Impact of the Customs Union of Belarus, Kazakhstan and Russia on Regional Trade

In 2010 Belarus, Kazakhstan and Russia formed a Customs Union. This union is known as a new generation of regional organizations in the post-Soviet space. The reasons of formation of such kind of Union are either economical or political. In 2015 all the above mentioned core countries formed Eurasian Economic Union with the inclusion of Armenia and Kyrgyz Republic. Statistical analysis shows that Customs Union had a significant impact on regional trade. Internal trade boosted during 2011-2012 and then tended to decline due to slow-down of Russian economy. Russian economic decline negatively impacted on regional growth and trade. Thus, objective of this paper is to determine the impact of Customs Union on regional trade with application of gravity model. By using data for the period of 2000-2015, we show that impact of Customs Union on regional trade was negative, but insignificant. These results can be explained by the structural problems of the regional economy, unfavorable external conditions, low level of economic diversification and a short period of the Customs Union functioning.