_ Tigran Sargsyan, Chairman, Eurasian Economic Commission. Interview by Dipanjan Roy Chaudhury, Senior Editor, Economic Times. Moscow, 18 August 2018.
– Can you elaborate on India’s association with EAEU?
– On the margins of the St. Petersburg International Economic Forum held in 2017 EAEU together with PM Narendra Modi, we discussed the prospects for trade liberalization and concluded that good opportunities exist for both sides. Prior to our meeting with the Prime Minister, the Commission received the Directive from the Heads of states of the Union Member States to negotiate with India. Partnership with India is important for EAEU integration. Over the years, India has been showing high rates of economic growth, continuously enhancing its industrial and technological capacity. The two sides agreed to organize a preliminary meeting of EAEU and India negotiators for determining the future agreement modalities and negotiations procedures.
A meeting was held in January 2018 in Delhi. During the consultations experts exchanged opinions on possible content of the future agreement, approaches to its regulatory provisions formation, schedules of tariff concessions. Such consultations help to reach mutual understanding about the format and depth of possible agreements before the parties commence discussing the text of the agreement itself.
– Is the free trade zone (FTZ) agreement between the EAEU and India currently being negotiated?
We are negotiating specifically on creating a free trade zone between EAEU and India. Consultations held in January serve as a preparatory stage before commencement of official negotiations. We are discussing the parties’ conceptual approaches to various aspects of the free trade zone formation, agreeing upon technical and organizational issues, exchanging necessary information on regulatory systems, their aspects, data sources for the negotiators’ work, etc. This stage has to be completed in order to boost the negotiations, by getting fully prepared for discussion of the text of the agreement.
I would like to note that both the EAEU countries and India take similar approaches to many areas of cooperation that are of mutual interest and will constitute the subject-matter of future free trade agreement.
In 2016, the joint research group that included experts from the Commission, EAEU countries and India, completed its work. The analysis, that included macroeconomic modeling, conclude that entering into the agreement is expedient, since it will enable the parties to achieve their substantial potential.
– What is the significance of India for EAEU?
– For the EAEU Member States India is, first and foremost, a new large market. According to the analysis conducted by our experts, a wide range of goods has the potential of supply.
As for agricultural products, it concerns mainly grains, oils, vegetables, drinks including mineral water. In industrial area there are fertilizers, machines, equipment, vehicles, products of mechanical engineering, salt, chemicals, rubber, plastics, steel and wood products. India, in its turn, has potential capacity to increase its export of agricultural, food and textile products, including ready-made clothes, as well as chemical, pharmaceutical and other products. In addition, India is interested in advanced technologies, for instance, aircraft engineering, shipbuilding, metallurgical engineering, chemical industry or in creating “smart cities”. Trade turnover between the parties can grow up by 30-40% from the current level depending on the depth of tariff liberalization.
The total increase in the EAEU countries’ GDP can reach about $ 1.4 billion in the short term and $ 2.7 billion in the long term. Liberalization of the current trade regime will help to increase India’s GDP by more than 3%. Current evaluations seem to be quite ambitious. If we attain even part of these objectives, it will become a major step forward for our economies.
– Inter alia, this type of agreements presupposes reduction of tariff and non-tariff barriers in trade. Does it apply to the document that you are currently negotiating?
– The issue of eliminating/reducing both tariff and non-tariff barriers in mutual trade is the subject-matter of our discussion. The negotiators will agree upon a set of goods for which duties will be eliminated immediately after the agreement enters into force or after some transitional periods as well as duration of such periods
– In 2016, India was not even in the top ten of the largest EAEU countries’ trade partners. How will you characterize the dynamics? What new branches and segments could businessmen from India and EAEU take interest in?
India is in the top twenty of the major Union trade partners and takes the 18th place in imports to the EAEU and the 15th place in exports from the EAEU. In 2017 as compared to 2016, the trade turnover between India and the EAEU increased by 23%, from 8.8 billion US dollars to 10.8 billion US dollars. The EAEU trade balance with India is positive. The first quarter of 2018 saw the same high rates of growth in trade. In 2017, volume of exports to India increased by 25.1% and amounted to 7.5 billion US dollars. The EAEU Member States supply to India crude oil (21.8% of exports), mineral and chemical fertilizers (5.8%), hard coal (3.4%), paper (2.7%), petroleum products (2.5%), turbojet engines (2.5%), industrial or laboratory equipment (2.1%), and other goods.
The volume of the EAEU imports from India increased by 18.4% and reached 3.3 billion US dollars in 2017. In 2017, the EAEU mainly imported from India such products as pharmaceuticals (20.7% of imports), mechanical equipment (8.1%), organic chemical compounds (6.4%), tea and coffee (5.7%), electrical equipment (4.3%).
– Do you see any prospect for joint projects (ventures) and investment cooperation between the EAEU and India besides trade? If yes, then in what areas?
– We consider the conclusion of free trade agreements with our partners to be a complex instrument aimed at developing trade and economic cooperation in general. I think the EAEU is of considerable interest for India in the view of investment. India and the Union Member States could implement joint projects in metallurgy, engineering, information technology, services and pharmaceuticals, jewelry industry, etc.
This year we are inviting our partners to participate in “Eurasian Week” International Exhibition Forum which is to be held in Yerevan (Armenia) in October 22 24; annual Saint Petersburg International Economic Forum where we organize separate business events; Eastern Economic Forum which is to be held in September 11-13 in Vladivostok (Russia).
First of all, I would like to say that both the EAEU and India take great interest in mutual cooperation. And that is precisely why the Commission is negotiating with India on conclusion of a free trade zone agreement. For example Indian businessmen pay great attention to cooperation with Russia. In particular, in the year 2016, such Indian companies as ONGC Videsh, Oil India, Indian Oil and Bharat RetroResourses purchased 38.8% of shares of Vankorsk oil-field in Krasnoyarsk Krai. India is also interested in the prospects of joint development of the Far East and diamond industry. Indian partners are also ready to invest in Sakhalin-2 and Sakhalin-3 oil and gas projects. Russian companies, in their turn, take interest in cooperation with India in the field of Delhi-Mumbai Industrial Corridor construction.
The Kudankulam Nuclear Power Plant was constructed with the help of Rosatom in the state of Tamil Nadu, with its two power-units generating two thousand megawatt of electric energy.
In addition, with participation of the Russian partners, a regional center and a plant manufacturing spare parts and equipment for nuclear power plants were put into operation.
– What are the basic principles of the EAEU cooperation with the third countries, what formats are possible and what are the parties’ benefits?
– The Eurasian Economic Union enables to implement five cooperation formats. The highest degree of integration with the EAEU presupposes full membership including full rights and obligations that corresponds to the economic union stage: single customs territory, single technical regulation, “four freedoms” principle, agreed and coordinated policies, etc.
The country can also get an observer status. Not so long ago this status was received by the Republic of Moldova. It enables the Head of the State and the Government of Moldova to attend by invitation the meetings of the Supreme Council and Eurasian
Intergovernmental Council. The country’s representatives are entitled to participate by invitation in the sessions of the EEC advisory bodies, as well as the Board and the Council of the Commission. The observer state is invited to take part in all sessions, except for those which are declared closed at the request of the Commission Board member or a Member State. At request, Moldova can receive the copies of acts adopted by the Union governing bodies, except for the restricted documents (confidential ones and for official use only). In addition, Moldova has an opportunity to send to the Commission’s office its representative who will permanently interact with the Commission and its governing bodies.
Preferential free trade agreements can be concluded with the countries and economic associations. Effects of such agreements are quite large-scale and based on providing preferential, the most favorable access to the markets. Such agreement was concluded with Vietnam. An interim agreement has been concluded with Iran, leading to the creation of a FTZ; this agreement will come into force in the near future. Negotiations on concluding FTZ agreements are also being conducted with Israel, Serbia, Egypt and Singapore.
There are also non-preferential trade agreements that do not imply any elimination of duties, but create institutional basis for interaction development and project cooperation. In May, such agreement on trade and economic cooperation was signed between the EAEU and China.
And, finally, memorandums of cooperation. By concluding such memorandums, we create constantly functioning mechanisms of interaction, platforms for exchanging opinions, operative addressing possible problems, and searching for their solutions. Memorandums can be concluded with countries, economic associations or international organizations. By now we have signed nine memorandums: with Mongolia, Chile, Peru, Cambodia, Singapore, Morocco, Jordan, Moldova, Greece, as well as with the regional association of Latin American countries – the Andean Community of Nations We have also signed memorandums with major international organizations.
– What countries are the key partners for the EAEU? How is the dynamics of foreign trade changing?
– Last year, the top seven trade partners in export from the EAEU included China (11.71% of the exports volume), the Netherlands (10.75%), Germany (7.09%), Italy (5.86%), Turkey (5, 08%), the Republic of Korea (3.5%) and Poland (3.43%). Main importers to the EAEU – China (23.23%), Germany (11.21%), the USA (5.83%), Italy (4.83%), France (4.27%), Japan (3.40%) and the Republic of Korea (3.11%).
For the year 2017, foreign trade turnover of the EAEU Member States with the third countries amounted to 633.8 billion US dollars, or 124.4% to the level of 2016. At the same time, the volume of exports from the EAEU to the third countries increased by 25.4% compared to 2016 and amounted to 386.6 billion US dollars in 2017. The volume of imports to the EAEU from the third countries increased by 22.9% in 2017 compared to 2016 and reached 247.2 billion US dollars.
– Why does South-East Asia interest the EAEU?
– Historically, the Union countries have had close trade and economic relations with the countries in South-East Asia. We have a serious potential for developing these ties, which has not been fully achieved.
Evolution of relations with Vietnam shows how intensification of cooperation and transfer to a new level of economic integration can facilitate achieving the potential. We have been observing it since the free trade zone agreement entered into force. Mutual trade has grown by one third, companies from the Union countries and Vietnam are showing increasing interest in building or intensifying cooperation, which has become much more profitable due to FTZ.
Other countries in the region, such as South Korea and Cambodia, also show great interest in developing business ties with the EAEU. We have concluded memorandums of cooperation with these countries and currently we are discussing the prospects and possible formats for deepening our trade and economic relations. A document on cooperation with Thailand is also being prepared.
India, in its turn, has been the EAEU countries’ strategic partner for a long time. We hope that this trend will continue in future. Large-scale and fast-growing Indian market is attractive for developing comprehensive interaction.
– You have signed the Agreement on Cooperation with China. Will it have any effect on the course of negotiations with India?
– The Eurasian Economic Union and the Commission are open to equal and mutually beneficial relations with all partners. At the same time, we do not make cooperation with one country dependent on interaction with another. The agreement concluded with China, certainly, will have no effect on the course and results of negotiations with India.