Trade policy and exchange rate issues in the former Soviet Union

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Trade policy and exchange rate issues in the former Soviet Union, Volume 1

Author:	Corden, W. Max;	Collection Title:	Policy, Research working papers ; no. WPS 915. Trade policy
Country:	Latvia; Moldova; Turkmenistan; Georgia; Armenia; Kazakhstan; Tajikistan; Ukraine; Lithuania; Estonia; Azerbaijan; Uzbekistan; Kyrgyz Republic; Russian Federation; Belarus;	Date Stored:	2001/04/18
Document Date:	1992/05/31	Document Type:	Policy Research Working Paper
Language:	English	Major Sector:	(Historic)Economic Policy
Region:	Europe and Central Asia	Report Number:	WPS915
Sub Sectors:	Trade	SubTopics:	Environmental Economics & Policies; Economic Theory & Research; Economic Stabilization; Free Trade; Fiscal & Monetary Policy
Volume No:	1

Summary: The author reviews possible trade and exchange rate policies of the former Soviet Union. Alternative exchange rate regimes, including a monetary union are considered. For Russia, a fixed but adjustable regime is most realistic. Frequent adjustment may be desirable, to prevent the use of trade restrictions to achieve balance of payments objectives. The author examines the need for transitional tariffs, including the argument for a temporary uniform tariff that is higher than the long-run revenue tariff. The temporary uniform tariff is designed to prevent temporary overshooting of the exchange rate. The case for a free trade area is strong because the republics of the former Soviet Union are so highly specialized, but there will be problems if price controls remain and differ among the republics. There could be a free trade area even if there is no monetary union. The author concludes that one approach to trade policy is to have no trade policy - to have completely free trade with convertibility for current account transactions. Some tariffs and export taxes may be justified, at least as second-best policies. If so, the author stresses that four principles be observed: 1) barriers to existing trade between the republics should not be set up; 2) all quantitative control measures should be avoided; 3) tariff and export tax structures should be very simple; and 4) trade policy should be transparent.


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