.
/roatia )." '5.( H." '5.H (.) ..( ..5 H.? ..'
Macedonia* =G8 ..( ?.5 ..) '5.) '-.? ''." ?.. H.# (.'
C#66#n9ea'*< #)
In%e&en%en* S*a*es
$rmenia n.a. 5.- ?.' 5.H '.5 '.( -.H -.. #.5
$erbai7an 5.5 5.' '." '.' '.? '.( ".# "." )."
:elarus n.a. n.a. #.H )." #.- ".# #.( #.. -."
Georgia n.a. n.a. n.a. 5.# 5.) -.5 "." ".- '.H
;aakhstan 5.5 'H.- 5.) ).? #.( -.5 '.) '.( '.?
;yrgy 8epublic n.a. n.a. n.a. '.5 -.# -.5 -.- -." '."
Moldova n.a. 5.. -.' '.' '." '.( -.- -.5 #."
Mongolia H.' ).' ).? -." 5."
8ussia n.a. #.. '-.5 ').5 ''.5 H.. H.' H.- ..(
Ta7ikistan n.a. n.a. 5.( ".5 '.- 5.? -.? ?.' -.'
Turkmenistan n.a. n.a. n.a. n.a. 5.# 5.# 5." 5.# 5.)
Ikraine n.a. n.a. n.a. '.H '.H '.- '.( -." -.#
Ibekistan n.a. '.# -." -.) -.? '.? '.? '.( 5.H
;ource< ,:8B 0-5551.
")
Ta3'e 0: S<are #) In*erna*(#na' Tra%e Ta=es (n T#*a' G#7ern6en* Re7en$es
0In percent1
"//" "//, "//4 "//5 "//8 "//; "//0 "//1 "///
EU access(#n c#$n*r(es
Ee=c'$%(n? !a'*(csF
:ulgaria -.5 ).- ..' H.' ?.H ?.. ?.. ).) -.(
/ech 8epublic #.( ".' #.? #.H -.H -.#
9ungary ).5 H.- H.? H.? '5.? (.' ).5 #.)
6oland ..) H.H ?.) ".' #.'
8omania #.5 #.? ".H "." ).? ?.' ).?
!a'*(c c#$n*r(es
,stonia '.( '.. 5." 5.5 5.5 5.5 5.5
<atvia ".) -.H -.- -.5 '.?
<ithuania 5.H #.H H.5 #.# #.5 -.H -.'
O*<er s#$*<eas*ern
E$r#&ean c#$n*r(es
$lbania '#." 'H.- 'H.. '".'
/roatia #." '5.H ..H (.) (.- ..# ... ?.H ?.?
C#66#n9ea'*< #)
In%e&en%en* S*a*es
$erbai7an )5.. ##." -'.5 ..- ..( .."
:elarus ".# 'H.5 (.H ).. )." H.? H."
Georgia ''.( '-.'
;aakhstan -.H #.)
;yrgy 8epublic #.5 ).5 ).5 ).5 ?.5 ".5
Mongolia '?.H ''.( ... ''." ).' 5..
8ussia '".H ..H
;ources< IM= Government =inance Statistics and Staff 8eports.
"?
Ta3'e 1: C#s*s #) W#r'% !an: Pr#Aec*s Re'a*e% *# *<e I6&'e6en*a*(#n #) T<ree WTO
A?ree6en*s
Area #) I6&'e6en*a*(#n C#$n*ry Na*$re #) 9#r: C#s* EG6F
Customs Valuation '5 ,astern
,uropean
countries
H yr. Institutional reform 3 customs
moderniation
'5.
Tunisia /ustoms reform component of a )
yr. W: e!port development pro7ect
'?
Tanania # yr. reform of customs procedures .+'5
<ebanon /ustoms reform component of a H
yr. W: fiscal management program
"
$rmenia " yr. W: pro7ect involving drafting
new laws* training staff*
computeriing procedures
-
Sanitary and Phytosanitary
standards (all WB projects)
8ussia # yr. S6S implementation 3 disease
control and improvement of food
processing facilities
')5
$lgeria - yr. locust control pro7ect ''-
:rail H yr. livestock disease control
pro7ect
'5.
$rgentina ) yr. general agric. e!port reform
pro7ect
.#
6oland ) yr. S6S component of agric.
e!ports development pro7ect
H'
9ungary ? yr. Slaughter+house
moderniation pro7ect
"'
Intellectual Property Rights
(all WB projects)
Me!ico " yr. pro7ect establishing agency to
implement industrial property laws
#-.'
Indonesia ? yr. pro7ect to improve I68
regulatory framework
')
:rail ) yr. pro7ect to train staff
administering I68 laws
"
;ource< World :ank.
"H
Anne= Ta3'e " - WTO: Da*es #) Access(#n an% Me63ers<(& #) Trans(*(#n C#$n*r(es
A&&'(ca*(#n Me63ers<(& A&&'(ca*(#n Me63ers<(&
EU access(#n c#$n*r(es C#66#n9ea'*< #)
Ee=c'$%(n? !a'*(csF In%e&en%en* S*a*es
:ulgaria 5(K'((? '-K'((? $rmenia ''K'((#
/ech 8epublic 5"K'((# 0G$TT1 $erbai7an 5HK'((H
9ungary 5(K'(H# 0G$TT1 :elarus 5(K'((#
6oland '5K'(?H 0G$TT1 Georgia 5HK'((? 5?K-555
8omania ''K'(H' 0G$TT1 ;aakhstan 5'K'((?
Slovak 8epublic 5"K'((# 0G$TT1 ;yrgy 8epublic 5'K'((? '-K'((.
Slovenia '5K'((" 0G$TT1 Moldova ''K'((#K 5HK-55'
!a'*(c c#$n*r(es Mongolia 5HK'((' 5'K'((H
,stonia 5#K'((" ''K'((( 8ussian =ederation 5?K'((#
<atvia ''K'((# 5-K'((( Ta7ikistan 5)K-55'
<ithuania 5'K'((" 5)K-55' Turkmenistan
O*<er s#$*<eas*ern Ikraine ''K'((#
E$r#&ean c#$n*r(es Ibekistan '-K'(("
$lbania ''K'((- 5(K-555 Eas* As(a
:osnia and 9eregovina 5)K'((( /ambodia '-K'(("
/roatia 5(K'((# ''K-555 /hina 5HK'(.?
Macedonia* =G8 '-K'((" The <ao 6B8 5HK'((H
Gugoslavia 5'K-55' Jiet @am 5'K'(()
;ource< WTO Secretariat.
".