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CIS Free Trade

Setting up a CIS Free Trade Zone has been on the agenda for quite some time, although practically none of the former Soviet republics can actually afford this today. The CIS countries are economically unprepared to quickly adopt a new kind of cooperation in free trade without restrictions and exceptions. And Russia is impending the process, insisting on Moscow-run Customs Union and Euro-Atlantic Economic Community as integral components. The Free Trade Zone documents were expected to be signed at the CIS summit in Yalta (Ukraine) held in September this year. However, only a joint statement of the CIS heads of state was adopted indicating that the creation and successful functioning of the free trade zone is a main priority for the CIS member countries. The agreement on setting up a single economic space including four countries such as Ukraine, Russia, Belarus and Kazakhstan was concluded in the course of the Yalta summit. The new formation will probably give a fresh impetus to the free trade zone project taking into consideration the fact that Moldova, Georgia, Tajikistan, Armenia, Azerbaijan and Kyrgyzstan announced their intention to join the agreement.

International experiences show that free trade zones are remarkably effective in a number of regions. There are fifteen such zones, such as the European Union (15 countries), the European Free Trade Association (Norway, Iceland, Switzerland, Liechtenstein), and the North Atlantic Free Trade Association (Canada, Mexico, and the United States). Latin American business is done duty-free courtesy of Mercosur (Argentina, Brazil, Paraguay, Uruguay, and Chile), and the Andean Community including Bolivia, Colombia, Ecuador, Peru, and Venezuela. Further free trade zones were created by the Caribbean states and South Africa, including Botswana, Lesotho, Namibia, Swaziland, and those in Southeast Asia (Brunei, Cambodia, Indonesia, Lagos, Malaysia, Burma, the Philippines, Singapore, Thailand, Vietnam), associating into the ASEAN Free Trade Association, or AFTA. It is important to point out that none of these countries has ever demanded special privileges. Stable trade relationships among such FTZ countries are complemented by their WTO membership with all those well-rehearsed, time-tested, and clear-cut principles of doing business, observed by every WTO member. It should be noted that some 1.5 billion people currently reside within such free trade zones, and that their overall GDP amounts to US$ 23-25 trillion. Such areas mean free migration of capital, products, and manpower.

The foundation of the Commonwealth of Independent States created a qualitatively new system of interstate relations between independent states in the sphere of foreign economic ties. The development of foreign trade on the basis of bilateral intergovernmental agreements on free trade, signed in 1991-1993, featured the peculiarities of the system.

In 1994, CIS member countries took a number of measures aimed at transition to multilateral free trade regime on the basis of a corresponding Agreement on Free Trade Zone Establishment. But the CIS countries failed to set up and agree on a multilateral list of exits from the free trade regime, stipulated by the Agreement. That is why the 1999 Protocol on entering amendments and supplements to the Agreement on the establishment of a free trade zone stipulated that the exits from the free trade zone regime, being of a temporal character, may be applied on the basis of bilateral documents.

The mentioned Agreement and Protocol replaced the existing bilateral free trade zone regime with a multilateral one. The prospect of establishment of the CIS common market has become a reality.

Setting up a CIS Free Trade Zone is the first stage in the process of building the CIS Economic Union. But in the process of its formation the CIS member countries will have to pass through several stages such as:

  • elimination of obstacles for free movement of commodities and services (cancellation of customs fees, as well as equivalent taxes and fees, qualitative restrictions and other obstacles);
  • establishment and development of an effective system of mutual accountancy and payments in trade and other kinds of operations;
  • cooperation in conducting trade and economic policy;
  • facilitating scientific and technical cooperation;
  • harmonization and unification of legislation of the CIS member countries which is essential for a proper and effective functioning of the free trade zone.

Frankly speaking, starting a CIS free trade zone is a matter of time. According to Alexander Lifshitz, a noted economist, former Finance Minister of Russia, the CIS member countries could receive an annual 1-2% GDP increment by instituting free-trade and reciprocal import-export procedures.

By Vlada Popushoi

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