Post-Soviet Free Trade

Ever since the Soviet Union collapsed, the independent states that emerged from the wreckage have tried to sort out their trade relations. But the flow of goods between countries continues to contract even more than it should. What is needed is free trade.

The twelve members of the Commonwealth of Independent States (CIS) concluded an Agreement on a Free Trade Zone in 1994, but it does not work. Whenever one member is successful in exporting to another, the importing member soon imposes quotas or prohibitive tariffs, impeding economic development.

The simple solution is a mechanism for conflict resolution. The World Trade Organization (WTO) has a well-functioning arbitration court with accepted penalties that could be utilized, but only four CIS countries (Kyrgyzstan, Georgia, Moldova, and Armenia) have joined the WTO. The largest CIS economies-Russia, Ukraine, and Kazakhstan-should hurry up and join as well. Alas, instead of adapting tried and tested mechanisms, various CIS countries invent ever more complex schemes, such as the five-state Customs Union, which was renamed the Eurasian Economic Community last year, when its failure became evident.

The latest invention is the recent declaration by the Presidents of Russia, Belarus, Kazakhstan, and Ukraine to start negotiations on forming a "Unified Economic Space." Three ideas are contained in this nebulous term: a customs union, coordination of accession to the WTO, and a currency union. None of these will benefit any participant.