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The accession negotiations of Belarus to the WTO are unusual since, due to its obligations in the Eurasian Economic Union, WTO accession is not expected to impact its tariffs or formerly substantial trade-distorting agricultural subsidies. Nonetheless, we estimate that WTO accession will increase welfare by 9.9% of consumption in Belarus. We show that inclusion of: (i) foreign direct investment; (ii) reduction in non-discriminatory barriers against services providers; and (iii) our model with imperfect competition and endogenous productivity effects together produce estimated gains eleven times larger than a model of perfect competition with only cross-border trade in services. Our analysis is enabled by our production of a data set on both discriminatory and non-discriminatory barriers in services and their ad valorem equivalents. Based on a new data set on labour productivity by sector and type of ownership, in our central model, we estimate that privatisation will increase welfare by 35.8% of consumption. We find substantial variance in the estimated gains from privatisation depending on model assumptions, but all the estimates of the impacts of privatisation indicate substantial welfare gains.

Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan formed the Eurasian Economic Union (EAEU) in order to create a single market. Armenia, Kyrgyzstan, and Kazakhstan all approximately doubled their average external tariffs, which were the Russian tariff, resulting in substantial transfers to Russia. Estimates show, however, that substantial progress in trade facilitation and reducing nontariff barriers could make the EAEU positive for all members. Moreover, the right to work for migrants or security arrangements with Russia may be the dominant issue for Armenia and the Kyrgyz Republic. So far, however, the EAEU has made little progress on reducing nontariff barriers or trade facilitation.

We investigate the environmental impacts of Russia's World Trade Organization (WTO) accession with a computable general equilibrium model incorporating imperfectly competitive firms, foreign direct investment and endogenous productivity. WTO accession increases CO2 emissions through technique (−), composition (+) and scale (+) effects. We consider three complementary policies to limit CO2 emissions: cap and trade, emission intensity standards and energy efficiency standards. With imperfectly competitive firms, gains from WTO accession result with any of these policies. If we assume perfectly competitive market structures, the negative environmental impacts of WTO accession are smaller and no net gains arise when environmental regulation involves energy intensity or efficiency standards.

In this paper we use ten-digit trade data that allow an accurate assessment of how the tariff structure of the Russian Federation will change as a result of the phased implementation of its World Trade Organization (WTO) commitments between 2012 and 2020 and how it has changed as a result of Russia's agreement to participate in a customs union with Kazakhstan and Belarus. WTO commitments will progressively and significantly lower the applied tariffs of the Russian Federation. Russian tariffs will ultimately fall to between 45 and 68 percent of their pre-accession levels, with the larger fall being on a weighted average, rather than an unweighted average basis. Nonetheless, bound tariffs will exceed applied tariffs for almost 1,500 tariff lines. Russia's commitments are not unusual, especially when compared to the transition countries that have acceded to the WTO.

We employ a computable general equilibrium model of the Kazakh economy to assess the effect of accession to the World Trade Organization (WTO). Our model incorporates foreign direct investment by multinational business service providers and by multinational oil and gas companies; it contains endogenous productivity effects in both goods and services markets through a Dixit-Stiglitz (1977) framework. Our model is innovative in that we assess the effect of local content provisions for multinational oil and gas companies, provisions that are highly contentious in WTO accession negotiations. We show that our model features are crucial to the results, as the estimated gains are more than ten times larger than the gains from a constant return-to-scale model.

The authors use a computable general equilibrium model of the Russian economy to assess the impact of accession to the World Trade Organization (WTO), which encompasses improved market access, tariff reduction, and reduction of barriers against multinational service providers. They assume that foreign direct investment in business services is necessary for multinationals to compete well with Russian business service providers, but cross-border service provision is also present. The model incorporates productivity effects in both goods and services markets endogenously through a Dixit-Stiglitz framework. As a result, the estimated gains from WTO accession are much larger than would be obtained from a typical model with perfect competition. The ad valorem equivalent of barriers to foreign direct investment have been estimated based on detailed questionnaires completed by specialized research institutes in Russia. The authors estimate that Russia will gain about 7.2 percent of the value of Russian consumption in the medium run from WTO accession and up to 24 percent in the long run. They estimate that the largest gains to Russia will derive from liberalization of barriers against multinational service providers. Piecemeal and systematic sensitivity analysis shows that their results are robust.

A senior World Bank economist presents a study focusing on issues controlling Russia's accession to the WTO in 2007. The paper discusses the principal reform commitments that Russia has made in an effort to become a member of the organization and addresses the question of whether the country faces excessive demands due to political considerations. While exploring such issues as potential relations with foreign exporters and investors, the author summarizes the relevant parts of his recent joint study of Russian import tariffs that casts a new light on a complex aspect of international trade. Among other problems relating to Russia's entry, he discusses in some detail branch banking and the tradedistorting subsidies in agriculture. Journal of Economic Literature, Classification Numbers: F13, F40, O19. 3 tables, 26 references.

What can Russia gain from committing to reform its telecommunications sector as part of its accession to the World Trade Organization (WTO)? We employ a computable general equilibrium model of the Russian economy that incorporates foreign direct investment (FDI). Liberalization of barriers to FDI in services sectors results in endogenous productivity effects through Dixit-Stiglitz (1977) variety effects. We find that reducing Russian barriers to FDI in telecommunications is crucial to Russia reaping full gains from WTO accession--1.6 percent of the value of Russian consumption in the medium term, and potentially much greater long-term gains. It will also lead to reduced quality-adjusted prices paid by industrial and consumer users of telecommunications and increased productivity for Russian labor and capital. Demand for Russian labor employed in telecommunications should increase, because multinational telecommunications companies employ mostly Russian labor. Russian capital owners in telecommunications w...

Journal of African Economies, 24 (5), ISSN:0963-8024, ISSN:1464-3723

This article uses a multi sector, multi county, computable general equilibrium model to examine Chile's strategy of 'additive regionalism' negotiating bilateral free trade agreements with all of its significant trading partners. Taking Chile regional arrangements bilaterally, only its agreements with Northern partners provide sufficient market access to overcome trade diversion costs. Due to preferential market access, however, additive regionalism is likely to provide Chile with gains that are many multiples of the static welfare gains from unilateral free trade. At least one partner country loses from each of the regional agreements considered, and excluded countries as a group always lose. Gains to the world from global free trade are estimated to be vastly larger than gains from any of the regional arrangements.

There is substantial evidence that with the progressive global decline in tariffs over several decades, trade costs are a more significant barrier to trade than tariffs, especially in Sub-Saharan Africa. This paper decomposes trade costs into three categories: costs that can be lowered by trade facilitation, nontariff barriers, and the costs of business services. The paper develops a 10-region, 18-sector, global trade model that includes Kenya, Tanzania, Uganda, and Rwanda of the East African Customs Union. The analysis finds that deep integration in the East African Customs Union that lowers these trade costs results in significant gains for the four countries, especially from improved trade facilitation. Extending the lowering of nontariff barriers and services liberalization multilaterally would increase the gains between two and seven times, depending on the country. that the analysis also finds that reducing nondiscriminatory services barriers in Kenya and Tanzania would increase welfare even more than multilateral reduction of discriminatory services barriers. The paper is innovative both conceptually and empirically. It contains foreign direct investment in services and is the first paper to numerically assess liberalization of barriers against domestic and multinational service providers in a multi-sector, multi-region, applied general equilibrium model. The paper uses new databases of the ad valorem equivalents of barriers in services and the time in trade costs. Both databases are shown to be important to the results.

An empirical analysis of the microeconomic links between trade and knowledge diffusion is useful for singling out some of the key predictions of the theory of endogenous growth in open economies. This literature postulates that total factor productivity is higher when trade gives countries access to a wider or more sophisticated range of technologies. The articles reviewed here find considerable evidence that imported technologies raise total factor productivity in importing countries, particularly developing countries and particularly when technologies are acquired by way of imports of intermediate goods. They also provide some support for the argument that exports and foreign direct investment are channels for learning. Although access to foreign technologies has a positive impact on developing countries' total factor productivity, overall these countries are shown to purchase older and simpler machines than industrial countries. Relative factor and machinery costs and skill and technology endowments affect the choice of imported technologies. However, government attempts to limit or guide the selection of technologies are likely to have a negative effect on growth because they discourage producers from purchasing the most appropriate and efficient machines. Rather, policies aimed at promoting technological development should strengthen the absorptive capacity of importing countries and address the complementarity between human and physical capital in a broader context.

After 18 years of negotiations, Russia has joined the World Trade Organization. This paper assesses how the tariff structure of the Russian Federation will change as a result of the phased implementation of its World Trade Organization commitments between 2012 and 2020 and how it has changed as a result of its agreement to participate in a Customs Union with Kazakhstan and Belarus. The analysis uses trade data at the ten digit level, which allows the first accurate assessment of the impact of these policy changes. It finds that World Trade Organization commitments will progressively and significantly lower the applied tariffs of the Russian Federation. After all commitments are implemented, tariffs will fall from 11.5 percent to 7.9 percent on an un-weighted average basis, or from 13.0 percent to 5.8 percent on a weighted average basis. The average "bound" tariff rate of Russia under its World Trade Organization commitments will be 8.6 percent, that is, 0.7 percentage points higher than the applied tariffs. Russia's commitments represent significant tariff liberalization, but compared with other countries that have acceded to the World Trade Organization, the commitments of the Russian Federation are not unusual, especially when compared with the Transition countries.

In 2010, Russia, Belarus and Kazakhstan formed the Eurasian Customs Union and imposed the Russian tariff as the common external tariff of the Customs Union. In 2015 they formed the Eurasian Economic Union (EAEU) designed to promote the free flow of goods, services, labor and capital, as Armenia and the Kyrgyz Republic joined. Armenia, the Kyrgyz Republic and Kazakhstan all had to approximately double their average external tariff to implement the common external tariff. Russia has benefited from additional exports under the protection of the higher tariffs. Estimates reveal that the tariff changes resulted in substantial transfers from Kazakhstan to Russia (with similar impacts expected for Armenia and the Kyrgyz Republic) as importers in Kazakhstan now purchase lower quality or higher priced Russian imports that are protected under the tariff umbrella of the common external tariff. Transfers from the Central Asian countries to Russia were the reason the predecessor to the EAEU (known as EurAsEC) failed, so this bodes badly for the ultimate success of the EAEU. But Russia’s accession to the World Trade Organization will substantially lower the common external tariff and reduce the transfers to Russia. Further, unlike EurAsEC, the EAEU aims to employ “deep integration,” e.g., to reduce non-tariff barriers and improve trade facilitation, create a single market, reduce trade distorting agricultural subsidies and harmonize some regulations. Estimates show that if substantial progress could be made in trade facilitation and reducing non-tariff barriers, this could make the Customs Union positive for Kazakhstan and other potential Central Asian members. And the right to work for migrants may dominate these issues for Armenia and the Kyrgyz Republic. Unfortunately, as of early 2016, the EAEU has not improved trade facilitation or reduced non-tariff barriers. To effectively implement the objectives of the EAEU, however, Russia will need to take the lead in ceding real authority to the Eurasian Commission and press for reforms, including those that reduce the substantial internal non-tariff barriers.

In this paper we provide the first documented estimates of the terms-of-trade impact on all 15 countries of the former Soviet Union of shifting to international prices in their trade. We decompose the total impact of a change in the terms-of-trade into a change in the interrepublic and extrarepublic terms-of-trade. The broad pattern is that raw material and energy exporters, notably Russia, Turkmenistan, and Kazakhstan, are estimated to gain, whereas countries that concentrate on food and machinery exports, notably the Baltic states, Belarus, and especially Moldova, are estimated to be the biggest losers. J. Comp. Econom., February 1994, 18(1), pp. 1-24. Trade Policy Division, Policy and Research Department, The World Bank, Washington, DC 20433.

This paper develops an innovative 21 sector computable general equilibrium model of Armenia to assess the impact on Armenia of a Deep and Comprehensive Free Trade Agreement with the European Union, as well as further regional or multilateral trade policy commitments. The analysis finds that such an agreement with the European Union will likely result in substantial gains to Armenia, but shows that the gains derive from the deep aspects of the agreement. In order of importance, the sources of the gains are: (i) trade facilitation and reduction in border costs; (ii) services liberalization; and (iii) standards harmonization. A shallow agreement with the European Union that focuses only on preferential tariff liberalization in goods will likely lead to small losses to Armenia primarily due to a loss of productivity from lost varieties of technologies from the rest of the world region in manufactured products. Additional gains can be expected in the long run from an improvement in the investment climate. The authors estimate only small gains from a services agreement with countries of the Commonwealth of Independent States, but significant gains from expanding services liberalization multilaterally.

In this paper the authors develop an innovative 21 sector computable general equilibrium model of Armenia to assess the impact on Armenia of a Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU, as well as further regional or multilateral trade policy commitments. They find that a DCFTA with the EU will likely result in substantial gains to Armenia, but they show that the gains derive from the deep aspects of the agreement. In order of importance, the sources of the gains are: (i) trade facilitation and reduction in border costs; (ii) services liberalization; and (iii) standards harmonization. A shallow agreement with the EU that focuses only on preferential tariff liberalization in goods will likely lead to small losses to Armenia primarily due to a loss of productivity from lost varieties of technologies from the Rest of the World region in manufactured products. Additional gains can be expected in the long run from an improvement in the investment climate. The authors estimate only small gains from a services agreement with the CIS countries, but significant gains from expanding services liberalization multilaterally.

Given the growing importance of commitments to foreign investors in services in regional trade agreements, it is important to develop applied general equilibrium models to assess the impacts of liberalization of barriers to multinational service providers. This paper develops a 55 sector applied general equilibrium model of Kenya with foreign direct investment and Dixit-Stiglitz productivity effects from additional varieties of imperfectly competitive goods or services, and uses the model to assess its regional and multilateral trade options, focusing on commitments to foreign investors in services. To assess the sensitivity of the results to parameter values, the model is executed 30,000 times, and results are reported as confidence intervals of the sample distributions. The analysis reveals that a 50 percent preferential reduction in the ad valorem equivalents of barriers in all business services by Kenya with its African partners would be somewhat beneficial for Kenya. If a preferential agreement with African partners is combined with an agreement with the European Union, the gains would more than triple the gains of an Africa only agreement. Multilateral reduction of services barriers, however, would yield gains about 12 times the gains of an agreement with the Africa region alone. These results suggest that preferential liberalization in the region is a valuable first step, but wider liberalization, with larger partners and liberal rules of origin or multilaterally, will yield much larger gains due to providing access to a much wider set of services providers. The largest gains would come from domestic regulatory reform in services, as this would almost triple the gains of multilateral liberalization.

Recent reforms in trade policy in Turkey have produced a foreign trade regime that exhibits very little antiexport bias on average. A quantitative, multisectoral general equilibrium model of the Turkish economy shows that piecemeal trade policy reform, based on first-best rationales that are appropriate for highly distorted economies, would not now be appropriate. Further tariff reductions must be coordinated with export subsidy reductions to attain significant welfare benefits. The dispersion of distortions, especially export subsidies, is more important than their level. A policy of harmonizing tariffs to the common external tariff of the European Community has virtually no effect on welfare.

Export restraints by the Russian Federation (Russia) on natural gas and timber have created concerns in European importing countries. The analysis in this chapter focuses on development perspective of export restrictions in that the restrictions are applied to improve the exporter’s terms of trade. The analysis focuses on Russian policies concerning natural gas and timber, which share the dual effect of decreasing domestic prices while increasing export prices.

Despite the growing importance of commitments to foreign investors in services in regional trade agreements, there are no applied general equilibrium models in the literature that assess these regional impacts. This paper develops a 52 sector applied general equilibrium model of Tanzania with foreign direct investment, and uses that model to assess Tanzania's regional and multilateral trade options. The model incorporates the features of the modern theory of international trade that has shown empirically that trade and foreign direct investment can increase productivity, and trade and foreign direct investment with technologically advanced countries is especially valuable for that purpose. To assess the sensitivity of the results to parameter values, the model is executed 30,000 times, and the results are reported as confidence intervals of the sample distributions. The analysis finds that a 50 percent preferential reduction in the ad valorem equivalents of barriers in all business services by Tanzania with respect to its African regional partners would be slightly beneficial for Tanzania. But wider liberalization, with larger partners or multilaterally, it will yield much larger gains due to providing access to a much wider set of service providers. Finally, the results show that the largest gains in services would be derived from reduction of regulatory barriers that are geographically non-discriminatory.

This paper summarizes the estimates of what Russia will get from World Trade Organization accession and why. A key finding is the estimate that Russia will gain about $53 billion per year in the medium term from World Trade Organization accession and $177 billion per year in the long term, due largely to its own commitments to reform its own business services sectors. The paper summarizes the principal reform commitments that Russia has undertaken as part of its World Trade Organization accession negotiations, and compares them with those of other countries that have acceded to the World Trade Organization. It finds that the Russian commitments represent a liberal offer to the members of the World Trade Organization for admission, but they are typical of other transition countries that have acceded to the World Trade Organization. The authors discuss the outstanding issues in the Russian World Trade Organizaiton accession negotiations, and explain why Russian accession will result in the elimination of the Jackson-Vanik Amendment against Russia. They discuss Russian policies to attract foreign direct investment, including an assessment of the impact of the 2008 law on strategic sectors and the increased role of the state in the economy. Finally, the authors assess the importance of Russian accession to Russia and to the international trading community, and suggestions for most efficiently meeting the government’s diversification objective.

Export restraints by the Russian Federation on natural gas and timber have been the source of major controversy between the European Union and the Russian Federation. The analysis of this paper suggests that the export restraints in natural gas very substantially benefit Russia. On the other hand, in raw timber the analysis suggests that a substantial reduction of Russian export taxes would increase Russian welfare. The paper explains that Gazprom has failed to invest adequately, resulting in little development of new gas supplies. The result has been progressively increasing use by Gazprom of Central Asian gas supplies, at progressively higher prices for Russia. The increased prices of gas for Russian consumers have shown that it is crucial for Russia to allow new entrants and to introduce competition in the Russian domestic market. Without export restraints, however, competition among multiple gas suppliers from Russia would erode or eliminate the monopoly profits of the Russian Federation on gas exports. Thus, with a more competitive domestic market, the Russian government would be expected to grant exclusive exporting rights to a single entity (as it presently does with Gazprom) or impose export taxes. Thus, Europe should not expect to achieve cheaper Russian gas as a result of structural reforms within the Russian gas market. A more promising avenue for European energy diversification is new pipeline construction to open up new sources of supply independent of Russia (especially the Nabucco pipeline), and liquefied natural gas purchases.

In this paper, the authors develop a 10-region comparative static computable general-equilibrium model of Russia to assess the impact of accession to the World Trade Organization on the regions of Russia. The model allows for foreign direct investment in business services and endogenous productivity effects from additional varieties of business services and goods produced under imperfect competition. The authors then show that these features are crucial to the results, as the welfare gains are about 20 times greater than in a constant-returns-to-scale model. The results for the estimated gains vary considerably across the regions; this is principally explained by the ability of the different regions to benefit from a reduction in barriers against foreign direct investment.

This paper discusses the political economy behind the principal trade policy decisions in Russia since independence. I discuss why export restraints were widely employed in the early transition years and why the export quotas proved more difficult to remove than anticipated. Why it was so difficult to resolve the monetary basis for the collapse in trade among the newly independent states. Why the search for rents for Russian industry motivated the creation of a customs union among selected countries in the Commonwealth of Independent States, but also proved its undoing. How Russian leaders initially were exceptionally insightful in seeing WTO accession as a golden opportunity for domestic reform, but why in recent years they have turned to industrial policy for diversification. I discuss the possibly unique political economy of Russia in which political contributions are extracted without political influence.

This paper summarizes the principal reform commitments that Russia has undertaken as part of its World Trade Organization (WTO) accession negotiations, providing detailed assessments in banking, insurance, and agriculture. The paper assesses the gains to the Russian economy from these commitments, based on a summary of several modeling efforts undertaken by the author and his colleagues. The author compares Russian commitments with those of other countries that have recently acceded to the WTO to assess the claim that the demands on Russia are excessive due to political considerations. He explains why Russian WTO accession will result in the elimination of the Jackson-Vanik Amendment against Russia. Finally, he discusses the remaining issues in the negotiations and the time frame for Russian accession as of the fall of 2007.

In this paper the authors use a computable general equilibrium model of the Kazakhstan economy to assess the impact of accession to the World Trade Organization (WTO), which encompasses (1) improved market access; (2) Kazakhstan tariff reduction; (3) reduction of barriers against entry by multinational service providers; and (4) reform of local content and value-added tax policies confronting multinational firms in the oil sector. They assume that foreign direct investment in business services is necessary for multinationals to compete well with Kazakstan business services providers, but cross-border service provision is also present. The model incorporates productivity effects in both goods and services markets endogenously, through a Dixit-Stiglitz framework. The authors estimated the ad valorem equivalent of barriers to foreign direct investment based on detailed questionnaires completed by specialized research institutes in Kazakhstan. They estimate that Kazakhstan will gain about 6.7 percent of the value of Kazakhstan consumption in the medium run from WTO accession and up to 17.5 percent in the long run. They estimate that the largest gains to Kazakhstan will derive from liberalization of barriers against multinational service providers, but the other three elements of WTO accession that the authors model all contribute positively to the estimated gains. Piecemeal sensitivity analysis shows that qualitatively the results are robust, but there are four parameters in the model that significantly affect the estimated magnitude of the gains from WTO accession.

Taking price changes from the Global Trade Analysis Project (GTAP) model of world trade, the authors use a small open economy computable general equilibrium comparative static model of the Russian economy to assess the impact of global free trade and a successful completion of the Doha Agenda on the Russian economy, and especially on the poor. They compare those results with the impact of Russian accession to the World Trade Organization (WTO) on income distribution and the poor. The model incorporates all 55,000 households from the Russian Household Budget Survey as real households. Crucially, given the importance of foreign direct investment (FDI) liberalization as part of Russian WTO accession, the authors also include FDI and Dixit-Stiglitz endogenous productivity effects from liberalization of import barriers against goods and FDI in services. The authors estimate that Russian WTO accession in the medium run will result in gains averaged over all Russian households equal to 7.3 percent of Russian consumption (with a standard deviation of 2.2 percent of consumption), with virtually all households gaining. They find that global free trade would result in a weighted average gain to households in Russia of 0.2 percent of consumption, with a standard deviation of 0.2 percent of consumption, while a successful completion of the Doha Development Agenda would result in a weighted average gain to households of -0.3 percent of consumption (with a standard deviation of 0.2 percent of consumption). Russia, as a net food importer, loses from subsidy elimination, and the gains to Russia from tariff cuts in other countries are too small to offset these losses. The results strongly support the view that Russia's own liberalization is more important than improvements in market access as a result of reforms in tariffs or subsidies in the rest of the world. Foremost among the own reforms is liberalization of barriers against FDI in business services.

This paper is the introduction and summary chapter of the 43 chapter volume entitled Handbook of Trade Policy and WTO Accession for Development in Russia and the CIS. The key policy conclusions of each of the chapters are highlighted in this paper. The Handbook will be published only in Russian in 2005, but an English language version of the majority of the papers described here is available on the website www.worldbank.org/trade/russia-wto. This paper first explains the potential importance of World Trade Organization (WTO) accession as a development tool, and discusses the recent successful development models and the role of trade policy in their development. The paper then summarizes the three parts of the Handbook. The first part treats trade policy (with applications to Russia and the Commonwealth of Independent States [CIS]). The second part treats World Trade Organization institutions and disciplines, again with Russia and CIS applications. And the third part focuses on various aspects of the impact of WTO accession on Russia. The numerous papers that relate trade policy and WTO accession to experience in Russia and the CIS are likely to be of special interest to native English speakers, since these papers are new to the literature. The papers in the Handbook are intended to be non-technical materials accessible to a wide policy audience. The Handbook forms the basis of a World Bank Institute course on trade policy and WTO accession, which has been delivered and will be delivered again on multiple occasions.

In World Trade Organization (WTO) accession negotiations, telecommunications is always a sector that receives close scrutiny by the WTO Working Party, and the extent of market access and nondiscriminatory treatment of multinational telecommunications companies in Russia has been a significant issue in Russia’s accession negotiations. The authors use a computable general equilibrium model of the Russian economy to assess the role of telecommunications in the discussions regarding Russian accession to the WTO. The results show that reduction of barriers to foreign direct investment in telecommunications will bring substantial gains to the Russian economy, including an increase in the productivity of Russian labor and capital. Despite the fact that multinationals use Russian labor less intensively than Russian firms, demand for Russian labor employed in telecommunications should increase, following reductions in barriers to foreign direct investment that are included in the context of WTO accession. This is because the overall demand for telecommunication services should increase due to the growth effects of the liberalization of barriers against foreign direct investment generally and the reduction in tariffs. Russian capital owners in telecommunications will likely be sought as joint venture partners and can restructure and obtain gains as partners with foreign firms. Wholly owned Russian firms are likely to experience losses.

The twelve members of the Commonwealth of Independent States established a Free Trade Area to help maintain trade among each other. More recently, Belarus, Kazakstan, the Kyrgyz Republic and Russia agreed, in principle, to establish a Customs Union (CU). The paper concludes that the dynamic effects of the CU (and Free Trade Area) are likely to be negative because it would tend to lock the countries into the old technology of the Soviet Union. The static effects are mixed but are adverse for countries that have liberal trade regimes compared to the common external tariff contemplated for the CU.

vWorldwide experience in the last 50 years demonstrates the benefits of open trade regimes: The OECD countries brought trade barriers down through successive WTO negotiations and experienced sustained growth in trade and incomes. Many developing countries governments initially felt differently and attempted to promote industrialization behind high protective barriers. But in the last ten years or so, the balance of opinion has shifted in these countries as well, as evidence accumulated that high rates of protection significantly depress economic development, and that open trade regimes are more conducive to growth. 2 Moreover, virtually all recent development success stories have been based on strong industrial export growth. Exporters have not been disadvantaged in these countries either because there were low barriers to imports— Chile, Hong Kong, and Singapore—or else regimes were developed to provide incentives to export comparable to import competing sectors despite the protection—the Republic of Korea and Taiwan (China), and Mauritius. 3 An effective trade policy is central to the integration of developing countries into the international economic system and the growth that will generate. Trade policy, together with the exchange rate, forms the transmission mechanism through which international trade affects domestic resource allocation, the efficient and competitive restructuring of industry and agriculture, access to new and diverse technologies, improved incentives to exporters, and reduction of smuggling, rent-seeking and corruption in customs.

Turkey and the European Union (eu) have agreed to implement a customs union. This means Turkey will eliminate its tariffs and levies on imports of manufactured products from the European Union. Turkey will also apply the eu's "common external tariff" on imports from third countries. Turkey will be obligated by 2001 to provide preferential access to its markets to all countries to which the eu grants such access. Since Turkey is both eliminating tariffs on eu imports and reducing tariffs on imports from third countries, it will become a rather open economy in nonagricultural sectors, with tariffs below 2 percent (zero for imports from the eu and slightly over an average 3 percent for thirdcountries). And since preferential access agreements with third countries will typically be reciprocal, Turkish exporters can expect improved access to those markets.

In 1981, the United States (U.S.) induced the Japanese to agree to a voluntary export restraint (VER) on their export of autos to the U.S. The countries negotiated the VER against a backdrop of falling U.S. production and employment in the auto industry and several legislative attempts to curb Japanese imports. The Japanese agreed to limit their U.S. exports to 1.68 million vehicles a year for a three year period. The study found that U.S. auto dealers captured some of the rents from the VER and that increasing returns to scale in the U.S. auto industry imply that protection has an effect on scale efficiency. From 1984 to 1987, seven Japanese auto manufacturing firms established assembly plants in the U.S. The authors argue that the VER generated pure profits in the domestic auto industry which induced the Japanese producers to enter the U.S. domestic market through foreign direct investment. Their entry then largely eliminated the abnormally high profits. The study sequentially introduces into the model the important elements of the auto industry and the VER, thereby isolating the impact of each on the estimates of the welfare effects of the VER. The impact of foreign direct investment was to lower the costs of the VER because the greater entry into domestic auto manufacturing resulted in a lower quota rent premium for foreign autos.

In this article a model is developed to evaluate the impact on an exporting country of a restraint imposed on its export by an importing economy in the context of a three region model of world trade in a single product. The welfare changes in any of the three regions in the model and in the global economy can be evaluated. The model is applied to the restraints imposed on steel exports from the Republic of Korea to the United States and the European Economic Community (EEC). The United States and the EEC are found to have incurred significant losses as a result of the restraints. The largest part of these losses are quota rents transferred to Korea and the rest of the world. Under reasonable parameter assumptions, Korea and the rest of the world obtain net gains from the quotas, because the resource misallocation costs are smaller than the quota rents. The model is modified to analyze a tariff barrier rather than a quantitative restraint. It is found that an equivalent tariff on steel transforms Korea and the rest of the world from net gainers to net losers as a result of a restraint.

Recently a number of studies have argued that foreign steel manufacturers use their export prices in relation to their domestic prices to smooth out fluctuations in home market demand. This phenomenon is called cyclical dumping. It is shown that the price discriminating monopolist model explains dumping, but its predictions with respect to cyclical dumping are ambiguous. Tests are performed for the United States, Japan and the European Community for each of three representative steel products. At conventional significance levels, the cyclical dumping hypothesis is rejected in all cases.