European Union will have to accept Eurasian Economic Union as an equal dialogue partner
St. Petersburg, 22 August 2016. According to the Centre for Integration Studies of Eurasian Development Bank (EDB) and the International Institute for Applied Systems Analysis (IIASA, Austria), it is essential to step up efforts to normalise and develop relations between the European Union (EU) and the Eurasian Economic Union (EAEU) with the aim to reach a comprehensive integration agreement in the long run. This conclusion is presented in their report “European Union and Eurasian Economic Union: Long-Term Dialogue and Perspectives of Agreement” based on the results of the joint project “Challenges and Opportunities of Economic Integration within a wider European and Eurasian Space”.
The conceptual framework of the common economic space “from Lisbon to Vladivostok” has two planning horizons — a short-term and a long-term one.
In the short run, it is essential to take stock of EU-Russia relations. However, to launch an official dialogue between the two unions, it is equally important to get the EU recognise the Eurasian Economic Union and the Eurasian Economic Commission.
Addressing basic political issues is vital to bring the current conflict to an end. Such efforts though should be reinforced with conceptual analysis of developing EU-EAEU economic relations and search of practical approaches to achieving that goal.
The underlying assumption of the report is that in future, EU-Russia relations will be channelled into constructive frameworks with prospects for lifting mutual sanctions. EU-EAEU relations should be based on long-term visions and planning. According to experts of the EDB Centre for Integration Studies, an integration agreement between the two unions will become feasible by the mid-2020s. “To that end, steps are to be taken now to define the forward-looking agenda at the expert level and build an analytical foundation for future negotiations,” says Evgeny Vinokurov, Director of the EDB Centre for Integration Studies. “We have identified 20 promising areas for the negotiation process.”
The anticipated EU-EAEU cooperation agreement should be comprehensive and take into account a wide range of issues to be covered, the magnitude and structure of relations, and the degree of connectivity between the two unions. Such an agreement can cover many areas of cooperation ranging from trade in goods and services to free capital flows, from the visa-free regime to transborder and transit infrastructure development, from technical regulations to intellectual property right protection.
The report summarises the results of discussions focused on these potential areas of EU-EAEU cooperation and some preliminary proposals formulated in the framework of six high-level round tables, which brought together representatives of the European Commission, Eurasian Economic Commission, and government bodies, as well as leading experts from EU-EAEU member states. In particular, the round table discussions covered the following issues:
∙ Trade regime: for the agreement to be beneficial for all the contracting parties, it should not be confined to creating a free-trade area as such (lifting or bringing down import duties). The logic is structured in the following way: a “classical” free-trade area is not favourable for either Russia or Kazakhstan as both countries export mainly primary commodities. Taking into account the structure of their trade flows, Russia and Kazakhstan are not interested in establishing a free-trade regime with the EU in its narrow sense—and the same applies to Armenia, Belarus, and Kyrgyzstan, although to a lesser extent. Concessions in the area of trade in goods should be balanced with counter concessions and progress in other areas. Special attention should be given to non-tariff barriers—the effects of lifting such barriers can significantly exceed those of reducing import duties.
∙ Energy sector: the issue of energy security is fundamental for both the EU and the EAEU. In the case of the EU, it is the matter of ensuring uninterrupted energy supply (reliable energy sources and transit infrastructure, fair and predictable prices), while in the case of Russia and Kazakhstan, it is the matter of stable demand (financial and economic security, fair and predictable prices), and in the case of transit countries, it is about stable incomes and deliveries. All the stakeholders are also interested in ensuring environment safety and energy system sustainability.
∙ Transport and infrastructure: it is obviously critical to modernise and facilitate further development of main Eurasian (automobile and railway) transport corridors by 2030. There is a wide range of technical solutions for integrating the 1520 mm rail system with the 1435 mm ones. There is also a tremendous potential for developing common electricity markets and transcontinental fibre optic communication lines. In both cases, the key focus should be on regulations, safety, and investments.
∙ The mobility of people: in the long run, the ultimate objective is to introduce a visa-free regime. In addition, there are real prospects for organising large-scale academic exchange and addressing the issues of mobility of transborder pension flows. However, it is premature to raise the issue of labour migration in the context of EU-EAEU relations at this stage.
∙ Techniques of estimating economic effects of EU-EAEU integration: the expert community should go beyond estimating short-term direct effects for trade and analyse long-term and indirect effects of entering into such an agreement, especially those related to non-tariff barriers. Modern techniques of analysis and modelling would be needed to adequately estimate such effects.
The report is prepared based on the results of the first stage of the international project “Challenges and Opportunities of Economic Integration within a Wider European and Eurasian Space”. As of today, this project is a unique independent platform for a regular dialogue between the European Commission and the Eurasian Economic Commission. The second stage of the project is to be launched in 2017. It will be focused on a wide array of studies aimed at bringing the EU and EAEU positions closer, while taking into account relations with China and other major Asian partners.
The entire report (in Russian) is available online.
Additional Information:
Eurasian Development Bank (EDB) is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth, and the expansion of mutual trade and other economic ties in its member states. EDB’s charter capital totals US $7 billion. The member states of the Bank are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation and the Republic of Tajikistan.
The EDB Centre for Integration Studies is a specialist research centre of Eurasian Development Bank. The Centre organises research and prepares reports and recommendations on regional economic integration.
Read more about the Centre’s projects and publications at www.eabr.org/r/research/analytics/centre/
EDB Media Center:
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e-mail: pressa@eabr.org