Trade policy development in the Black Sea Region

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Guzhva Igor
PhD, Vice-rector for scientific work and international relations Ukrainian State University of Finance and International Trade, Kyiv, Ukraine
Received 11 January 2016 Accepted 20 January 2016 Published 28 February 2016
Black Sea Economic Cooperation, regional forum, trade facilitation, free trade area, investment cooperation.
The article focuses on analyzing the current status and perspectives of the development of common trade policy mechanisms among Black Sea Region countries within the Black Sea Economic Cooperation. This research points the trends in trade flows among BSEC members, discusses the profound alterations in regional economic cooperation and global trade policy agenda that necessitate the reformation of the BSEC. It is argued that Black Sea Region countries should develop new BSEC agenda on trade issues, which will embrace the creation of information exchange mechanism, joint research body and trade facilitation.
© 2016 The Author.
Introduction. The Black Sea Economic Cooperation Organization (the BSEC) was established in 1992 by the Black Sea Economic Cooperation Declaration. The BSEC includes 12 countries: Azerbaijan, Albania, Bulgaria, Armenia, Greece, Georgia, Moldova, Russia, Romania, Serbia (the BSEC member since April 2004), Turkey and Ukraine. All of them have a direct access to the Black Sea or have economic interests in the area. Therefore, the Organization was established to strenghten economic cooperation among the Member States, increase free movement of goods and services, capital and labor and integration of economies of these countries into the global economic system.
Under the Charter of this Organization the Member States cooperate in the following areas: trade and economic development, finance and banking, communications, energy, transportation, agriculture, health and pharmaceutics, environmental protection, tourism, science and technology, cooperation in the field of culture, statistical data and economic information exchange, collaboration among customs authorities, humanitarian contacts and the fight against organized crime etc.
According to & quot-The BSEC Economic Agenda& quot- provisions, adopted at the Jubilee Summit in Istanbul on June 26, 2012, also the 20th anniversary of the Organization, the main current goal of the Organization is to promote the rational use of resources, scientific, technical and infrastructural capacities of the Member States in order to provide peace and sustainable development in the Black Sea Region (BSEC, 2012).
Results. The existence of the BSEC for 20 years itself has demonstrated the feasibility and necessity of such a regional organization. At the current stage of the world economy the BSEC countries occupy a prominent place in the international commodity market (Table 1).
In 2014 the largest share of foreign trade among the BSEC Member States belonged to Russia (its exports is 55. 9% of the total exports of the BSEC and imports is 35. 3%), Turkey (share of the BSEC exports amounted to 17. 7% and share of the BSEC imports amounted to 29. 9% and Ukraine (respectively, share of the BSEC exports amounted to 6. 1% and share of the BSEC imports amounted to 6. 7%). Overall in 2014, the BSEC Member States merchandise exports amounted to over 890 billion USD, representing about 5. 6% of the global goods exports. Despite the differences in the foreign trade balance in the BSEC Member States, the overall balance in 2014 was positive and amounted to over 79 billion USD.
Given the significant potential of the BSEC Member States in the global market, the Organization'-s main statute goal is to create a regional Free Trade Area. However, given the current dynamic development of the integration process among the BSEC Member States, the achievement of this goal is unrealistic, since all BSEC Member States have joined different integrated groups outside of the Organization and its functioning principles and economic interests are inconsistent with each other.
Table 1. The BSEC Member States Foreign Trade in 2014
Country Export Import Balance (USD mln.)
(USD mln.) Share (Country/BSEC- BSEC/world), % (USD mln.) Share (Country/BSEC- BSEC/world), %
Azerbaijan 21 751,7 2,4 9178,5 1,1 12 573,1
Albania 2430,7 0,3 5229,9 0,6 -2799,2
Bulgaria 29 386,5 3,3 34 740,0 4,3 -5353,5
Armenia 1490,1 0,2 4159,5 0,5 -2669,3
Greece 35 755,3 4,0 62 180,6 7,7 -26 425,2
Georgia 2861,1 0,3 8596,2 1,1 -5735,0
Moldova 2340,0 0,3 5317,0 0,7 -2977,0
Russia 497 833,5 55,9 286 648,8 35,3 211 184,7
Romania 69 877,8 7,8 77 889,0 9,6 -8011,1
Serbia 14 843,3 1,7 20 608,5 2,5 -5765,2
Turkey 157 714,9 17,7 242 223,9 29,9 -84 509,0
Ukraine 53 913,3 6,1 54 381,4 6,7 -468,1
BSEC 890 198,7 5,6 811 153,8 5,1 79 044,9
Total in the world 15 864 249,0 15 870 318,7 —
The source: UN Comtrade Database (2015)
In particular, Greece, Bulgaria and Romania are the EU Members States, Turkey and the EU have formed a Customs Union, Russia and Armenia are members of the Eurasian Economic Union, Ukraine, Georgia and Moldova have signed Association agreements with the EU which envisage the formation of deep and comprehensive free trade areas. At the same time, several countries are actively negotiating bilateral free trade agreements. Thus, the formation of a & quot-net"- of the integration groups requires changes to the conceptual approach to the trade areas of cooperation within the BSEC.
Discussion. Therefore, a practical step of the regional trade intensification within the BSEC, in our opinion, should be trade facilitation among the BSEC Member States, based on the UNECE Recommendations and in accordance with the provisions of the WTO Agreement on Trade Facilitation (WTO, 2015). According to the UNECE (2014) definition, trade facilitation is & quot-the simplification, standardization and harmonization of procedures and associated information flows required to move goods from seller to buyer and to make payment& quot-. Also the automation of trade procedures and information flows which have become increasingly more important must be added to this definition. In other words, the new WTO Agreement is aimed at creating favorable conditions for performance of export-import transactions in the shortest terms and in a convenient way. The importance of the Agreement also lies in the fact that it is the first multilateral WTO Agreement, which was adopted after the establishment of the WTO in 1995.
The trade facilitation at the regional level as well as at the national level covers many different processes (e.g., the trade information flows rationalization and automation, the public-private partnerships establishment, the transit traffic simplification, the border crossing procedures simplification and the integrated customs management) and involves the active participation of public authorities, businesses, financial institutions, carriers and freight forwarders.
In examining the experience of the Association of Southeast Asian Nations (ASEAN), the primary stage of development and deepening of the regional trade and economic cooperation is the
establishment of so-called starting point for further harmonization and trade liberalization (AFTA, 2014). In a practical aspect this means the collection and systematization of the information about trade regimes and conditions of export-import transactions in the concerned countries. At the current stage, it can be concluded that the existence of the consolidated and systematized information on the conditions and formalities of performances of transactions with separate countries largely simplifies work of direct participants in international trade.
In our opinion, the Organization such as the BSEC can and should serve as a regional forum for the exchange of ideas, suggestions and jointly developing solutions to the simplification of the documentary and procedural trade procedures. Adoption of the new multilateral WTO Agreement on Trade Facilitation is an additional lever of the BSEC Member States activities intensification at the regional level. Accordingly, practical steps to trade facilitation in the Black Sea Region in the medium-term perspective should focus on efforts of the BSEC Member States in:
— establishing the Trade Facilitation Regional Council, which will include representatives from government, science and business of the BSEC Member States-
— developing concepts and strategies for trade facilitation in the Black Sea Region-
— coordinating the action plan for the implementation of the regional strategy- and
— taking decisions on the financial and organizational issues.
The active participation of governments representatives and business communities of the BSEC is especially important. Moreover, such work should be comprehensive and systemic. It is also important to maintain dynamism in joint meetings of working groups (on trade and economic development, customs cooperation, agriculture, infrastructure, etc.). Successful implementation of the proposed measures in the medium-term perspective will provide:
— simplification of procedural and documentary import and export transactions-
— creation of favorable conditions for the regional trade and investment cooperation intensification-
— coordinated work of the BSEC Member States governments, in particular the improvement of the efficiency and transparency level in the administration of export-import transactions- and
— regional public-private dialogue.
Since almost all BSEC Member States are the Members of the WTO and some countries are in the process of joining this organization, it should be noted that the WTO as a whole provides quite convenient and extremely practical mechanism for information exchange that makes international trade transparent and predictable. This includes the notifications mechanisms (informing the WTO Member States of changes in trade regimes) and the Trade Policy Review (periodic reports on the trade policies of the WTO Member States).
For the purposes of trade and economic cooperation intensification in the Black Sea Region it is proposed to carry out the localized and specialized information exchange at the regional level which can be more efficiently distributed among the interested foreign economic activity participants. In particular, this initiative can be implemented through the creation of a single information portal for allocation of such information on BSEC Member States as:
— country profile — general information-
— foreign trade regime, including conditions of market access for goods and services-
— trade related statistical data-
— national standards-
— procedures related to import, export and transit of goods and related formalities-
— emergent information on trade remedies, TBT and SPS issues and others recent changes in foreign trade regime-
— prompt notification on significant events taking place in the Black Sea Region- and
— investment projects and business opportunities.
At the first stage it is important to identify contact points (or persons) in every concerned country for efficient information collection. It is also important to have a proper collection center and system of received information.
Another way to ensure information exchange among BSEC members is to analyze a publication of the BSEC Annual Report & quot-BSEC: Assessment of the progress made to overcome barriers to trade& quot- that will provide updated information on trade and economic developments in the Region.
In the framework of a discussion of practical steps as to the regional trade intensification and development in the Black Sea Region the attention should be drawn to the possibility of application of the modern tools of economic analysis, modeling and forecasting, including tools operating within such projects as GTAP (USA), RIM (Russian Federation), EcoMod (EU). Carrying out an analysis of the BSEC Member States current trade regimes with application of these instruments will determine the industry specialization in the production of certain goods etc. The most reasonable way to organize such studies, in our opinion, is to launch the joint research program, which will focus on:
— comparative analysis of foreign trade regimes of BSEC Member States-
— business surveys on what prevents the development of trade and economic cooperation in the Black Sea Region- and
— developing the medium-term strategy of the Black Sea Region economic growth.
Received findings will allow to argue optimal conditions, forms and methods of trade and
economic cooperation development in the Black Sea Region.
Undoubtedly, the major source of information for the improvement of trade environment in the BSEC Region is experience and skills of its Member States. In practice the findings of these studies will provide reference information for the entities concerned over the amount of business activity. At the state level the BSEC Member States could use these findings as a basis for decisionmaking in foreign policy. To the BSEC these measures will create conditions for the continuation of the analysis and study of issues related to specialization and localization of production activities in the Black Sea Region, including the value chains formation.
1. BSEC (2012) Renewed Economic Agenda «Towards an Enhanced BSEC Partnership». Available at: http: //www. bsec-organization. org/Information/SiteImages/Annex%20VI_Attach3%20-%20The%20BSEC%20Economic%20Agenda. pdf.
2. UN Comtrade Database (2015) Merchandise: Trade matrix by product groups, exports in thousands of dollars, annual, 1995−2014. Available at: http: //unctadstat. unctad. org/wds/Table Viewer/tableView. aspx? ReportId=24 739.
3. WTO (2015) Trade Facilitation Agreement: Official document. Available at: https: //www. wto. org/english/tratop_e/tradfa_ e/tradfa_e. htm.
4. UNECE (2014) Trade facilitation — principles and benefits. Available at: http: //tfig. unece. org/details. html.
5. AFTA (2014) Understanding ASEAN'-s Free Trade Agreements. Available at: http: //www. aseanbriefing. com/news/2014/ 02/13/understanding-aseans-free-trade-agreements. html.

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