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International Trading System: Prospects for Emerging Markets Санкт-Петербург/ St. Petersburg 1 2 марта 2007 1 2 March 2007 программа

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1. Introduction. Just as the other former socialist countries in Central and Eastern Europe, in the last 16 years Bulgaria undertook a fundamental transformation of its political and economic system. The country joined the International Monetary Fund and the World Bank in 1990. Furthermore Bulgaria is a NATO member since 2004 and is expected to join the European Union in 2007. After a rocky beginning and initially poorly designed and even more poorly implemented reforms during the last 6 years Bulgaria is one of Europe’s fastest growing economies.


Paradoxically for a rules based organization, the World Trade Organization /WTO/ has no clear rules for the “price” of membership. Article XII of the Marrakesh Agreement, the legal instrument covering the WTO accession process, merely states that new members may join the organization “on terms to be agreed.” This sparse guidance leaves the door wide open to encompass an expedited hassle-free accession process and a drawn-out, decade-long, and burdensome accession experience (Evenett & Braga, 2005).

Bulgaria joined the WTO as of 1 December 1996, after the Protocol for the Accession to the Marrakech Agreement came into force. It was one of the first East European countries to do so. Bulgaria has taken on every multilateral trade agreement annexed to the Marrakech Agreement from the date of accession, without recourse to a transitional period. As a result of the WTO membership (even if not exclusively) the Bulgarian economy at present is generally well integrated in the global economic system. For better or for worst every sector of the Bulgarian economy is now linked with the world outside, either through its direct involvement in international trade or through its indirect linkages with the export or import transactions of other sectors in the economy. Most of the trade in Bulgaria is now subjected to strict and self-abiding multilateral trade obligations, international scrutiny, and transparency.

Some experts argue that WTO accession can lead to economic growth in the applicant countries. As main reasons they point the possible improvements in domestic policies, improved access to state-of-the-art machinery imports and subsequent productivity increases, as well as more competition and lower prices in the domestic markets of applicant countries (Langhammer & Lucke, 1999). In addition the general idea is that more predictable access to foreign markets will result in higher exports. Another strong argument is that WTO membership enables higher private capital inflows into sectors newly opened to foreign investment economic basis, furthermore that often WTO membership could be used as a seal of approval recognized by the international business community. Economists would also point to the benefits that flow from better foreign access to the acceding nation’s markets, specifically in terms of lower prices for and a greater variety of imports. By binding national tariffs, committing to eliminate quotas on imports, and reforming other state measures, the credibility of an acceding nation’s policies can be enhanced and hence the private sector faces less uncertainty (Ibid.).

Their opponents have also some reasonable argumentation and evidence to support it. They argue that free trade and open markets will contribute for further impoverishment of the poor countries and enrichment of the rich countries. Thus trade barriers are needed to compensate and balance the differences between countries and their respective level of economic development and competitiveness. A particularly strong argument is that countries and regions with non-competitive industrial sectors are quite vulnerable as an increased inflow of often cheaper products could have a killing effect. Furthermore for such countries and regions benefiting from the free access to new markets could have marginal value due to considerably stronger market competition, matured markets difficult for newcomers entry and last but not least lack of considerable experience among the would be exporters (NCRD, 2004). In addition, foreign barriers faced by some exporters in countries that joined the WTO may have in fact changed little after accession. Exporters could be either unaware or unable to take advantage of improved market access abroad. This could be due to a lack of information, to expensive and inefficient infrastructure in the acceding country, or a lack of experience in successfully shipping goods abroad (Evenett & Braga, 2005).

This paper presents an attempt to summarize the impact of WTO membership on the Bulgarian economy. Such an aim is not 100% achievable as in the 1990s WTO membership coincided in time with many and much more profound changes in the national economic and social structures and patterns. Therefore it is very difficult to distinguish and frame only the impact of joining the WTO. Nevertheless the Bulgarian experience could be interesting as the country joined the WTO in a moment when its economy was in the deepest of crisis and its industry at the pick of its non-competitiveness. As this situation is reality for many other countries that could join the organization in future this experience could be a valuable example.

The paper is built in two parts. The first part deals with the policy measures the Bulgarian authorities undertook in order to accommodate the WTO requirements for a membership. The second part focuses on the perceived economic impact of WTO membership in four key sectors: investments, agriculture, industry, services and trade. Finally conclusions are made complemented with some recommendations that could be considered by policy makers at various levels.