Научно-исследовательский центр Мизеса

Importation is one of the most remarkable failures of the Belarusian government in 2005. After an unprecedented rise in 2004, by 41.4 percent, imports were projected to rise by up to 10 percent in 2005. However, imports rose by just 1.3 percent. The average prices of imported products increased by 3.1 percent, while the physical volume of imports shrank by 4.6 percent. Belarus is steadily turning into a closed economy, a Venezuela in Eastern Europe, but working on imported oil and gas.
The government obviously overreached itself in its fight against import. Quotas, quality certificates, administrative restrictions at the level of retail trade, discriminatory payment regime, high import duties and large customs costs and a wide campaign aimed at stimulating demand for domestic products had led to a sharp - and unexpected - fall in the amount of imports.
Belarus imported 19.24 million tons of oil last year, an 8.7-percent increase year-on-year. The share of mineral products in the structure of imports rose from 28.2 percent in 2004 to 33.6 percent in 2005. Unlike with crude oil, the import of petroleum products from Russia decreased significantly: by 50.1 percent in physical terms. A serious increase in prices for them, by 71.9 percent, had to be blamed for that to a substantial extent. High-spirited rhetoric about Belarusian-Russian integration hides the fact that the Belarusian government proved to be unprepared even for the creation of a free market of petroleum products (it would lead to lower prices in Belarus).
The decrease in imports caused a decrease in the country's trade balance deficit from $2.72 billion to $720 million. The deficit in trade with Russia shrank insignificantly, from $4.73 billion in 2004 to $4.29 billion in 2005. And this is in conditions where prices for gas and crude oil were kept in check administratively. If the gas price goes up to about $100 per 1,000 cubic meters, Belarus will have to pay to Russia $1 billion to $1.3 billion more. Pressure on the exchange rate of the Belarusian rubel will get so strong that the National Bank will not be able to keep within its present monetary policy.
Decline was particularly noticeable in brown coal (43.7 percent year-on-year), truck tractors (79.1 percent - a clear example of harmful effects caused by import substitution), tires (33.3 percent), wool (61.1 percent), grain (33.7 percent) and tobacco products (17.8 percent). The ousting of those products made the Belarusian consumer poorer and allowed domestic producers to raise prices.
Belarus could save millions of dollars if it did not place obstacles to the import of those products. Prices for foreign grain fell by 15.2 percent in 2005, for trucks - by 34 percent and electric engines - by 25.3 percent. The right to choose should have been given to consumers, not bureaucrats.
It is the freedom of choice that the Belarusian authorities are afraid of when they are fighting against imports. The year of 2005 saw a favorable balance of trade in mineral products, for the first time in Belarus' history. Its deficit was $835 million in 2004, and the following year already had a surplus of $38 million. Thus, oil helped not only fill up public budget but also support the stable exchange rate of the Belarusian rubel although money supply rose significantly.
The value of foodstuffs imported in 2005 exceeded the value of food exports by $361 million. If Belarus joins the WTO and fulfills its requirements in terms of agricultural market liberalization, it will find it extremely difficult without private ownership of land and up-to-date private production to sustain pressure from producers in neighbor countries.
Agricultural reform has to be started sooner or later. The country is not so rich to buy foodstuffs at prices that are 20-40 percent higher than those in the region and even in the international market. The need to be on friendly terms with all neighbors and rich countries on all continents is predetermined by the structure of Belarusian foreign trade. Every bad word with respect to the East or the West and every conflict only increase the costs of missed opportunities.
The share of Russia in Belarusian exports fell to less than 40 percent in 2005 for the first time in Belarus' history. Russia accounted for 47 percent of all Belarusian exports in 2004 and 35.8 percent in 2005. About 60 percent of Belarus' imports come from Russia. Against the background of failures in Belarusian-Russian trade, the share of EU countries in Belarusian exports rose from 36.7 percent in 2004 to 44.1 percent in 2005. Imports from the EU to Belarus was also growing: from 19.8 percent in 2004 to 21.4 percent in 2005.
Last year saw a breakthrough in trade with Ukraine. Its share in Belarusian exports increased from 3.9 to 5.7 percent, and in imports from 3.3 to 5.4 percent. It would be good for Belarus to have a bilateral free trade agreement with the southern neighbor. The same format of trade relations would be also good with respect to the EU and Russia. Belarusian exports to China have been on the rise for three years in a row, although its share remains small, 2.7 percent, and 87 percent of it are nitrogen and potash fertilizers.
Belarus is actually non-existent on the second largest market in the world, India. Exports to this country is not even $200 million. Apart from fertilizers and chemical products, Belarus does not have anything to offer to this market of more than 1.2 billion people. Active diplomatic efforts to win market in Asia and Africa have not yet produced tangible results. Belarus' trade with the whole Africa ($149 million) is much smaller than that with the Yaroslavl province of Russia ($254 million). Trade with all North America ($538 million) and with all South America ($450 million) is smaller than trade with the Perm province of Russia ($544 million).
The growing markets in China, India and even Africa are willing to buy up-to-date technologies and products and look for reliable partners and investors. But Belarus cannot offer anything except for petroleum products, fertilizers, chemical products and metals. If the country continues its current trade policy, it will not be able to get out of such an unenviable situation.

Belarus' foreign trade balance in 2002-2005, in millions of US dollars

Belarus' key trading partners in 2002-2005

*Including countries that joined the EU in 2004,
Source: Belarus' Ministry of Statistics, 2003-2006