Belarusian authorities restrict imports with temporary licensing

Due to rising real incomes, consumer goods imports have been on the rise amid an overall decline in imports. By introducing temporary restrictions on the imports of some goods, the government aims to improve sales of domestically produced goods and foreign trade balance. Countries outside the Customs Union may introduce reciprocal restrictions, thus minimising positive effects from licensing.

As of June 1^st, Belarus introduces licensing on importing pasta, confectionery and their ingredients from outside the Customs Union.

In Q1 2014, the international trade deficit was USD 129.3 million. In Q1 2013, the deficit was USD 694.8 million. In Q1 2013, consumer goods trade surplus was USD 246.2 million, however a deficit occurred in Q1 2014. Due to pay rises and therefore consumer incomes growth, imports of fruit, vegetables, fish, chocolate, bread, and pastry products have increased.

The said licensing is introduced for a limited time-period – until November 30^th, 2014. Similar restrictions on beer imports will be in effect until October 31^st, 2014. With these restrictions, the government aims to protect domestic producers from competing with foreign producers, primarily Ukrainian. The devaluation of the Ukrainian hryvnia has made Ukrainian foodstuffs cheaper and increased their competitiveness on the Belarusian market. Amid falling profits in the Belarus’ food industry, import restrictions might improve the industry’s financial health.

However, the said measures might have little effect. The bulk of these goods are imported from Russia. For instance, in Q1 2014, Belarus imported USD 7.6 million worth of pasta, including USD 4.6 million worth from Russia. By restricting imports from countries outside the Customs Union, Belarus encourages Russian companies to take over current suppliers. As a result, instead of reducing imports, Belarus will change their origin. Import volumes subject to licensing are insignificant and would have no considerable impact on the trade balance.

Meanwhile, countries, which will be affected by the licensing, might introduce restrictions on Belarusian products in response. Ukraine may limit imports of petroleum products from Belarus, which is an extremely sensitive issue for Belarus, and demand restrictions on their products to be abolished. If so, the licensing will only have negative effects and the trade balance will not improve.

The Belarusian government has once again resorted to ineffective measures, which, given the open border with Russia, would not have the desired effect. Reciprocal actions against Belarusian products may lead to Belarus’ trade relations with major trading partners deteriorating and fewer exports to these countries.