EU – EAEU: audit of mutual interests

_ Yuri Kofner, head, Eurasian sector, CCEIS, HSE; research assistant, IIASA. Vienna, 1 November 2017.

Creating a common economic space from Lisbon to Vladivostok is generally conceived as a good idea. But what are the actual interests of the affected sided - the European Union and the Eurasian Economic Union in such a potential project? A more in-depth understanding of these interests of both sides, on which any future negotiations for deepened cooperation should be based, needs to be elaborated.

It should be noted, that the interests of the EU and the EAEU partially coincide and partially diverge. Yet, in any case, as mentioned above, there would be an objective mutual interest in stronger economic cooperation. The table below summarizes the understanding of EU’s and EAEU’s interests as emerged from experts discussions, conducted over the past three years at IIASA in Austria. [1]

Interests of the European Union Interests of Eurasian Economic Union
  1. Trade liberalization (i.e., creation of a comprehensive FTA with the EAEU);
  2.  Elimination of the measures  hindering competition on equal terms between domestic and foreign companies in the EAEU member states;
  3. Guarantees of energy security (supply security).
  1. A comprehensive FTA with the EU only in the long term and with substantial transition periods;
  2. Growth of European investments;
  3.  Transfer of technologies from the EU;
  4. Stability of demand for energy in the EU (demand security).

Within the structure of a possible EU-EAEU agreement, there are likely to be asymmetric mutual concessions and a broad range of issues might be covered (in addition to above mentioned economic asymmetries).

The EAEU member states are more interested in a comprehensive agreement with the European Union that would cover a much broader range of issues than those covered by a standard free trade area agreement. This is supported by the conclusions of research done by the Munich based Ifo-Institute [2], which states for example that should the markets be opened, the EAEU agriculture and automotive industry may suffer losses.

The EU approach in the last decade has been to negotiate and sign only comprehensive FTAs with other countries which ensure extensive liberalization of trade in both goods and services, the substantial liberalization of the movement of capital as well as of people linked to economic activities. These agreements also provide for either a comprehensive harmonization or mutual recognition of regulations affecting trade and economic relations.

Harmonizing trade regulation of the two unions, both in the tariff and non-tariff sphere, will likely to occur by the EAEU adopting the EU standards, or international standards, coinciding with those of the EU.

Most of the member states of the EAEU, except for Belarus, are WTO members. However, the fact that Belarus is not yet a WTO member is one of the main technical obstacles to deepening the EU -  EAEU cooperation. In strict legal terms, this is of course not an obstacle for potential EU - EAEU FTA negotiations. However, the lack of Belarus’ membership would complicate these negotiations since one of the participants would not be bound by WTO rules. The best strategy would be to assist Belarus in a speedier accession to the WTO, what would be beneficial both for Minsk and the Eurasian Economic Union in general.

According to Tatyana Valovaya, Minister in charge of the Development of Integration and Macroeconomics, Eurasian Economic Commission (EAEC), the EAEU is generally interested in having a dialogue with the European Commission at the official level. Secondly, the EAEU would prefer a non-preferential trade and investment agreement with the EU, but with more in-depth regulation of non-tariff barriers, mutual recognition of technical barriers to trade and sanitary – phytosanitary measures, facilitation of the customs procedures, cooperation in science, research and the digital economy.

Asymmetric solutions need to be found, where the EAEU countries would gain additional advantages in exchange for the partial opening of markets. They are primarily interested in two things – access to European capital, and access to European technologies.

Such ideas are, however, not realistic from the EU’s point of view either in economic or legal terms. The EU is interested in agreements providing a comprehensive liberalization (even if this does not happen promptly but within a limited transition period), furthermore any FTA foreseeing only a “partial” opening of markets would be illegal under the WTO rules.

When thinking about the content of a potential agreement between Brussels and Moscow one might take into account the EU 2020 strategy and the EAEU 2025 program documents.

Notes:

  1. Vinokurov E, Balás P, Emerson M, Havlik P, Pereboev V, Rovenskaya E, Stepanova A, Kofner J, et al. (2016). Challenges and Opportunities of Economic Integration within a Wider European and Eurasian Space. Synthesis Report. In: Challenges and Opportunities of Economic Integration within a Wider European and Eurasian Space, IIASA, Laxenburg.
  2. Freihandel von Lissabon bis Wladiwostok. Wem nutzt, wem schadet ein eurasisches Freihandelsabkommen? Bertelsmann Stiftung; IfO-Institut. 216 S. 2016.

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