The Cross-Roads of Eurasia and Asia Pacific

_ Yaroslav Lissovolik, chief economist, Eurasian Development Bank. Moscow, April 2017.

In the beginning of September the Valdai Discussion Club held a special session in Vladivostok at the Second Eastern Economic Forum (EEF) which was titled “Integration in Greater Eurasia and the Asia-Pacific Region: Where Do Interests Intersect?”. The subject matter elicited a wide array of views on the modalities of coordination between the rising number of regional integration projects including Greater Eurasia and the Trans-Pacific Partnership (TPP). At the end of the day, it appears that it may well be possible to advance a workable arrangement in the Pacific region that allows for greater coordination between the Eurasian and the Trans-Pacific integration groups.

A structured view of the interplay between the waves of integration in the Pacific between Eurasia and the Asian Pacific involves three key trajectories in the Southern, the Central and the Northern rims of their intersection.

Firstly, in South-East Asia the countries of ASEAN are increasingly featuring as the focal point of intersection of the largest integration projects such as TPP, China-led Regional Comprehensive Economic Partnership (RCEP) as well as the formation of new FTAs on the part of the Eurasian Economic Union. This is by no means surprising given the growth performance and the still significant growth potential harboured by ASEAN economies.

The second potential link between Eurasia and the Asian Pacific is the region of the North Pacific, which in contrast to the dynamic integration in the South-East Asian region currently represents a void of integration between Russia and other North Pacific countries such as the US, Canada and Japan. Indeed, Russia’s trade and investment with these economies is well below potential given the lack of integration linkages connecting Eurasia’s Northeast with other parts of the North Pacific. In this respect the creation of a North Pacific Partnership (NPP) could serve to fill that void and satiate the region with greater investment and trade flows via establishing links between the TPP, the Eurasian Economic Union as well as between Greater Eurasia and the Asia Pacific more broadly. The North Pacific integration track is clearly more of a long term goal given the current divisions among key players in the region, though initial steps towards building ties via investment liberalization, microregional/sub-regional cooperation and collaboration in R&D as well as human capital development may well be possible in the near- to medium-term.

The third link that connects the Northern and Southern rims of the intersection between Asia Pacific and Eurasia (ASEAN and NPP) is represented by the two economic heavy-weights in the Pacific, namely South Korea and Japan. The trajectory formed by these two countries is the Central link in the intersection between Eurasia and Asia Pacific, with Japan and Korea serving also as important links between the North Pacific as well as ASEAN on the one hand and key Eurasian economies such as Russia and China on the other. With Japan and Korea featuring in the core intersection between Greater Eurasia and the Asian Pacific, it may not be entirely accidental that the Second Eastern Economic Forum had a particular emphasis placed on Russia’s economic cooperation with Japan and South Korea.

The advancement towards establishing and reinforcing the above three links between Greater Eurasia and the Asia Pacific could render the mega-projects in the region more stable and complete. In particular, greater economic cooperation in the North Pacific could pave the way to forming a broader Comprehensive Pacific Partnership (or the Greater Pacific) that would complement the formation of Greater Eurasia and encompass the entire Pacific basin without division lines.

In sum, the economic integration agenda in the area of building linkages between Greater Eurasia and the Asia Pacific involves the following trajectories:

  • In the near term: further alliances based on FTAs and investment liberalization to be forged by Eurasia in the “Southern rim” represented by ASEAN countries;
  • In the medium- to longer term: creation of economic partnerships with Japan and South Korea (the “Central rim”), with the proposal coming from South Korea on the creation of an FTA with the Eurasian Economic Union unveiled at the Eastern Economic Forum in Vladivostok being one of the potential building blocks;
  • In the longer term: creation of a North Pacific Partnership (NPP) in the “Northern rim” to connect the TPP with Greater Eurasia via trade and investment liberalization.

In the end, the above multi-track approach to building Eurasia’s bridges in the Pacific while fraught with challenges is relatively more flexible compared to the headwinds faced by Eurasia in the West in forming a single bridge between the European and the Eurasian unions. And of course there is no completeness in the evolution of the Greater Eurasia without Eurasia’s alliance with Western Europe. But as Dostoevsky wrote in his last article dedicated to Russia’s economic development (1881), it is only via making inroads into Asia that Russia will be able to elicit greater economic cooperation with Europe. According to Dostoevsky, “in the future Asia is our outlet, this is where our riches are, this is our ocean”. It may then be possible perhaps that the path to forging Eurasia’s economic ties with the West may be facilitated by mounting integration observed in the Pacific. Ex oriente lux!

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