The accession of Turkmenistan to WTO: what will it give to people?

The accession of Turkmenistan to WTO: what will it give to people?

What happened?

At the end of July Turkmenistan officially received the status of an observer in the World Trade Organization (WTO). The country’s application was unanimously accepted by all members of the given structure which includes 164 states.

ORIENT well explains what is the joining of WTO as an observer for Turkmenistan means, and what benefits to ordinary citizens it promises.

Why WTO exists?

WTO acts as the guarantor of observance of certain rules which allow its participants to trade with each other fairly and on a competitive basis. The Organisation’s member countries incur obligations and laws which do their national economies liberal, free from state intervention pass.

Thus, by “intervention” one often takes into account the state support to economy. Privileges for farmers, cheap credits for business, the customs duties on the import goods… All this is considered intervention in economy from the state and contradicts WTO principles.

The matter is that state support to businessmen in one country can limit possibilities of business from another. It becomes more difficult to second to export the production, it is more difficult to compete with local manufacturers who use privileges from the state. And such advantage of one of the parties breaks a principle of free competition – one of market economy pillars. In summary – the general decrease in trade between the countries.

Whether the economic policy of Turkmenistan contradicts WTO principles?

Unequivocally it is impossible to tell. Turkmenistan is a socially-focused state, the policy of which inherently assumes granting of various privileges both to ordinary people and business.

In 2015 in the country long-term government programs on development and support of import replacing and export-oriented manufactures were approved. During the same period it was entrusted to state banks to finance more actively businessmen and agro-manufacturers, to give them financial privileges. Restrictions on import of some kinds of the goods for support of local manufacturers were introduced.

At first sight it may seem that the economic policy of Turkmenistan contradicts key principles of the WTO. But it is not absolutely so.

The matter is that measures of support taken by the state are directed to establishment of enterprises as fast as possible in the enterprise country the production of which can compete with import analogues and also be exported. When this purpose is reached, privileges will be not so necessary to manufacturers. Moreover – they will start to interfere with expansion of geography of Turkmen export.

So, if the Turkmen government will continue to support the manufacturers already after they become competitive internationally, foreign countries will block deliveries of their goods, referring to dishonest competition and underestimated, subsidised prices.

Thus, the period of active state support can be replaced by the period of systematic liberalisation quite naturally. It will be a competent strategic step which will help the country to be integrated into the international trade relations successfully.

Whether privileges to business will be soon cancelled?

No. Firstly, Turkmenistan has become only an observer in the WTO for a while. It means that the country yet has not incurred any obligations but only starts their exploration.

Secondly, being an observer in the WTO, Turkmenistan will receive now all tools and the information, necessary to estimate – whether the domestic economy is ready to liberalisation or not. Only on the basis of this analysis corresponding decisions will be undertaken.

Privileges, grants and other kinds of state support will be reduced only in the event that home producers really will be ready for it and reach the global level of competitiveness.

Thirdly, experience shows that states join the WTO officially after long (on the average 9, 5) years of negotiations. For example, Russia conducted them for 18 years (!) – from 1993 to 2011, and officially was admitted into the organisation only in 2012.

Fourthly, each question on the joining of the countries the WTO is considered individually and considers many factors. So, Kazakhstan has joined the WTO, but has reserved the right to support agriculture at the expense of state grants. The similar situation can occur to Turkmenistan. All again depends on the results of the analysis of economy and long-term negotiations.

How the joining of Turkmenistan the WTO will impact ordinary buyers?

The goods in the Turkmen market for simple consumers will become cheaper, and production assortment will extend.

All this will be caused because of economy liberalisation that will lead to increase in quantity of the new enterprises, import and export growth, competition increase, and together with it, to reduction of prices. It will be easier for foreign business to run business in the country, it is more favourable to export even more production.

Today many manufacturers in Turkmenistan should not compete with foreign suppliers, however, they let out competitive production. Occurrence of real opponents from abroad will induce the domestic developer to improve the manufacture and the price policy, to struggle for clients and to pay more attention to their requirements.

Thus, to some extent, it will become more difficult to business, but domestic consumers anyway will win from liberalisation of economy.

Jennet Ovezova