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# Policy Research

~~~~~~~~IntwmAttonal Trade o fl5 -@A O Q1. **~** ~ ~ ~ ~ ~ ~ ~ ~ ~ **4** WPS 1 175 Thispaper- aproduct ofthe IntematidnalTrade Division, International Economics Deparrnent-is part of a largereffort in the departnent to analyze and predict structural changes in trade and to identify factors operating to restrain trade. Copies of this paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Jean Jacobson, room _S7-035,_ extension 33710 (September 1993, 35 pages).

ow VJsing a comprehensive World Bank-UNCrAD data base on tariff and nontariff barriers (NTBs), : Kaminski and Yeats examine the incidence of OECD trade barriers to exports of the fonner Soviet Urion S.U). OECD markets have grown steadily in importance in te -]past decade and now receive rore than half of FSU exports. And additioal trade ould help the FSU republics make the transition to markqt economies.

Overall, OECI) taEiffs that the FSU republics face are 70 to 9G percent higher than the average paid on all goods imported, but their worst effect C~ s ishe result If the _margins ofpreference_ they give other (.bn-FSU) exporters. For example, because of a spial EFTA-EC protocol, manufactures are traded duty-free between countries in these two blocs, while similar (competing) FSU goods may face duties of 20 percent or more.

No significant trade expansion will occur unitil nontariff barriers are liberalized in NTB"ridden" product groups of intrest to FSU exporters. Sectors in which NTBs are particu-Mrly important include fish, fruit, sugar, veg:eables, beverages, textiles clothing, and ferrous metals. OECD trade barriers on some FSU commodity exports provide high levels of "effective protection" that constrain the efforts of the newly independent states of the FSU (NIS.s) to increase domestic commodity processing.

Although the United States has granted most-favowd-nation status to the NISs (excludiiig Azerbaijan), and tle European Community recently signed the Agreements on Trade, Commercial, and Economic Cooperation with the Baltic states, these developments have not substantially improved their market access. Because of geograt'ic proximity and the existing transportation network, the European market is the most important OECD market for most NISs. But under present EC arrangements, NIS products are subject to highler tariffs and more restrictive nontariff barriers than exports from EFIA members, Lome Convention signatories, or former European CMEA members (the Czech Republic, Hungary, Poland, Romania, and Slovakia). Lower wage rates in many NISs may not be sufficient to compensate for their generally lower productivity and the losses in value added (triggered by higher tariffs) that exporters have to absorb to compete in protected markets.

Except for exports of energy and industrial raw materials, trade opporunities for many products in which the newly independent states of the former Soviet Union might have a comparative advantage are greatly restricted by OECD tariffs and nontariff bariers.

ThePolicy Research Working PapSeriesdisseminates therfdings of workunderway in theBanku Anobjectiveof the series is to get these findings out quickly, even if presentaions are less than fuly polished. The fndings, interpretations and concWsous in these papers do not necessarily represent official Bank policy.

Produced by the Policy Research Dissemnadon Center . ,~~~~~~~~~~~