CERR studies show that participation in regional trade agreements can increase Uzbekistan’s exports by 140%
Tashkent, Uzbekistan (UzDaily.com) -- On 8 April 2021, Deputy Director of the Center for Economic Research and Reforms (CEIR) Umid Abidkhadjayev took part in the International Discussion Club on the topic “Central Asia: from regional interaction to joint sustainable growth”.
According to the deputy director of the leading think tank of Uzbekistan, 2/3 of world production occurs within the framework of global and regional value chains. In this regard, Uzbekistan should pay special attention to the establishment and strengthening of economic ties with the countries of Central Asia (CA), including the creation of joint ventures for export to third countries.
Export is an important indicator in foreign trade and shows the importance of export markets for Uzbekistan. In 2020, the share of CA countries in total exports of Uzbekistan amounted to 14.5%. At the same time, among the CA countries, the largest volume of exports fell on Kazakhstan and Kyrgyzstan 6.0% and 5.0%, respectively.
Speaking about numbers, Umid Abidkhadjayev noted that in the period 2017-2019. trade turnover with the Central Asian countries almost doubled from US$2.7 billion to US$5.2 billion.
In his speech, the Deputy Director of CERR presented a preliminary analysis of the comparative advantages in the economy and the prospects for the growth of the export potential of the Republic of Uzbekistan.
In particular, the assessment of the effects of the conclusion of regional trade agreements (RTAs) on the flows of exports and imports using the gravity model of foreign trade (Gravity Model), carried out as part of the CERR study, showed that, all other things being equal, participation in the RTA can double the volume of bilateral export and import of Uzbekistan.
The obtained coefficients of elasticity allow to draw a number of important conclusions. The effect of trade volumes: the obtained coefficients suggest that, other things being equal, participation in regional trade agreements (RTAs) leads to an increase in Uzbekistan’s exports by an average of 140.4%, which is close to existing estimates in the literature [Baier and Bergstrand, 2007; Anderson and Yotov, 2016]. For example, Baier and Bergstrand (2007) documented that, on average, a free trade agreement roughly doubles the bilateral trade of two trading partner members over 10 years. Effect of tariffs: The introduction of tariffs in importing countries on imports from Uzbekistan negatively affects Uzbekistan’s exports. All other things being equal, with the introduction of tariffs in trading partner countries, the average equivalent decline in Uzbekistan’s exports is 16%.
It follows from this that Uzbekistan’s participation in regional trade agreements can more than double the volume of bilateral exports and imports. At the same time, exports may increase to a greater extent. At the same time, the introduction of tariffs in trading partner countries can significantly reduce Uzbekistan’s exports to these countries.
It is expected that the expansion of mutual access by the CA countries to domestic markets can largely contribute to the solution of the tasks set by them to increase the export of finished products, since in mutual trade in most non-primary goods, these countries are not competitors, but partners.
In particular, increasing the export opportunities of commodity producers can contribute to the creation of regional value chains in the CA region, including industrial and agricultural clusters, which can have a compensatory effect in reducing transaction costs.
At the same time, as the Deputy Director of CERR emphasized, it is necessary to pay attention to the digital economy and the creation of digital trading platforms for Central Asia.
The expert noted that investing in infrastructure projects in CA countries is an important condition for development in the medium term.
- According to ADB’s Meeting Asia’s Infrastructure Needs report, Asia will need about US$22 trillion to maintain current economic growth rates. dollars of infrastructure investments until 2030. Such investments are good because they have a spillover effect, that is, their positive indirect effect goes beyond state borders and, ultimately, it is a game with a non-zero sum,” Abidkhadjaev emphasized.