72713 v1 World Trade Indicators 2009/10 Mongolia Trade Brief Trade Policy technology, machinery and fertilizer from VAT and customs duties through the end of 2009.3 In June Mongolia began its transition to a market�based 2008, after food prices peaked globally, the economy in 1991 and liberalized its trade in the course government abolished customs tariffs for imported of its WTO accession in 1997. As represented by a wheat flour, butter, green tea, pork, fish and other MFN Tariff Trade Restrictiveness Index (TTRI)1 for food items for three months.4 High fuel prices overall trade of 4.3 percent, Mongolia has a slightly prompted the government to abolish excise taxes, more liberal trade policy than its East Asia and Pacific customs duties and VATs for imported petrol and (EAP) regional neighbors (which scored an average diesel fuel in July 2008, which were later re-imposed in TTRI of 4.8 percent), and a significantly more open October 2008.5 To stimulate exports in the face of market when compared to lower-middle-income falling global demand, the government removed an countries (which have an average TTRI of 8.6 export tax on raw cashmere in June 2009, and raised percent). It ranked 54th (where 1st is least restrictive) the number of authorized ports with China to export among 125 countries. The country’s import barriers cashmere from 3 to 20.6 remain slightly lower for non-agricultural goods than for agricultural goods, with TTRIs of 4.2 and 5.3 percent, respectively. The simple average of the MFN External Environment applied tariff rate was 5 percent in 2008. Yet it still Mongolia’s Market Access TTRI7 (including remains well below the average for the EAP region preferences) for 2007 is 1.6 percent for all goods, with and lower-middle-income countries, which are 9.3 and no significant difference found between agricultural 11.4 percent, respectively. Mongolia decreased its and non-agricultural goods. Its exports face lower maximum tariff on all goods (excluding alcohol and barriers than the average for both the EAP region and tobacco) in 2007 from 15 to its current value of 10 lower-middle-income countries, which have MA- percent. The trade policy space, as measured by the TTRIs of 3.8 and 2.4, respectively. The simple average overhang, has remained constant over the past several of the rest of the world tariff faced by Mongolian years and in 2008 was equal to 12.6 percent. Regarding exports is 10.1 percent. When weighted by actual the extent of its commitments to services trade exports, it is 1.9 percent, with the rate faced by liberalization, Mongolia ranked 65th out of 148 agricultural goods (7.8 percent) substantially higher countries according to the GATS Commitment Index. than non-agricultural goods (1.4 percent). Mongolia In response to rising food prices in the first half of benefits from the EU’s GSP plus scheme of 2008, Mongolia removed import tariffs on wheat and preferences for 7200 types of products and remains 40,000 tons of wheat flour.2 Wheat seed imports were the only WTO member not signed on to a FTA. In exempted from the country’s value added tax (VAT) January 2008, Canada announced that it would begin through May 2011 and in February 2008 the negotiations of a bilateral investment deal with government exempted high-tech irrigation facilities, Mongolia.8 Towards end 2008, as exports dropped, it became extremely costly ($365 million dollars in reserves between July and December 2008) to maintain the Mongolian tugrug/tugrik at its effectively Unless otherwise indicated, all data are as of August 2009 pegged rate to the US dollar, and the tugrug was and are drawn from the World Trade Indicators 2009/10 allowed to depreciate in November 2008.9 The Database. The database, Country Trade Briefs and currency depreciated 38 percent over the two quarters Trade-at-a-Glance Tables, are available at (October 2008- March 2009).10 http://www.worldbank .org/wti. If using information from this brief, please provide the Behind the Border Constraints following source citation: World Bank. 2010. ―Mongolia Mongolia was placed in the top third of favorable Trade Brief.‖ World Trade Indicators 2009/10: Country Trade global business environments in the Ease of Doing Briefs. Washington, DC: World Bank. Available at Business index for 2009, being ranked 60th out of the http://www.worldbank.org/wti. World Trade Indicators 2009/10 Mongolia Trade Brief 183 countries. However, the country placed in the 2. FAO, 2009 and State Great Khural Resolution No. 96. bottom 10 percent in the Logistics Performance Index 3. Mongolian Law on VAT and State Great Khural 2007, a measure of the ease of trade facilitation. As a Resolution February 27, 2008. landlocked country which relies on transit 4. State Great Khural Resolution No. 235. transportation (through Russia and China), Mongolia’s 5. State Great Khural Resolution No. 282. score was weaker than its regional and income group 6. Global Trade Alert, 2009. comparators. As a member of the Central Asia 7. MA-TTRI calculates the equivalent uniform tariff of Regional Economic Cooperation (CAREC) Program, trading partners that would keep their level of imports a group of eight regional neighbors created to increase constant. It is weighted by import values and import economic cooperation, Mongolia agreed in November demand elasticities of trading partners. 2008 to invest significantly towards upgrading the 8. Bilaterals.org, 2008. infrastructure in a number of trade corridors by 9. World Bank, February 2009. 2017.11 In spite severe fiscal constraints, the 10. World Bank, July 2009 government has committed to infrastructure 11. Asian Development Bank, 2008. development and maintenance. 12. All output data is from IMF 2009. 13. Bank of Mongolia, 2009. Trade Outcomes 14. Economist Intelligence Unit, 2008. During 2008, Mongolia’s total trade in goods and services combined grew by 53.6 percent in nominal References US dollar terms during 2008.12 The Mongolian Asian Development Bank. November 21, 2008. CAREC economy is highly dependent on exports from its Program Adopts Ambitious Transport, Trade, and mining sector, particularly copper and gold, which accounted for 33 and 24 percent of total exports in Energy Plans. 2008, respectively.13 It is also the second largest global ———. 2009. Asian Development Outlook 2009: Rebalancing cashmere producer.14 Exports of goods and services Asia’s Growth. (almost three-quarters of which are sent to China) Bilaterals.org. January 14, 2008. Canada Announces Start of increased by 34.4 percent in 2008, as the high prices Bilateral Investment Treaty Negotiations with Mongolia. for gold and copper in the first half of the year, Economist Intelligence Unit. 2008. Country Profile 2008: buoyed the sharp decline in copper prices in the Mongolia. second half of 2008. This decline, coupled with the Food and Agriculture Association of the United Nations decrease in worldwide demand for minerals, led to an (FAO). 2009. Policy Measures Taken by Governments to overall decrease in exports during the last quarter of Reduce the Impact of Soaring Prices (As of 15 December 2008 of 3.2 percent and a further decrease of 44.4 2008).‖ percent in the first quarter 2009, on a year-on-year Global Trade Alert. August 2009. Mongolia: Export Tax for basis. Cashmere Abolished Along with Measures to Promote Exports. Mongolia imports most of its non-meat food and International Monetary Fund (IMF). February 2009. petroleum and as a result imports increased by 70.8 International Financial Statistics. percent in 2008, causing high inflation. China and World Bank. July, 2009, Mongolia Monthly Economic Update Russia are the source for almost two-thirds of its ———. February, 2009. Mongolia Quarterly. imports, with oil making up the greatest share of World Trade Organization. July 15, 2009. Report to the imports from Russia. As prices fell in late 2008 and TPRB from the Director-General on the Financial and early 2009, inflation eased, and although imports grew Economic Crisis and Trade-Related Developments. by 36 percent on a year-on–year basis in the last Bank of Mongolia. 2009. Balance of Payments-Mongolia quarter of 2008, they fell by 39 percent in the first /2004-2008. quarter of 2009. . Notes 1. TTRI calculates the equivalent uniform tariff that would keep domestic welfare constant. It is weighted by import shares and import demand elasticity.