Accession of Black Sea Region Wheat Producers to the WTO: Implications for World Wheat Trade

Abstract

Wheat trade accounts for one third of world grain trade and is expected to double by 2050.The KRU (Kazakhstan, Russia and Ukraine) countries account for approximately a quarter of the world wheat exports and are collectively considered one of the key wheat exporting regions. Ukraine became a member of the WTO only in 2008. Russia became an official member of the WTO in 2012. Kazakhstan is expected to follow Russia and reach an accession deal with WTO members shortly. As a result of WTO accession, all three countries will be entitled to “most favoured nation” (MNF tariffs), and hence, gain improved access to a number of important markets that have been largely inaccessible due to very high tariffs that could be charged on imports from non-member countries. World wheat trade liberalization, reflecting the move to the MFN tariff as a result of accession, was simulated using the global simulation model (GSIM). The KRU region’s increased market accessibility as a result of successful accession to the WTO has the potential to foster important re-alignments in world wheat trade flows, prices and changes in welfare among major wheat trading countries. Simulation results suggest that increased access to markets leads to more trade between KRU countries and previously restricted markets. KRU countries trade more with now freer markets such as Turkey, the EU and China. Major traditional wheat exporters such as Australia, Canada, the EU, and the US do not seem to be negatively impacted to any important degree. Their relative market access conditions, however, erode in Turkish, Middle Eastern, and African markets with their trade flows being diverted and broadly distributed among other countries and regions at reduced prices. Trade liberalization is not uniform across regions and therefore leads to different net welfare changes across countries. However, those welfare changes appear to be modest.