59227 POVERTY THE WORLD BANK REDUCTION AND ECONOMIC MANAGEMENT NETWORK (PREM) Economic Premise JANUARY 2011 · Number 47 An Initial Estimation of the Economic Effects of the Creation of the EurAsEC Customs Union on Its Members Lúcio Vinhas de Souza This note provides an initial estimation of some of the economic effects of creating the Eurasian Economic Community (EurAsEC) customs union. Relying on the computable general equilibrium model from the Global Trade Analysis Project (GTAP), results of the simulations consistently support the conclusion that, as an arrangement, the EurAsEC customs union (CU) would be a GDP-reducing framework in which the negative trade-diversion effects surpass positive trade-creation ones. The Treaty on Establishment of the Eurasian Economic Organization [WTO] accession in 2008 and the ongoing ne- Community was signed on October 10, 2000, by the presi- gotiations for a "deep free trade area" with the European dents of five Commonwealth of Independent States (CIS) Union [EU]) have limited Ukraine's involvement in this countries: Belarus, Kazakhstan, Kyrgyzstan, the Russian Fed- process. In a meeting on August 16, 2006, therefore, a deci- eration, and Tajikistan. Uzbekistan applied for membership sion was made to establish a CU within the EurAsEC frame- in 2005 and was formally accepted in 2006, but suspended work, comprising only Belarus, Kazakhstan, and Russia as its membership in December 2008. Additionally, Armenia, initial members. The other EurAsEC members will join this Moldova, and Ukraine have "associated status." EurAsEC's CU when their economies are ready. original building block is the treaty creating a CU compris- That decision received a significant boost with a surprise ing Belarus, Kazakhstan, and Russia; that treaty was signed announcement in mid-2009: Belarus, Kazakhstan, and Rus- on March 29, 1996. EurAsEC's main stated aims are, first, sia declared that they would aim for a joint WTO accession the ultimate (re)creation of a CU; and, later, development of after the creation of a CU among their three countries. This a "single economic space" among its members, all of which announcement was seen by some as reflecting the Russian were part of the former Soviet Union. government's growing disillusion with its very lengthy WTO Discussions about the creation of such a common eco- accession process (initiated in mid-1993 and now the nomic space involving the four largest CIS economies (re- longest-running effort of its kind in the history of the WTO); spectively, Russia, Ukraine, Kazakhstan, and Belarus) result- and was seen by others as confirming the limited commit- ed in an agreement of principle toward that aim, signed on ment to reform that led to this lengthy accession process in February 23, 2003. However, the political developments in the first place.1 A "customs union commission" would be the Ukraine in 2004 (compounded by Ukraine's World Trade CU managing body within the EurAsEC structure, comple- 1 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise mented by other structures (among them, the Interstate Figure 1. Changes in Tariff Lines for Belarus, Kazakhstan, and the Council [where heads of state and government sit and which Russian Federation is the main decision-making body] and the Court [which Belarus acts as a CU dispute settlement mechanism, with apparent Country supranational powers]). Kazakhstan The introduction of a common external tariff (CET) schedule based on the 2007 amendment to the Harmonized Russian Federation System nomenclature and the elimination of nontariff bar- riers among those three countries were slated for January 1, 0 10 20 30 40 50 60 70 80 90 100 2010. Remarkably, given the complexity of such tasks, this Percent deadline was achieved. Nevertheless, some very important no change increase decrease elements (for instance, division of customs revenues among the three states) were not completed until the end of 2010. Source: EurAsEC Secretariat. Additionally, the energy sector--a crucial economic sector for all three countries--has been integrated in a limited fash- ion into the initial harmonization effort. the formally liberalized intra-CIS trade and the free trade The EurAsEC point of departure was an already signifi- area of Belarus and Russia. Several studies show that Belarus cant level of tariff schedules convergence between Belarus already "overtrades" with the CIS/Russia by more than 200 and Russia. As a result of the further harmonization intro- percent.3 Namely, further negative GDP and welfare trade- duced with the CET in early-2010, 7 percent of Belarus' ap- diversion effects (that is, the dislocation of trade flows to proximately 11,200 tariff lines increased and 18 percent de- less-efficient trade partners because of the introduction of a creased. Among other items, tariffs on meat products, trade "tax wedge") may be greater than any potential posi- metals, and motor cars increased; those on apparel, footwear, tive trade-creation ones, resulting in a regional trade arrange- machinery, mechanical appliances, and pharmaceutical sub- ment that will be detrimental to the economies of the coun- stances decreased. In Kazakhstan, 10 percent of the tariff tries involved. lines increased and 45 percent decreased. Increases were The framework that will be used for such estimations seen on means of transportation, wood, refrigeration equip- here is the GTAP model (RunGTAP, version 3.53) and ment, pharmaceutical preparations, electro-mechanical do- GTAP 7 Data Base.4 The current GTAP database has 57 eco- mestic appliances, footwear, and apparel; there were decreas- nomic sectors, which were aggregated here in the 15 sectors es on agricultural products, hides and skins, and optical described in table 1. This reduced aggregation was chosen to medical or surgical instruments and appliances. In Russia, 14 facilitate the estimation process, while preserving enough percent of the tariffs increased and 4 percent decreased. Tar- detail to include the sectors most likely to be significantly af- iffs on meat products, yeast, and some articles of apparel and fected by the CU (among them, energy and autos) and to in- clothing accessories rose; those on fruit concentrates, baby clude those sectors of greater importance for the national food, materials for photography, wool and fabrics, pharma- economies involved. ceutical substances, parts of footwear, and electromechanical The set of input-output matrixes and tariff and tax data appliances decreased.2 requirements of the GTAP 7 Data Base have been signifi- In other words, with the exception of Kazakhstan, the cantly expanded to CIS countries.5 Additionally, its input- clear majority of the nontrade-weighted tariff lines actually output matrix for Russia was updated. The total number of remained unaffected. To a point, as noted above, that reflects countries now covered by the GTAP model stands at 113, the already high degree of harmonization that existed be- but this figure was aggregated in the set of 10 countries/re- tween Belarus and Russia (see figure 1). gions enumerated in table 2, encompassing all the EurAsEC CU members and their most relevant trade partners. Estimating the CU Effects: The Model and the Data Set Estimating the CU Effects: The Results This note will produce an initial estimation of the GDP, sec- It is important to point out that the convergence toward a toral output, and trade flows arising from the creation of the CET does not simply imply a transposition of the existing EurAsEC CU. It must be said that, in principle, what (if any) Russian tariff lines to the other members of the CU. The significant economic change could arise from this process is Russian tariff schedule itself also changed (as was apparent unclear because the economies were already largely integrat- in figure 1). Nor does it mean full harmonization. For in- ed in terms of trade. For instance, they were integrated via stance, Kazakhstan was allowed to apply tariffs different 2 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise Table 1. Sectors of the Model Used in the Simulations many constraints to any modeling exercise. Therefore, the simulated tariff changes necessarily will have an approxi- Sector Description mate and indicative value relative to the actually observed 01 Petrol Petroleum, coal products changes. Of course, this does not invalidate the exercise be- 02 GasOil Gas and oil cause, by its very nature, any economic modeling effort al- 03 Financial Financial services not classified elsewhere ways produces only indicative outcomes. 04 Truck Transport equipment not classified elsewhere With these provisos in mind, what do the results tell us? 05 Auto Motor vehicles and parts First, an estimation is made of the CU implementation (par- 06 GrainsCrops Wheat, cereal, and grains not classified elsewhere, allel to a full removal of any remaining taxes between the vegetables, fruits CU members), excluding the energy-related sectors (name- 07 MeatLstk Meat and meat products, animal products not ly, crude oil, gas, and processed petroleum products). The re- classified elsewhere sults are shown in table 3. Aggregate GDP results are either 08 Extraction Coal, minerals not classified elsewhere, forestry, unambiguously negative (Belarus and Russia) or nonsignifi- fishing cant (Kazakhstan) for the CU members, and largely irrele- 09 ProcFood Dairy and food products, sugar, beverages, tobacco 10 TextWapp Textiles, wearing apparel, leather products vant for all the other main EurAsEC CU trade partners.7 11 LightMnfc Wood and paper products, metal products not Looking at the results at an industry level, they are roughly classified elsewhere as one would expect, with the exception of the somewhat 12 HeavyMnfc Chemical, rubber, plastic, and mineral products not counterintuitive gains in the textile/apparel and truck (or, classified elsewhere; electronic and machinery more precisely, "other transport equipment") sectors for Be- equipment larus and Kazakhstan and the exception of autos and heavy 13 Util_Cons Electricity, heating, water and gas manufacturing and manufacturing for Belarus (given the greater tariffs, to ap- distribution, construction proximate the Russian level).8 Most other sectors experience 14 TransComm Sea, air, and land transport not classified elsewhere; noteworthy losses. Also, the trade balance worsens by ap- trade and communication proximately US$4 billion in Russia, is unchanged for Be- 15 Other services Insurance, business services not classified elsewhere, larus, and improves by roughly US$350 million in Kaza- public administration khstan. (Both Kazakhstan and Russia usually run large trade Source: GTAP, modified by the author. surpluses, whereas Belarus traditionally experiences large trade deficits.) Alternatively, one may estimate a scenario in which, with Table 2. Regions of the Model Used in the Simulations the implementation of the CU, there is a limited harmoniza- tion of the conditions in the energy sector--namely, crude 1 Russian Federation 06 Rest of Asia (including Oceania) oil and gas are traded in equal terms and processed petrole- 2 Belarus 07 Americas um products remain outside the CU. One might think of 3 Kazakhstan 08 EU-27 this as the central scenario in the short to medium term, giv- 4 Ukraine 09 Africa en the difficult discussions concerning changes in taxation of 5 China 10 Rest of the world the Belarusian exports of processed oil products (based on Source: GTAP, modified by the author. Russian crude oil imports).9 These results are shown in table 4. The GDP effects now are negative across the board for the CU members, and the GDP losses experienced by Belarus from those agreed in the CET to more than 400 tariff lines (the country that arguably benefits more than other CIS for a transition period lasting until 2015. There are also tariff economies from relatively preferential trade terms in gas and quota lists for several products (usually those of an agricul- crude oil) almost double to more than 6 percent of GDP. tural or husbandry nature) that vary for each CU member; Also for Belarus, the sectoral effects are now negative for al- and for 2010 at least, those lists are to be managed at the na- most all sectors, except the important petroleum products tional level. Finally, as indicated above, there is the all-impor- industry, which has significant positive gains and in this sce- tant question of the terms and time frame for incorporating nario is assumed not to be harmonized. The gains probably the energy-related industries into the CU.6 show that factors of production in sectors negatively affected These matters are further complicated by the fact that migrate to this protected sector, increasing its output. Russia, there is no full equivalency between the individual (or ag- with almost 90 percent of the EurAsEC CU aggregate GDP, gregate) CET tariff lines and the GTAP sectors and their re- has a GDP loss of more than 1 percent. The auto industry in spective tariffs (which are also calculated there as trade- Russia benefits somewhat, at the significant expense of that weighted ones and so are country-specific), which introduce industry in its CU partners (as do Russia's textile/apparel 3 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise Table 3. Simulation Results of CU without Harmonization of Energy Sectors GDP CHANGES Russian Rest of Federation Belarus Kazakhstan Ukraine China Rest of Asia Americas EU-27 Africa the world ­0.38 ­3.20 0.04 0.00 ­0.03 0.01 0.00 0.00 0.03 ­0.08 Sector Output changes per sector Petrol 0.15 0.66 ­1.45 0.15 ­0.10 0.08 0.08 0.17 0.08 0.01 GasOil 2.58 ­0.45 2.77 ­0.81 ­0.54 ­0.59 ­0.54 ­0.72 ­0.48 ­0.56 Financial 0.84 1.03 1.27 ­0.04 0.01 ­0.01 ­0.01 ­0.03 0.04 0.05 Truck ­11.54 12.47 6.40 ­1.47 0.14 0.00 0.06 ­0.03 1.22 0.77 Auto 1.16 8.58 ­24.61 ­1.75 0.01 ­0.06 0.00 ­0.04 0.54 0.05 GrainsCrops ­0.21 ­3.92 ­5.34 ­0.21 0.02 0.00 0.04 0.08 0.19 0.20 MeatLstk 1.76 ­4.19 ­1.31 ­0.51 0.00 0.00 ­0.08 ­0.03 ­0.07 0.01 Extraction ­1.74 ­6.51 ­4.74 ­0.89 0.00 ­0.06 0.00 0.01 0.13 0.11 ProcFood ­2.27 ­5.76 ­2.53 ­1.52 0.20 0.03 0.04 0.06 0.07 0.18 TextWapp ­2.70 7.10 11.37 1.18 ­0.25 0.03 0.06 0.01 0.64 0.61 LightMnfc ­2.22 ­3.69 0.82 ­2.00 0.00 0.01 0.03 0.05 0.74 0.40 HeavyMnfc ­11.38 5.76 ­11.84 ­0.01 0.09 0.06 0.17 0.22 1.39 0.94 Util_Cons ­1.30 ­0.45 ­1.14 0.28 ­0.03 0.04 ­0.03 ­0.09 ­0.16 ­0.32 TransComm 1.80 ­0.87 1.51 ­0.01 ­0.03 ­0.02 0.00 ­0.01 0.07 ­0.06 Other services 1.99 ­3.04 3.74 0.13 0.01 0.00 ­0.01 ­0.02 ­0.12 ­0.06 Source: Author's estimations. Table 4. Simulation Results of CU with Partial Harmonization of Energy Sectors GDP CHANGES Russian Rest of Federation Belarus Kazakhstan Ukraine China Rest of Asia Americas EU-27 Africa the world ­­1.25 ­6.26 ­0.43 0.07 ­0.04 0.00 0.00 ­0.05 0.00 ­0.10 Sector Output changes per sector Petrol 8.53 210.78 75.94 4.34 ­0.66 ­0.37 ­0.50 ­4.18 ­1.37 ­3.33 GasOil 0.01 ­44.97 ­1.94 ­3.45 0.50 0.42 0.22 0.91 0.40 0.65 Financial 2.11 ­4.26 ­0.35 ­0.37 0.00 0.00 0.00 ­0.01 ­0.06 ­0.02 Truck ­2.85 ­10.22 9.74 ­4.85 0.08 0.18 ­0.03 0.05 ­0.99 ­0.02 Auto 4.71 ­8.24 ­23.33 ­3.18 ­0.03 0.04 ­0.07 ­0.07 ­0.27 ­0.39 GrainsCrops ­0.06 ­3.96 ­5.94 ­0.58 0.03 0.02 0.05 0.14 0.09 0.09 MeatLstk 0.29 ­3.84 0.08 ­0.75 0.00 0.01 ­0.10 ­0.01 0.04 0.03 Extraction 1.13 ­5.88 ­2.89 ­0.93 ­0.04 ­0.08 ­0.05 ­0.03 ­0.18 ­0.09 ProcFood ­1.98 ­6.08 ­2.55 ­2.38 0.19 0.01 0.04 0.08 0.06 0.16 TextWapp 1.06 ­26.60 2.92 ­1.83 ­0.11 0.18 0.04 0.08 ­0.45 ­0.29 LightMnfc 2.42 ­18.83 ­3.61 ­3.89 0.03 0.05 0.00 0.06 ­0.31 ­0.11 HeavyMnfc ­3.29 ­22.54 ­12.97 ­0.47 0.04 0.08 0.10 0.16 ­0.75 ­0.12 Util_Cons ­0.08 7.26 6.91 1.02 ­0.09 ­0.08 ­0.06 ­0.23 ­0.09 ­0.38 TransComm 0.62 2.27 2.79 ­0.21 ­0.05 ­0.04 ­0.02 ­0.03 ­0.17 ­0.16 Other services ­0.37 5.68 1.13 ­0.02 0.00 0.00 0.00 0.01 0.07 0.08 Source: Author's estimations. 4 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise and light industry sectors, and as do the truck and textile/ap- reducing nature of the arrangement. The sectoral pattern of parel industries in Kazakhstan). Additionally, the trade bal- results is again similar to the previous scenarios (that is, over- ance worsens by almost US$11 billion in Russia, by more whelmingly negative), as are the ones in the non-CU trade than US$800 million in Belarus,10 and by almost US$800 partners. Finally, the trade balance worsens by almost US$11 million in Kazakhstan. As before, the rest of the world is just billion in Russia, close to US$600 million in Belarus, and marginally affected, albeit sectoral effects of importance may more than US$$800 million in Kazakhstan. again be found in Ukraine, a trade partner for whom the EurAsEC CU is an important market.11 Conclusions Finally, we estimate the results of a full harmonization of the energy sectors trade tax treatment, parallel to creation of In this brief note, an initial estimation of some of the eco- the CU. These results are shown in table 5.12 nomic effects of the creation of the EurAsEC CU was per- Again, the results are unambiguously negative for all CU formed, using the GTAP CGE model. The simulations pre- members, and again Belarus has the greatest GDP losses sented here have some weaknesses and limitations, suggesting among all countries. Nevertheless, the GDP losses are halved that the results should be seen as more indicative than pre- for both Belarus and Russia when compared with the previ- scriptive. Nevertheless, the results of all different scenarios ous scenario. That result may reflect both economies adjust- consistently support the conclusion that, as an arrangement, ing away from the suboptimal allocation of resources. For in- the EurAsEC CU would be a GDP-reducing framework stance, that led Belarus to concentrate excessively in wherein the negative trade-diversion effects clearly over- economic sectors for which it has no real or only limited whelm any positive trade-creation effects. In general, GDP comparative advantages. This process may help erase some falls and most industries are negatively affected by the of the trade-diversion GDP losses caused by creating the arrangement (regardless of the assumptions used) and the EurAsEC CU, but it doesn't hide the underlying GDP- external positions of the CU members worsen. This result Table 5. Simulation Results of Full CU GDP CHANGES Russian Rest of Federation Belarus Kazakhstan Ukraine China Rest of Asia Americas EU-27 Africa the world ­0.66 ­2.77 ­0.54 0.11 ­0.04 0.00 0.00 ­0.04 0.00 ­0.12 Sector Output changes per sector Petrol ­9.32 34.63 26.76 10.26 0.10 ­0.07 0.39 0.33 0.41 0.80 GasOil ­1.40 ­39.31 ­2.17 ­4.84 0.27 0.09 0.01 0.56 0.14 0.36 Financial 2.01 ­2.62 ­0.26 ­0.49 0.01 ­0.01 0.00 0.00 ­0.04 0.03 Truck ­1.20 ­4.76 10.65 ­6.50 0.08 0.10 ­0.03 0.05 ­0.43 0.36 Auto 5.49 ­3.83 ­22.96 ­3.95 ­0.02 0.00 ­0.06 ­0.07 ­0.07 ­0.24 GrainsCrops 0.14 ­0.47 ­5.63 ­0.82 0.03 0.02 0.05 0.12 0.12 0.13 MeatLstk 0.57 0.26 0.01 ­0.79 0.01 0.01 ­0.10 ­0.01 0.01 0.04 Extraction 1.13 ­7.53 ­3.02 ­0.68 ­0.01 ­0.07 ­0.01 0.00 ­0.06 ­0.03 ProcFood ­1.54 ­1.67 ­2.51 ­2.73 0.20 0.02 0.04 0.09 0.06 0.19 TextWapp 2.16 ­19.49 3.61 ­3.08 ­0.12 0.13 0.04 0.07 ­0.16 0.08 LightMnfc 3.11 ­14.93 ­3.44 ­4.91 0.02 0.02 0.00 0.04 ­0.06 0.03 HeavyMnfc ­1.70 ­12.18 ­11.26 ­1.02 0.02 0.06 0.10 0.07 ­0.20 0.04 Util_Cons 0.28 5.91 7.09 1.28 ­0.09 ­0.03 ­0.05 ­0.24 ­0.10 ­0.45 TransComm 0.95 3.93 2.94 ­0.30 ­0.04 ­0.03 ­0.02 ­0.05 ­0.11 ­0.20 Other services ­0.15 11.75 1.16 ­0.06 0.02 0.00 0.00 0.03 0.01 0.09 Source: Author's estimations. 5 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise compares poorly with the largely positive effects arising 8. Those results should be seen as a percentage change in from multilateral trade integration (such as WTO accession13 the output of the sector in relation to a non-CU benchmark. and free trade areas with the EU).14 9. For a description of the terms of the Belarus-Russia en- ergy trade, see Gatovsky and Kashinskaya (2006); for an Notes analysis of the energy trade between Russia and the CIS countries, see Lysenko and Vinhas de Souza (2007). In De- 1. For an overview of the expected effects of Russia's cember 2010, an agreement was announced between Be- WTO entry, see Alekseev et al. (2004); for the effects in Be- larus and Russia in which Russia would continue to provide larus, see Pavel and Tochitskaya (2005) or an earlier analysis Belarus with a tax-free amount of oil for domestic consump- of the Belarus case by Vinhas de Souza and Bakanova tion, and Belarus would be responsible for collecting and (2002). A recent overview of the trade relations between Be- transferring to the Russian treasury revenues of processed oil larus, the EU, and CIS/Russia is available at Tochitskaya and products exported from its territory. (It should be noted Vinhas de Souza, (2009). that, as of late-January 2011, the actual terms of the agree- 2. For another 376 CET tariff lines (mainly in textiles and ment are still being negotiated.) footwear) for all CU members, it was unclear if the CET in- 10. For Belarus--the country among EurAsEC CU mem- troduction would increase or decrease rates because of dif- bers with by far the most fragile external position (that is, ferent national classifications for products. systematically very large trade and current account deficits 3. Specifically, the CIS share should be less than 15 per- and low foreign currency reserves)--that would have im- cent, although it actually is close to 50 percent--mostly as a plied in 2010 an increase in the trade deficit from an already result of trade with Russia. Kazakhstan overtrades with the huge 14 percent to approximately 17 percent of GDP. CIS by 70 percent, whereas Russia's share is the predicted 11. The positive effect in the Ukraine petrol industry that one. Conversely, Belarus significantly undertrades with the partially compensates for the negative effects elsewhere EU, using almost half of its predicted trade share (see Shep- may just reflect the nonadjustment of the terms of trade in otylo [2009]). some energy products. The sector does not operate under 4. The GTAP model is a quasi-dynamic computable gen- full market conditions, given external subsides (by Russia) eral equilibrium (CGE) multiregion global trade model, in and domestic cross-subsidisation (see Lysenko and Vinhas which interregional links come mostly from bilateral trade de Souza [2007]). flows, and input-output and social accounting matrixes rep- 12. All estimations presented in this report underwent resent the countries' different productive structures. See several types of robustness analysis (reestimation of the mod- Hertel and Tsigas (1997) for a comprehensive description. els by robust multistep solution algorithms, which reduce lin- A CGE model is a state-of-the-art workhorse tool for simu- earization errors) and sensitivity analysis (to parameter and lation analyses of the effects of the creation of regional trade shock values); and these analyses confirmed the results. agreements. 13. On December 7, 2010, Russia signed an agreement 5. The CIS countries now included in the GTAP are Ar- with the EU that, in principle, eliminates the remaining out- menia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzs- standing bilateral issues in the Russian WTO accession ne- tan, Russia, and Ukraine. Therefore, all EurAsEC CUs are in gotiations. This agreement might open the way for a WTO the data set. This expansion of the GTAP database toward entry by 2011-12, finalizing a process that has lasted for the CIS was one of the main aims of one of the working more than 17 years (and thereby achieving the dubious dis- packages of the EU "Eastern Neighbourhood: Economic Po- tinction of being the longest accession process in the history tential and Future Development" project. This particular of the WTO). working package (namely, "Analysis of the Economic and In- 14. Among many sources, see Alekseev et al. (2004); Pavel stitutional Consequences of WTO Accession and of Future and Tochitskaya (2005); and Tochitskaya and Vinhas de EU-CIS Free Trade Agreements") was designed by Lúcio Souza (2009). Vinhas de Souza while at the Kiel Institute for World Econ- omy, one of the partners in that project. About the Author 6. This also includes long-term questions--such as the granting of exports and imports monopoly rights (fully ex- Until September 2010, Lúcio Vinhas de Souza was responsible cluded from the CU competences); and in Russia, where gas for Russia and Belarus at the Directorate-General for Economic exports are a state monopoly, this situation will not be af- and Financial Affairs of the European Commission in Brussels, fected by the CU creation. Belgium. He is currently on a temporary leave of absence from 7. Those GDP results should be seen as a percentage the European Commission, working with the World Bank's De- change in relation to a non-CU benchmark. velopment Prospects Group in Washington, DC. Vinhas de 6 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise Souza also currently holds positions as associate fellow/associate Lysenko, T., and L. Vinhas de Souza. 2007. "The Effects of Energy Price lecturer in several research institutes and universities in Western Shocks on Growth and Macroeconomic Stability in Selected Energy- Importing CIS Countries." European Economy Occasional Papers. Euro- and Eastern Europe. The views expressed in this note do not nec- pean Neighbourhood Policy: Economic Review of EU Neighbour Countries essarily reflect those of any organization with which the author 30 : 2­22. is or was associated. All usual disclaimers apply. Pavel, F., and I. Tochitskaya. 2005. "The Economic Impact of Belarus' Ac- cession to the WTO: A Quantitative Assessment." IPM Research Center, References Minsk, Belarus. http://research.by/pdf/pp2004e14.pdf. Shepotylo, O. 2009. "Export Diversification across Industries and Space: Do Alekseev, A., D. Sokolov, N. Tourdyeva, and K. Yudaeva. 2004. "Estimating CIS Countries Diversify Enough?" Discussion Paper 20, Kyiv School of the Effects of EU Enlargement, WTO Accession and the Formation of Economics, Kyiv, Ukraine. FTA with EU or CIS on the Russian Economy." Unpublished manu- Tochitskaya, I., and L. Vinhas de Souza. 2009. "Trade Relations between an script. New Economic School, Center for Economic and Financial Re- Enlarged EU and the Russian Federation, and Its Effects in Belarus." Eco- search, Moscow, Russia. nomic Change and Restructuring 42 (1): 1­24. Gatovsky, A., and I. Kashinskaya. 2006. "Belarusian Trade in Energy Goods." Vinhas de Souza, L., and M. Bakanova. 2002. "Trade and Growth under Unpublished manuscript. IPM Research Center, Minsk, Belarus. Limited Liberalization: The Case of Belarus." Discussion Paper 2002- Hertel, T., and M. Tsigas. 1997. "Structure of the GTAP Model." In Global 053/2, Tinbergen Institute, Rotterdam, The Netherlands. Trade Analysis: Modelling and Applications, ed. T. Hertel, pp. 38­46. Cambridge, UK: Cambridge University Press. The Economic Premise note series is intended to summarize good practices and key policy findings on topics related to economic policy. It is produced by the Poverty Reduction and Economic Management (PREM) Network Vice-Presidency of the World Bank. The views expressed here are those of the authors and do not necessarily reflect those of the World Bank. The notes are available at www.worldbank.org/economicpremise.