Kazakhstan applied to join the World Trade Organization (WTO) in January of 1996. Twenty long years later (July 27, 2015), President Nazarbayev signed the official ascension documents in Geneva, making it the 162nd WTO member state.
While assessing the impact of Kazakhstan’s entrance into the WTO is difficult at this early stage, speculation is rampant given current geopolitical tension in Central Asia and the global price of oil. This article will attempt to contextualize this decision by adding insight to three questions – why, why now, and what’s next?
Why?
The WTO is an important stepping stone for legitimacy and integration on the world stage. To some, most notably Kazakh economist Aidarkhan Khusainov, WTO membership is more comparable to United Nations membership, simply providing an image boost, rather than a substantive change in Kazakh political economy. This diminished outlook is not the only position in Kazakhstan and around the world, however, as many believe that this move will open up Kazakh markets, allow for increased foreign investment, and diversify the largely energy-dependent and landlocked nation.
Regardless of economic prognostications, Nazarbayev’s signature ultimately formalized an already informal economic reality. As Nazarbayev himself said, “In the mid-1990s, Kazakhstan had ties only with post-Soviet states, while now we are trading with 185 countries of the world.” Kazakhstan’s elevated status into the WTO, therefore, is a bit more pomp and circumstance, and less substantive change, as much of the Kazakh economy has already been developed in the global arena for some time. Thus, WTO membership is more about affirmation of deeds already accomplished, than hope for potential development somewhere far off in the future.
Why Now?
Kazakhstan’s membership status in some ways could always be seen as a foregone conclusion. For example, more than 50% of the nation’s trade is with the European Union. WTO membership, therefore, is a continuation of a two-decade long process of real economic integration and reform, rather than a radical departure from it. The significance of ‘now’ is less about Kazakhstan’s economic reality and more about the potential geopolitical and economic challenges in the region.
First, the global drop in the price of oil has had a significant impact on the Kazakh economy. WTO membership will not only provide new opportunities for investment and economic diversification, but greater flexibility in global markets.
Second, U.S.-led sanctions on Russia have indirectly constrained Kazakhstan’s economy. Russia and Kazakhstan are more than trade partners, but members of the Eurasian Economic Union (EEU), which features Kazakhstan, Russia, and Belarus. Russia’s economic woes have negatively affected the strength of this union. Evidence of this from a political perspective is the renewed stress on WTO negotiations from both Kazakhstan and Belarus starting in 2013. Moreover, Russia has gradually shown a willingness to support these negotiations (Russia joined the WTO in 2012) rather than oppose them.
Third, the why now of this moment is representative of a broader desire for engagement in Central Asia, particularly between those global players with higher stakes in the region. We are far from a proliferation of cooperation, but recent events have shown an environment in cautious conversation and optimistic consideration. WTO membership does not magically transform enemies into friends, but it does pave the way for a more solid process of enhanced cooperation between Kazakhstan and many other nations.
What remains to be seen is whether this shift is more representative of the dynamism of the landscape or the individual states? In this case, will we see motivated regional cooperation or cooperation in lieu of state capacity for direct or unilateral action?
What’s Next?
Economic projections range from the optimistic (new investment and development) to the pessimistic (job loss, wage decrease, and simply being out competed) to the apathetic (WTO is more about banal prestige and less about workable policy). Any basic economic theory will show that increased free trade comes with benefits and drawbacks, where the effect on the state is ultimately determined by good governance. What is most clearly next is Kazakhstan’s opportunity to diversify economically and have that diversification feed into a new positive political evolution. If the country is able to broaden its economic capacity, then its membership in the WTO, at least in the short term, is a win, offering Kazakhstan an outlet from energy export dependence. If it is able to broaden that into real political (read: democratic) consolidation, then membership in the WTO will have proven far more invaluable than anyone could have surmised. These potential geopolitical ramifications and speculative regional suggestions are what should be seen as the truly fascinating, and still unknown mystery, of pending WTO ascension.
What Kazakhstan’s WTO entrance hopefully suggests is less contestation and more cooperation across Central Asian economies. The EEU can be seen as strong evidence of this. Until very recently, the EEU was a barrier for Kazakhstan’s entrance in the WTO. With Russia and Kazakhstan now WTO members, and Belarus poised to follow, the EEU (which is Russian-led), has shown a clear willingness to conform to global economic standards. The EEU is thus now operating within the parameters of the WTO. What remains to be seen is if there is a bigger or more politically-motivated strategy behind Russia’s cooperation. Put another way – how does this affect the regional economic strategy of Russia’s so-called privileged area of influence? Is Kazakhstan moving away from the regional fold and into independence (or interdependence) in the global market? I find it difficult to believe that Russia would passively allow the countries of what it considers to be its personal sphere of influence to integrate one by one into the global economy (a US and EU-led order) without also trying to achieve serious advantages or privileges for itself. This is not necessarily a bad thing. Indeed, it is quite a normal thing when considering international political economy. But there are both acceptable ways of achieving those advantages or privileges and non-constructive ways. In this case, a win for WTO liberal institutionalism is a sign that both sanctions and the regional economic landscape have limited Russia’s influence and ability to project power arbitrarily. Russia can either adapt to that reality and incorporate itself better into that changing landscape or problematically try to fight such change. Time will tell exactly how that plays out.
To turn to Kazakhstan’s strategic outlook, however, WTO membership represents not only a win for Nazarbayev’s ambitions, but for Kazakhstan’s potential as a serious player on the international stage. Being the strongest economy of the former Soviet states but also quite literally surrounded by great and regional powers, Kazakhstan has been unable so far to cast a long geopolitical shadow in any direction. I expect Kazakhstan to gradually fill this opportunity of potential by trying to expand its own capacity and in so doing drafting more of an independent, rather than subservient, strategy to its large imposing neighbor to the North. Hopefully, Kazakhstan will carve out that new role without incurring a heavy price militarily or in terms of new economic regional conflict. So congratulations, Kazakhstan, on the end of your 20-year odyssey. Here is to hoping a WTO with Kazakhstan turns into a win-win-win for all sides: Kazakhstan, Central Asia, and the global community.
