CENTRAL ASIA BETWEEN WEST AND EAST
Abstract
When I was first asked to speak about the prospects of EU expansion into Central Asia, I replied that this would be a very short paper! There is no such prospect. But no one with my love for speaking would let it go at that. So, I decided to interpret the question in a different way: would it be preferable for some or all of the Central Asian countries to seek some kind of associate status with the West or with the East, or with neither, nor with both—through the World Trade Organization? And would they be accept-ed by the EU, ASEAN, or the WTO? Would closer ties with Russia or China be a good idea? In this essay these possibilities are considered in turn.
Let’s start with a few definitions and basic facts. I define the Central Asian (CA) states as the former Soviet republics of Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. The first is to the west of the Caspian Sea, but its culture and political-economic regime are similar to the others. The Xinjiang-Uighur Autonomous Region of the People’s Republic of China, Afghanistan, the Azeri parts of Iran, and several Turkic1 parts of the Russian Federation might likewise be included as Central Asian, but except for Afghanistan, none of these areas is a sovereign entity able to arrange its own trade affairs. Since the Treaty on European Union specifies that membership is open to “European” states, the implication is that these clearly Asian states are not even remotely candidates for membership in the EU.2
All these six Turkestani states of Central Asia are landlocked, remote from the main world markets. Azerbaijan has just been connected to the Mediterranean by the Baku-Tbilisi-Ceyhan oil pipeline, and Turkmenistan and Kazakhstan have gas or oil connections to Russia, but these are limited in capacity. All six states are ruled by authoritarian presidents who hold to an ideology of secular nationalism as opposed to political Islam.
one is a “democratic” state. Human rights, free media, and an independent judiciary are all missing. Not one has held a fair election, in the estimation of OSCE or other outsider observers. All suffer from corruption and weak protection of private property, especially the petroleum-rich states among them. Hence, even aside from geography, they do not presently meet the Copenhagen criteria for membership in the European Union.
Within a basically authoritarian political regime, all of these regimes have pursued some gradual economic reforms, with an external strategy I call “export globalism”—dependence on staple exports with multilateralism as contrasted with regional integration or neocolonialism. Except for the capital or main commercial cities, they are poor, even if high energy prices lately appear to put Kazakhstan, Azerbaijan, and possibly Turkmenistan into a slightly higher GNI category. Owing to Soviet-era development of their health and educational facilities, their U.N. (UNDP)human development indices are rated “medium. "The poorest sections of Uzbekistan (Karakalpakstan, near the devasted Aral Sea), parts of Kazakhstan, and the mountainous regions of Tajikistan and Kyrgyzstan have lost significant population, as many males have left for Russia or elsewhere to earn money in manual labor. Skilled Germans, Slavs, and Jews had departed in the 1990s.
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Tajikistan and Afghanistan are ethnically Central Asian, but linguistically West Iranian.
One might perhaps argue that Turkey, Georgia, and Armenia are culturally “European,” because of language, re-ligion, or geography,—hence possible future candidates—
ut in Central Asia only the northern tier of Kazakhstan has any significant European population.
For a somewhat more detailed survey of these coun-tries, the reader may consult my “Central Asia on the Edge of Globalization,” Challenge, Spring 2004 or the longer essays on Uzbekistan, Turkmenistan, Tajikistan, Kyr-gyzstan, and Kazakhstan in The Economic Prospects of the CIS, Sources of Long Term Growth, ed. by Gur Ofer and Richard Pomfret, Edward Elgar Publishers, Cheltenham,U.K. and Northampton, MA, 2004. Richard Pomfret’s forth-coming book from Princeton University Press is the most authoritative recent treatment of Central Asian economies as a whole.
In 2000 export/GDP ratios were 59% for Kazakhstan, 42% for Kyrgyzstan, 81% for Tajikistan, 63% for Turkmen-istan, and 25% for Uzbekistan; but the last figure will be higher for 2004-2005 because of the return to a convertible soum (see: The World Bank, 2004, p. 9). The area’s staple exports often pass through entrepôt markets, such as Switzerland or Bermuda.
Russia’s share in the Central Asian markets temporarily expanded following its 1998 devaluation. Despite poor rail and road connections, the Russian Federation remains a natural market for Central Asian goods, as judged by distances, as well as familiarity with market conditions.
See: M.C. Spechler, “Regional Cooperation in Central Asia,” Problems of Post-Communism, Journal of Central Asian Studies, Vol. IV, No. 1, November-December, 2002, pp. 42-47. Little has changed since 2002 in this regard.
Uzbekistan has the highest general tariff rate—an average of 19%.
Besides its North Caucasus fields, Russia gets natural gas from Turkmenistan, Kazakhstan, Uzbekistan, and Azerba-ijan in that order.
See: European Union Enlargement, ed. by N. Nugent, Palgrave Macmillan, New York, 2004, p. 214.
See: W. Cimoszewicz, “The Eastern Dimension of the European Union. The Polish View,” Speech at the confer-ence “The EU Enlargement and Neighborhood Policy” [www.msz.gov.pl/start.php]. At the time, Mr. Cimoszewicz was Poland’s Minister of Foreign Affairs.
See: The Economist, 25 June, 2005, p. 4. Russia would probably settle for visa-free entry and institutionalized political consultations, as it has with NATO.
See: European Union Enlargement, p. 134. Permit me as an American to admit the contradiction between my government’s free trade and development rhetoric and its outrageous $3 billion support for cotton farmers in the U.S.
See: A. Adam, Th. Moutos, “The Political Economy of EU Enlargement: Or, Why Japan is Not a Candidate Country,” in: Managing European Union Enlargement, ed. by H. Berger and Th. Moutos, MIT Press, Cambridge, 2004,p. 290.
From rich to poor, Singapore, Malaysia, Thailand, the Philippines, Indonesia—the original members—then Bru-nei, Vietnam, Myanmar (Burma), Cambodia, and the Lao PDR. The last four joined in the late 1990s. Their total popula-tion exceeds 540 million with an average income of about $3,500 per capita at purchasing power parity—a level of GDP per head not very different from Central Asia.
See: Sh. Narine, Explaining ASEAN. Regionalism in Southeast Asia, Lynne Rienner, Boulder, CO, 2002,pp. 131ff.
New members must also eliminate nontariff barriers, harmonize their customs nomenclatures, and implement the GATT Valuation Agreement. All these measures would be helpful to Central Asian trade.
ASEAN countries are in fact quite diverse culturally: Buddhist, Islamic, and Sinic. English is usually the language of intra-regional meetings. Internationally and within the Central Asian region, too, CA is usually assigned to Europe or Eurasia, though Tashkent shares a longitude with Bombay.
See: D. Webber, “Two Funerals and a Wedding? The Ups and Downs of Regionalism in East Asia and Asia Pa-cific after the Asian Crisis,” in: Comparative Regional Integration, ed. by F. Laursen, Ashgate, Aldershot, Hampshire,England, 2003, p. 138.
Intra-regional trade was 22% of ASEAN total trade as of 1999, as compared with 63% in the EU at that time (see:
bidem).
See: S. Andriamananjara, M. Schiff, “Regional Cooperation Among Microstates,” Review of International Econom-ics, Vol. 9, No. 1, 2001, pp. 41-51; P. Athukorala, J. Menon, “AFTA and the Investment-Trade Nexus in ASEAN,” World Economy, Blackwell Publishing, Oxford UK, Vol. 20, No. 2, 1997, pp. 15-174. Japanese FDI is a strong force for regional integration in Southeast Asia, especially monetary integration these days.
See: O. Lumenga-Neso, M. Olarreaga, M. Schiff, “On ‘Indirect’ Trade-Related R&D Spillovers,” Policy Research Working Paper 2580, The World Bank, Washington, D.C., 2001.
See: “China Isn’t Only Game in Asia,” Wall Street Journal, 12 May, 2005, p. A13.
The EU does not grant GSP status to Myanmar because of its human rights record, but as a member of WTO,that country must be granted MFN. This experience might well be relevant in the case of Uzbekistan, Turkmenistan, or even Kazakhstan. On the other hand, the EU does grant special GSP “regional cumulative rules of origin” provisions for processing operations carried out within ASEAN. Reportedly this helped Lao PDR garments to enter the EU (see: E. Fu-kase, W. Martin, “Economic Impacts of ASEAN Free Trade Area Accession for the Lao People’s Democratic Republic,”in: ASEAN Enlargement: Impacts and Implications, ed. by M. Than and C. Gates, Institute of Southeast Asian Studies,Singapore, 2000).
Former Prime Minister of Singapore Lee Kuan Yew mentioned this in the Straits Times, 23 January, 2001 (Quot-ed from: D. Webber, op. cit., p. 145).
See: B. Desker, “Islam in Southeast Asia: The Challenge of Radical Interpretations,” Cambridge Review of Inter-national Affairs, Vol. 16, No. 3, October 2003, pp. 415-28.
Assuming the presidents in Central Asia wish to liberalize, WTO membership might give them “cover” (see: Es-kender Trushin, Eshref Trushin, “Kazakhstan and Uzbekistan: The Economic Consequences of Membership in the World Trade Organization,” in: Central Asia and the New Global Economy, ed. by Boris Rumer, M.E. Sharpe, Armonk, New York,2000, p. 197). The authors are experienced Uzbekistan nationals.
E. Fukase, L.A. Winters, “Possible Dynamic Effects of AFTA for the New Member Countries,” The World Econ-omy, 2003, pp. 853-871.
E. Fukase, W. Martin, Free Trade Area Membership as a Stepping Stone to Development. The Case of ASEAN.
orld Bank Discussion Paper No. 421, The World Bank, Washington, D.C., 2001, p. 112.
See: Vo Tri Thanh, “Vietnam’s Trade Liberalization and International Economic Integration: Evolution, Problems,and Challenges,” ASEAN Economic Bulletin, Vol. 22, No. 1, 2005, pp. 75-91.
See: Vo Tri Thanh, op. cit. This multi-sector study was circulated as a discussion paper by CIEM-NIAS (Hanoi)in 2002.
E. Fukase, W. Martin, Free Trade Area Membership..., citing computable general equilibrium studies by D.A. De-Rosa for the International Food Policy Research Institute in 1995 and J.D. Lewis and Sherman Robinson for the World Bank in 1996.
Richard Pomfret has estimated that Uzbekistan could benefit to the amount of 3 to 5% of its GDP if US/EU cot-ton subsidies were removed.
United Nations Conference on Trade and Development, Regional Integration and the World Economy, 16 Octo-ber, 2000, United Nations, New York and Geneva, 2001, pp. 13-14.
See: Regional Integration and the Multilateral Trading System, OECD, 1995, p. 81. This unofficial report found that existing regional and multilateral approaches have been complementary for trade and investments.
As of now, Belarus is the other member. Moldova and Ukraine are observers.
See: G. Rabballand, “Determinants of the Negative Impact of Being Landlocked on Trade: An Empirical Investi-gation Through the Central Asian Case,” Comparative Economic Studies, Vol. 45, No. 4, December 2003, pp. 520-536.
uriously, this economist from the Sorbonne assumes Central Asian trade will go mainly to Europe. Land-lockedness seems to reduce trade on all continents some 75-80% from the volumes predicted by gravity models, apparently because of costs and delays of border crossings. That would be in addition to the costs of land haulage, roughly double that by sea (see:
. Limão, A.J. Venables, “Infrastructure, Geographical Disadvantage and Transport Costs,” World Bank Economic Review,Vol. 15, No. 3, 2001, pp. 451-479).
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