Eurasian Economic Integration – 2017

• Report

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The Eurasian Development Bank has prepared a report called Eurasian Economic Integration – 2017 for presentation at the St. Petersburg International Economic Forum. The report reflects the directions, events, and decisions that determine the current vectors of the integration processes in the Eurasian Economic Union. The authors offer fresh data and analytical insights with respect to macroeconomic development; changes in trade and investment capital flows; the labor market; and progress in non-tariff barriers elimination. They provide a detailed review of certain critical developments, including the endorsement of the EAEU Customs Code; the completion of negotiations on the common drugs and medical products market; and the acceleration of efforts to create free trade areas.

Eurasian economic integration has achieved meaningful results but its initial rapid progress has ended. This is proved, in particular, by difficulties in negotiating the Customs Code and the common drugs and medical products market. These were the two most important topics on the integration agenda in recent months, the consensus on which was hard to reach.

A number of potential effects of Eurasian economic integration remained non-fulfilled. At the start of the Customs Union in 2011—2012, there were many talks about possible competition between jurisdictions. It would have resulted in thousands of companies moving from country to country, for example, in search of more advantageous tax regimes. Now, five years later, it is clear that businesses’ anchorage to their native countries has occurred to be stronger than anticipated. This is due to the state’s significant share in economy and still high non-tariff barriers.

Negative trends in mutual trade and investments persisted. However, the rates at which those indicators declined in EAEU member states were considerably lower than outside the EAEU. The intra-Union trade fell by 6.7% (although the volume of trade in physical terms increased by 0.4%), compared to a drop of 12% in the EAEU’s foreign trade. The values of the EAEU’s mutual trade are still dependent on global hydrocarbon prices, although this correlation is weakening. The change in mutual FDI stock, albeit negative, is still considerably better than elsewhere in the CIS region.

The report has the following structure. Chapter 1 Eurasian Economic Integration presents a structured view of internal EAEU developments related to a variety of key areas and processes. They range from the Customs Code and common drugs and medical products market to non-tariff barriers, financial markets, and current free trade area negotiations. Chapter 2 Macroeconomic Processes in the EAEU provides an analysis of the most important indicators of the social and economic development of EAEU member states. It describes the convergence of their economies. Chapter 3 Common Goods and Services Market, the largest chapter in the report, focuses on the evolution of mutual trade and the creation of common goods and services markets. In Chapter 4 Investments in the EAEU, we proceed to review mutual investments within the EAEU and external investment flows to and from Eurasian countries. Chapter 5 Common Labor Market presents information on one of the frequently underestimated success stories of Eurasian integration—the common labor market. It also includes certain incidental matters such as mobility of pensions, cash remittances, and medical insurance coverage for labor migrants. Chapter 6 Public Perception of Eurasian Integration deals with how the various aspects of Eurasian integration are viewed by the general population.

The EDB Centre for Integration Studies intends to continue the publication of the report on an annual basis.