Written by Alisher Umirdinov

Associate professor, Nagoya University of Economics

December 11, 2020

For a long time, Uzbekistan used to be truly one of the least integrated country to the world economy. The country has neither joined World Trade Organization (WTO) nor concluded deep Free Trade Agreements (FTAs) with big economies. And the last four years brought turbulent waters into Uzbekistan in terms of its economic integration and trade liberalization. While the new government of President Mirziyoyev kicked off country’s accession talks into WTO, it also gave positive signals for Eurasian Economic Union (EAEU) as well as started negotiations on renewal of the Partnership and Cooperation Agreement between Uzbekistan and the EU (1999) with an Enhanced Partnership and Cooperation Agreement(EPCA) in 2020. Moreover, Tashkent and Seoul also showed interest in concluding free trade deal for numerous times. But which economic treaty is expected to be first?

  • Uzbekistan and WTO Accession

     Uzbekistan resumed accession talks to WTO in the early 2020 and relaunched Working Party meetings after 15 years of dormancy. Despite COVID-19, Parties to WTO and Uzbekistan successfully held online meeting on 7th of July 2020 giving a hope to the accession of the biggest Central Asian nation into WTO soon. Importantly, high level Uzbek officials emphasized the fact of ‘absolute priority’ of joining to the WTO for Government of Uzbekistan. In fact, Uzbekistan updated its Memorandum on the Foreign Trade Regime (MFTR) and the working party reviewed it section-by-section. At the time of writing this blogpost, I am sure that Parties to WTO had already submitted their written questions and officials in Tashkent shall be currently busy with updating country’s Legislative Action Plan. At the working party meeting, Uzbekistan was also urged “to submit translated copies of the WTO-related legislation in order to allow members to have a precise and comprehensive picture of the status of legislative reforms.” From now on, in tandem with MFTR, Uzbekistan and WTO Member countries shall move on to the most important pillar of accession talks: bilateral market access negotiations. According to the chair of the working party, Ambassador Ji-Ah Paik of the Republic of Korea noted, the scheduling of the next meeting will depend “on the availability of the required inputs and on the progress on the market access front.”

       One can easily assume that bilateral negotiations shall be most painful for Uzbekistan. Nonetheless, Tashkent seems not to be in a rush and some officials in Uzbekistan have even assumed that the accession talk may take as short as five years. Interestingly, while the general public widely supports Uzbekistan’s joining to this global trade house, we still can feel resistance from state owned enterprises and vested interest groups.  All in all, there is no returning back to trade isolation and the country will probably will move forward. The only problem is when the time is ripe for the accession.

  • Uzbekistan and EAEU  

    As for the joining to EAEU, things are quite complicated. The fact that a considerable number of Uzbek migrant workers is living in Russia gives Moscow quite big bargaining power to induce Uzbekistan to join EAEU. Despite Russian influence, after some thorny path of domestic discussions, Uzbek parliament seems to have agreed on an observer status in May 2019, which is much more neutral

than being a member to the organization. This status gives Uzbekistan no access to expedited or preferential treatment of products, single tariff arrangements, or reduced transportation costs. Instead, Uzbekistan obtains the right to participate in open EAEU Council meetings (upon invitation, of course), to be in contact with various EAEU bodies, and to receive non-confidential documents. Supreme Eurasian Economic Council discussed granting Uzbekistan the Observer State status on 4 September 2020 and the final decision was left to be adopted by the Union’s Heads of State. Recently, Russian side announced that Uzbekistan may get that status in December 2020. To conclude, Uzbekistan probably will get an access to necessary information in EAEU, but its membership will not be likely for years to come.   

  • Uzbekistan-EU EPCA

The early fruits can be taken from trade talks with EU. In fact, Uzbekistan and EU concluded so-called Partnership and Cooperation Agreement in the late 1990s. However, that agreement has become quite outdated by now and it has now little potential in connecting Uzbekistan to EU market. Moreover, compare to neighboring Kyrgyzstan, Uzbekistan could not be entitled to GSP+status (the EU General System of Preferences that unilaterally grants duty-free access for most goods) to EU market for many years. Being eager to get the similar status, Uzbekistan persuaded EU to launch talks on a new agreement on February 2019. Recognizing Uzbekistan’s commitment to the ongoing structural, administrative and economic reforms, the EU agreed. Importantly, to be entitled for to GSP+status, till now Uzbekistan has signed all necessary international agreements required by EU side. And finally, European Commission decided to give GSP+status to Uzbekistan in the end of November 2020. Furthermore, rather than being just free trade agreement, EU-Uzbekistan EPCA is expected to cover very large areas such as the rule of law, political dialogue and reforms, freedom and security, human rights, anti-corruption, migration, and sustainable development. After successfully holding sixth round of negotiations on trade and trade-related matters, the officials in Tashkent have informed that two sides may conclude a new treaty until the end of this year (2020).

  • Uz-Kor FTA

While progress in WTO accession talks and EPCA is remarkable, Uzbekistan is also simultaneously showing willingness to sign (deep) FTA with South Korea, one of the biggest trade partners of the country. Actually, Korea has been trying hard to persuade Uzbekistan to sit over the table and negotiate the terms for FTA. On the other hand, hosting a big Korean diaspora, sending thousands of migrant workers to South Korea every year and attracting multi-billion Korean FDI to date, Uzbekistan also has a big interest in these trade talks, but the previous Uzbek government failed to have an open economic diplomacy in action. Finally, in March 2020, two sides launched a joint study project on forging a bilateral free trade agreement. After having completed the feasibility study of potential FTA in a very short period of time, Uzbekistan and Korea announced launching FTA negotiations in the beginning of November 2020. How long does it take to conclude this FTA and its scope have not been announced yet, but if the agreement is realized that would be the first deep FTA Uzbekistan has ever signed. To date, Uzbekistan is an active member to as many as nine yet traditional shallow FTAs, and the majority of them is limited to CIS countries.

Conclusion

As you can see from the discussions above, to boost exports in the face of the new Coronavirus pandemic, Uzbekistan is negotiating comprehensive and deep FTAs with several trade blocks and countries simultaneously. A treaty with EU is likely to be the first early harvest for Uzbekistan. I personally hope that Uzbekistan-EU ECPA will play a bigger role in changing the minds of Uzbek policymakers and get them experienced in preparing other crucial trade talks with WTO and South Korean partners. The next option might be either accession to WTO or conclusion of Uz-Kor FTA. If WTO accession talks are prolonged against expectations of many, one can assume that Koreans will push Uzbekistan stronger towards their orbit. All in all, since spaghetti bowl phenomenon of trade agreements is going ahead with recent signature of Regional Comprehensive Economic Partnership in South East Asia, Uzbekistan urgently needs the consistent and steadfast free trade policy to overcome its trade isolation.

Cite as: Alisher Umirdinov, “Uzbekistan’s trade policy is in crossroads: which one comes first, WTO, EAEU, new EU Partnership and Cooperation Agreement or Uz-Kor FTA?”, UzbekistanLawBlog, 11.12.2020.