Belarusian Economic Research and Outreach Center
 Aleksandr Vashchilko

Effects of Trade Wars on Belarus

The trade wars following the 2014 events in Ukraine affected not only the directly involved participants, but also countries like Belarus that were affected through international trade linkages. According to estimations based on a model outlined in Ossa (2014), these trade wars led to an increase in the trade flow through Belarus and thereby an increase of its tariff revenue. At the same time, because of a ban on imports in the sectors of meat and dairy products, the tariff revenue of Russia declined. As a member of the Eurasian Customs Union (EACU), Belarus can only claim a fixed portion of its total tariff revenue. Since the decline in the tariff revenue of Russia led to a decline in the total tariff revenue of the EACU, there was a decrease in the after-redistribution tariff revenue of Belarus. As a result, Belarusian welfare decreased. To avoid further welfare declines, Belarus should argue for a modification of the redistribution schedule. Alternatively, Belarus could increase its welfare during trade wars by shifting from being a part of the EACU to only being a part of the CIS Free Trade Area (FTA). If Belarus was only part of the CIS FTA, the optimal tariffs during trade wars should be higher than the optimal tariffs without trade wars. The optimal response to the increased trade flow through Belarus is higher tariffs.

This policy paper is available only in Russian.