Term Paper: United States of America's Trade With Kazakhstan

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¶ … Patterns of the United States Trade with Kazakhstan

Today, the Republic of Kazakhstan has emerged as both a growing political and economic powerhouse among the former states of the Soviet Union. As the largest of the former Soviet states (except for Russia itself), Kazakhstan possesses both the natural resources and the economic clout to forge new economic and strategic alliances with former military adversaries, including the United States. Indeed, the North Atlantic Treaty Organization has expanded to almost twice its former membership during the Soviet era, the Kazakhstan is well situated to become a prominent member of the international community in the future. To determine the economic impact of these transitions on the United States, this paper provides a review of the relevant peer-reviewed, scholarly and governmental literature to examine the historic trends in exports of the U.S. To Kazakhstan. A summary of the research and significant findings are presented in the conclusion.

Review of Literature

Much has transpired in the last two decades for the people of the former Soviet states, and the impact of these changes are having a particularly significant effect on the amount of goods and services being exported to the Republic of Kazakhstan (hereinafter "Kazakhstan"). While some constraints to international commerce continue to exist, confidence levels in the rule of law and the elimination of corrupt business practices among political and business leaders have contribute to an increase in exports from the United States to Kazakhstan virtually across the board. According to Wyzan (1995), "In 1992 firms continued to ship goods across state boundaries, assuming that the central bank of Russia (CBR) would cover the credits" (97). The collapse of the former Soviet Union, though, has some profound effects on the level of trade experienced by Kazakhstan because of increasingly problematic conditions within the nation's banking system and its former ties with the Soviet Union, price disputes, and the concomitant impact of rising inflation (Wyzan 97).

As a result, trade steadily declined by more than a third in 1992 (Wyzan 97). As this author emphasizes, though, trade is a reciprocal enterprise: "Kazakhstan's close economic ties to Russia meant that many Russian firms were in turn dependent on trade with Kazakhstan. Much of the industry in Siberia and the Urals relies upon Kazakhstan for its raw materials or to purchase its products" (Wyzan 97). For instance, Kazakhstan continued to rely on such purchases for more than 50% of the country's output of the Krasnoyarsk harvester factory alone and Russian companies naturally wielded a great deal of pressure on the policymakers in Moscow to release additional credits to Kazakhstan (Wyzan 97).

At that time, trade with Kazakhstan was primarily in the form of bilateral deals signed by individual firms or regional councils; the prices established through these process approximated internal Russian prices (Wyzan 97). These approaches to trade development provided the framework for the liberalization of price levels because energy costs remained at between 20-30% of what existing world market levels (Wyzan 97). Other initiatives that helped spur early trade development in Kazakhstan included a subsidy from Russia in 1992 represented approximately 10% of Kazakhstan's GDP, in addition, Russia experienced a trade surplus of R139 billion with Kazakhstan (exports of R284 billion and imports of R145 billion) in 1992 (Wyzan). Likewise, Kazakhstan's total exports to the Commonwealth of Independent States amounted to R582 billion in 1992, compared to imports of R787 billion (World Bank 1993:21 cited in Wyzan at 97-8).

This investment in Kazakhstan's trade development has not been without benefit for Russia either. In fact, total Kazakh debt to Russia rose from R250 billion in 1992 to R500 billion in 1993, also representing approximately 10% of Kazakhstan's GDP (Wyzan 98). The next few years witnessed an increasing need for the policymakers in Kazakhstan to identify additional trading partners. According to Wyzan, "At the end of 1993 Russia's policy appeared to be swinging in a more 'selfish' direction, as indicated by an unwillingness to subsidize trade with Kazakhstan and even a certain jealousy toward Kazakhstan's dealings with Western corporations" (107). The terrorist attacks of September 11, 2001 further changed the relationship between the U.S. And the former Soviet states in fundamental ways.

Today, Kazakhstan represents a key partner in the U.S.-sponsored war on terrorism. According to the U.S. Department of State, "Since September 11, 2001, the Government of Kazakhstan (GOK) has provided unlimited overflight rights for U.S. aircraft, waiving fees on more than 4,000 flights in support of Operation Enduring Freedom (OEF). In support of Operation Iraqi Freedom, in August 2003, the Kazakhstani Government sent a 29-member engineering contingent to assist in reconstruction efforts in Iraq" (U.S. Government Assistance to and Cooperative Activities with Eurasia 2). Not only has the Kazakhstani government been highly cooperative in helping the U.S. government dispose of the nuclear materials that are a legacy of the Cold War, these former foes has become even closer trade partners in the succeeding years - to their mutual benefit.

Opponents of McDonaldization may have some valid points, but the fact remains that Kazakhstan represent a strategic ally for the United States both in terms of its abundant natural resources as well as its proximity to the Russia. As U.S. government analysts emphasize, "Participation by the Kazakhstani Government in the Aktau-Baku-Tbilisi-Ceyhan oil transport system will also provide a major new outlet for Caspian energy to world markets. The U.S. government promotes democratic and market reform in Kazakhstan in an effort to bolster stability and prosperity in the key region of Central Asia" (U.S. Government Assistance 3).

The country enjoys an abundance of natural resources, especially oil, that has also helped promote it economic development and therefore its need for various imports from historic and new trading partners. In this regard, Kazakhstan's GDP is $40.7 billion in current prices, and the country has experienced consistent and robust economic growth in recent years. The U.S. goal of having Kazakhstan serve as a role model for neighboring nations may or may not be involved, but the country is certainly achieving this goal in significant ways. According to U.S. government analysts, "The Oil National Fund, established in 2001, currently holds about $7 billion in assets and serves both stabilization and saving functions. Kazakhstan continues to play a leading role in Central Asia in economic reforms, with a solid banking system, growing mortgage markets (at a volume of more than $1 billion in 2005), and approximately $4.5 billion in pension accumulations" (Economic reform 11).

Despite such progress in facilitating trade development and ensuring future political stability, some problems remain firmly in place. Notwithstanding efforts by the Kazakhstan government to diversify its economy in recent years, the country remains highly dependent on its proven oil resources and corruption is still a problem (Economic reform 11). In this regard, analysts at the U.S. Department of State report that Kazakhstan has launched a number of initiatives intended to diversify its economy away from overdependence on the oil sector by developing its manufacturing potential: "The policy aims to reduce the influence of foreign investment and foreign personnel. The government has engaged in several disputes with foreign oil companies over the terms of production agreements; tensions continue. Upward pressure on the local currency continued in 2007 due to massive oil-related foreign-exchange inflows" (Kazakhstan 3). Fueled in large part by continuing growth and foreign exchange earnings, Kazakhstan has announced plans to assume a leading role in the region as a financial center and has developed a banking system comparable to those in Central Europe for this purpose (Kazakhstan 3).

Methodology

The methodology used for this study was straightforward and was designed to specifically identify recent trends in U.S. exports to Kazakhstan from the most reliable sources possible. To this end, export data for the period 1994 to 2005 was obtained from the United Nations Statistical Division, including world exports and exports from the Russian Federation (the latest data available) and comparable data for the period 2003 through 2007 for U.S. exports was obtained from the U.S. Census Bureau's Foreign Trade Division. Other relevant data concerning the relationship between Kazakhstan was obtained from the U.S. government's CIA World Factbook and the U.S. Department of State. The tabular export data was then graphed in order to identify salient trends in U.S. exports to Kazakhstan during these periods. Finally, relevant country facts and key economic metrics are provided at Appendix a; a current map of Kazakhstan is provided at Appendix B.

Data Analysis

Table 1.

Summary of Kazakhstan Export and Imports and Partners.

Area

Summary

Exports - commodities:

oil and oil products 59%, ferrous metals 19%, chemicals 5%, machinery 3%, grain, wool, meat, coal (2001)

Exports - partners:

Germany 12.4%, Russia 11.6%, China 10.9%, Italy 10.5%, France 7.6%, Romania 4.9% (2006)

Imports:

29.91 billion f.o.b. (2007 est.)

Imports - commodities:

machinery and equipment 41%, metal products 28%, foodstuffs 8% (2001)

Imports - partners:

Russia 36.4%, China 19.3%, Germany 7.4% (2006)

Source: Kazakhstan 4.

Figure 1. Kazakhstan's Largest Export Partners

Source: Based on tabular data in Kazakhstan at 4.… [END OF PREVIEW]

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