A lot has happened for the Eurasian Economic Union in its first year of existence. The member states have felt the positive effect of free trade within the bloc and are working on a serious strategy for the future that will result in deeper, expanded cooperation.
President Vladimir Putin (second right) poses for official family photographs with other heads of state of the Supreme Eurasian Economic Council. From left: President of Armenia Serzh Sargsyan, President of Belarus Alexander Lukashenko, President of Kazakhstan Nursultan Nazarbayev; on the right is President of Kyrgyzstan Almazbek Atambayev. Photo: Sputnik
For a very different take read: "How to cure the woes of the Eurasian Economic Union"
Established on Jan. 1, 2015, the Eurasian Economic Union (EAEU) launched a new period of economic integration in the Eurasian region. A Union formed among Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan is not simply a reincarnation of the U.S.S.R. as some politicians would claim. And it is also not an attempt to create a certain one-sided economic club. The way the Union is developing is a sign of its potential power, which is quite the opposite – the Union is strong due to a full and free dialogue with everyone.
Even before the establishment of the Union, the Eurasian integration process yielded obvious economic dividends for all its participants. For example, the total trade of Russia with Armenia grew by 64 percent during the last three business years, with Belarus – 15 percent, with Kazakhstan – 39 percent, and with Kyrgyzstan – 31 percent.
Even those states that joined the EAEU not long ago have already felt the positive effect. For instance, the inflow of foreign direct investment to the economy of Kyrgyzstan increased 2.3 times from January to June 2015 and amounted to $498.5 million. Moreover, the volume of investment coming from the Commonwealth of Independent States (CIS) countries and Russia to Kyrgyzstan grew 2.8 times and 7.4 times, respectively.
Without a doubt, the effect from being a member of the Union is different in each country, keeping in mind that positive changes are not visible straight away since the level of integration of each economy is different. And this is in line with one of the key principles of the EAEU – the principle of “multispeed integration” which allows the states to gradually adapt to common laws and regulations as well as find their respective specialization areas and join in the division of labor.
How the Union has been developing over the past year
One year is not a long period of time. Surely, not all mechanisms of cooperation between the states have been adjusted. The large-scale work on synchronizing the legislative framework, standardizing technical requirements and eradicating the barriers to external trade among member states is in process.
Since the moment of the establishment of the EAEU, 80 such barriers were erased and it is planned that by 2025, there will be no obstacles in trade whatsoever. The regulations and norms in energy effectiveness, resource saving, machine and equipment production, ecological, sanitary and veterinary control, intellectual property protection and other areas are being harmonized.
A common gas market is being formed, the total effect of which is likely to reach $4-5 billion a year. A common market for pharmacy and medical products is also being created that will increase the quality of products and their accessibility to the population.
Apart from addressing daily matters of economic interaction, the members of the Union are also working on a serious strategy for the future: they are discussing the perspectives of forming a common education area of the EAEU, as well as developing mechanisms for cooperation in nanotechnology and innovation.
Some progress in these areas is being achieved – the Eurasian Engineering Center aimed at become a base for science and technology cooperation is being created while a Russian-Kazakh Fund for Nanotechnology, and Kyrgyz-Russian center for innovation in Central Asia have been already set up.
Interaction with third-party countries
The further extension of the Union is facilitated both by the access of the new member states and by various cooperation carried out with third-party countries, some of whom are significant trade partners.
Tajikistan is on its way to a Union entry decision. In late May 2015, the Union and Vietnam signed a free trade zone agreement, which, according to some experts, might by 2020 allow the increase of the overall trade turnover from the current $4 billion to $10 billion.
On Nov. 25, the first business forum "The Eurasian Economic Union and Vietnam" dedicated to the development of mutual trade was held in Hanoi, Vietnam. The forum brought together more than 150 companies and business associations from both Vietnam and the EAEU. More than 30 countries that are Union trade partners showed interest in the free trade zone.
The end of November 2015 also marked the signing of the memorandum for cooperation between the Eurasian Economic Commission, a permanent regulatory body of the Eurasian Economic Union, and the Ministry of Trade, Industry and Energy of the Republic of Korea. The memorandum created the base for bilateral cooperation in a wide range of areas of economic development.
Constructive dialogue has also been established between the Union and Latin American states – namely, Mexico, Chile, Peru and Uruguay.
Eurasian integration is the initial part of the global economy. Today the Eurasian Economic Union is keeping up its dialogue with the Asian-Pacific Economic Cooperation (APEC) forum, the Southern Common Market in Latin America (MERCOSUR), the Association of Southeast Asian Nations (ASEAN), as well as other partners – the BRICS countries, for example.
Russian and Chinese leaders discussed the opportunities of cooperation between the Eurasian Economic Union and China during a meeting in Moscow on May 8, 2015. The joint communiqué of Vladimir Putin and Xi Jinping says that Eurasian integration and The Silk Road Economic Belt could be correlated.
It means there is a possibility for a higher level of cooperation - a common economic area for all of Eurasia. In effect, Eurasian integration is the integration of other integrated institutions.
The Eurasian Economic Union can easily be and it must be a part of the Greater Europe project – extending from the Atlantic to the Pacific Ocean. And it will never become a part of the closed geopolitical game with specific rules and benefits only for exclusive players.
Today experts are actively discussing the prospects and possible models for cooperation between the EAEU and the newly created Trans-Pacific Partnership (TPP). As Tatiana Valovaya, Minister in charge of the Development of Integration and Macroeconomics at the Eurasian Economic Commission, said while speaking at the conference at the Cato Institute in Washington, DC on Oct. 29, 2015: “The formation of mega-regional trade blocs is a positive trend, adding more stability to the development of the global economy.”
And this seems to be the case. The EAEU is one of the world’s centers of economic development and the countries of the Union consider the TPP not as a competitor or foe, but as a potential partner and an extra opportunity to extend the limits of cooperation and a next step towards global economic integration.
The Union currently offers to its partners entry to the market of an area of approximately 20,000,000 square kilometers of the world's land surface, encompassing 180 million people, as well as access to affordable energy, skilled labor, extensive transportation infrastructure and the unique geographic location of the countries that strengthen the ties between West and East. The Union is number one in the world in production of oil, natural gas and gas condensate, number one in the world’s production of potash fertilizers and number two for length of railway connections.
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A unified toolkit of export, import and investment support is being developed by the Union member states. Russia’s Vnesheconombank, the Development Bank of Belarus and the Development Bank of Kazakhstan have already signed a Memorandum on Cooperation in investment and the trade and economic spheres. The Memorandum provides a possibility for financial institutions of other member-states to join in.
The Memorandum’s implementation would promote sustainable economic development and stimulate trade, economic and investment cooperation. The parties agreed to upgrade mechanisms of credit activities between the financial institutions, to cooperate closely upon implementing of joint investment projects and to promote exports of Union member-economies.
A "Russian Export Center" of Russia’s Vnesheconombank was created as a basis for further cooperation. It will provide Russian and foreign companies operating in Russia with a wide range of actual support measures, including financing under subsidized interest rates, export insurance and state guarantees.
To sum up, a lot has happened in the Eurasian economic project over the past year. At the same time, we do witness the steady readiness of member states to have a system and open dialogue that allows the Union to move forward and achieve the goals of the Eurasian economic project. Its mission is clear - to create conditions for modernization and further stable development of the economies of the member states in order to improve the living standards of their population.