On 14 December 2018, the Austrian Central Bank (OeNB) and the Reinventing Bretton Woods Committee co-organised a conference on “Connecting Europe and Asia” convening high-level policy makers, top business executives and renown researchers. Taking place toward the end of the Austrian Presidency in the Council of the European Union, the goal of the event was to discuss ways to improve cooperation between Europe and Asia and to make both sides benefit.
The colloquium was attended by Dmitry Erohin, member of the European Society for Eurasian Cooperation, master student, WU (Vienna University of Economics and Business).
The conference was opened by the host, the governor of the Austrian Central Bank, Ewald Nowotny. He called the cooperation between Asia and Europe a vital and interesting topic, especially in the context of China’s growing economic and political influence. Nowotny expressed regret that some countries saw this as a challenge. The positive Chinese economic growth should have a positive impact in the wider Eurasian space. But even though China was becoming the worldwide economic leader, Europe remained the best place to be – because of its economic strength, attractiveness, GDP per capita. Nowotny also stressed the importance of infrastructural projects in the process of integration as, for instance, railroads for the landlocked countries.
Marc Uzan, the executive director of the Reinventing Bretton Woods Committee noted that we were living in a new age of connectivity. The economic ties between the EU and Asia were quite strong but there was still space for stronger and mutually beneficial connectivity in the form of building physical as well as non-physical infrastructure, market integration, maintaining stability in Central Asia, creating synergies and networks. Uzan highlighted the role of the European Investment Bank in various connecting projects.
During the panel session on “Integration in Europe: European Union and Eurasia”, Elena Rovenskaya, the program director for Advanced Systems Analysis at the International Institute for Applied Systems Analysis (IIASA), presented IIASA as the centre of science diplomacy, a neutral platform and a tool to build a trustful and depoliticized dialogue. IIASA had been running a project on the “Challenges and Opportunities of Economic Integration within a Wider European and Eurasian Space” since 2014, analysing transport corridors, FDI, convergence of technical product standards between EU and the Eurasian Economic Union. Rovenskaya emphasized that there were two possibilities of integration: bottom-up or top to bottom. The first variant would be the development of transport and infrastructure connectivity as past the Belt and Road Initiative, including development of the Kosice-Vienna broad gauge extension, the “Arctic” railway in Finland and others. All these projects would require coordination between participating countries. Connectivity enhancement in the top-down scenario would be based on cooperation between regional organizations and programs: the EU, the EAEU and the Eastern Partnership. All of them represented different instruments to connect countries, but the challenge lies in the harmonization of different integration processes to achieve a win-win situation for all. Rovenskaya added that IIASA’s research showed the positive impact of theoretical EU-EAEU economic integration and cooperation in transport, infrastructure, trade, investment and labour mobility. Unfortunately, the economic relations between the EU and the EAEU are currently defined by foreign policies and not by economic reasoning. To be able to optimize benefits from economic connectivity, one would need to consider the transport-infrastructure-trade-investment-mobility nexus.
William Tompson, the head of Eurasia Department at the Global Relations Secretariat of the OECD, presented the OECD’s project on the connectivity. He highlighted that the benefits of enhanced connectivity were not automatic. Focus on infrastructure would not be enough. Complex packages, going beyond trade and infrastructure, would be needed. At the same time, the benefits should not be exaggerated: landlocked location and distance to global markets could be mitigated but not eliminated. Coordination among countries to remove infrastructure and non-infrastructure bottlenecks would also necessary. The agenda should be multi-dimensional and include policy responses, infrastructure provision, human capital formation, improvement of the business environment and innovation. Tompson also presented data on the cost of distance for different countries: e.g., Kazakhstan needed 250 dollars per ton to reach the countries with 20% of the global GDP in aggregate, whereas Germany and the USA would only need approximately 50 dollars. The factors of this gap were distance, costs, speed, border crossings. The estimations made with the international freight model showed that logistics performance was generally poor, and competition could be enhanced. The link between policy objectives and investment choices was often unclear, and the focus lay on large-scale products, which diverted attention from critical local challenges. Tompson also criticized the ministries of transport, which he called ministries of road-building, not knowing that transport was far more than that.
The head of unit in the European Commission, Petros Sourmelis, presented the EU’s perspective. The European Union is interested in deeper cooperation and trade relationships with its Eastern partners for reasons of trade complementarity, cultural affinity and geography. As for now, the EU is not convinced if the EAEU was really a supranational organization and whether its decisions were binding for its member states. Sourmelis cited the EAEU’s incomplete internal market as another barrier for deeper interaction with the EAEU. However, the EU is open to cooperation with the EAEU on a technical level. Sourmelis added that “one needed to start somewhere”, and he hoped for more engagement to discuss all relevant issues. At the same time, political level engagement would remain a long-term perspective. Implementation of the Minsk Agreement would be necessary for a possible broader cooperation The EU saw constructive steps from Russia and is open to talks in order to build trust for long-term and broader engagement.
Member of the Board (Minister) of the Eurasian Economic Commission Tatyana Valovaya closed the high-level panel session. She first reminded the participants of the history of the ancient Silk Road. In the 21st century the global trade geography is shifting once again to Asia. Within the next 20 years China is likely to become leading power. Valovaya argued that there would be no risk in China getting richer. The only risk would be living in the world, where global rules would be determined by economic powerhouses. Every stakeholder should be able to equally participate in the rule making process. Moreover, regional economic unions are likely lead to better global governance. For that aim, building interregional partnerships between Europe, Asia and Eurasia would be vital. Valovaya reminded that in 2003 a lot of political and technical work had achieved towards EU-Russia cooperation, which had then been stopped by political reasons. In 2015, the EAEU began wider cooperation with China as part of the Belt and Road Initiative. Consequently, in May 2019 a non-preferential agreement was signed. Its goal is to harmonize technical standards and custom regulations, to decrease non-tariff barriers as much as possible and to support cooperation projects in the digital economy. However, the EAEU considers not only China as a key partner. Geographic diversification would be necessary. Valovaya gave the USA as a good example, as it did not “put all the eggs in one basket”, but concluded economic partnership agreements with various partners. She admitted that the EAEU had some “growth pains”. However, this is normal for any integration project and the Eurasian Economic Commission together with the member states “are working on them 24/7”. Solving all of them should not be a precondition for the dialogue with the EU. The EAEU never intended to be as supranational as the EU. For example, the Eurasian Union is not aiming to introduce a common currency or to create a political union. The EU-EAEU cooperation would strengthen both unions and create the necessary economic dialogue. More technical cooperation would be needed. And, of course, the leaders of the EU should be participating in the dialogue to better understand the EAEU and its work towards more connectivity in Eurasia.