Consequences of trade wars for Belarus

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Summary 

Trade wars that followed the events of 2014 in Ukraine affected not only their direct participants, but also other countries such as Belarus, through the trade relationship between the countries. According to Ossa model assessment (2014), trade wars lead to an increase in trade flow through Belarus, which in turn leads to an increase in revenues from import duties. At the same time, because of the ban on imports of meat and dairy products, Russian Federation's income from import duties decreased.

As a member of the Eurasian Customs Union, Belarus claims to receive a fixed proportion of the total income from import duties. The reduction of Russian Federation's income from import duties leads to a decrease in the total income from import duties of the Customs Union and decrease of Belarus income from import duties after their redistribution. As a result, welfare of Belarus decreases. To avoid this, Belarus should advocate the change of redistributive schemes.

Belarus can increase its well-being during trade wars by leaving the Customs Union and remaining only a member of the CIS Free Trade Zone. As a member of the zone, the optimal import duties imposed by Belarus in trade wars will be higher than the optimal import duties in the absence of trade wars. The increase of import duties is the best answer to the increasing trade flows through Belarus.

Authors
Aliaksandr Vashchylka
Sector 
Year 
2016
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Last updated 21.09.2016
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