Greater Eurasia

EU – EAEU could revive Eastern Partnership

November 25, 2018
_ Yuri Kofner, head, Eurasian sector, Higher School of Economics; research assistant, International Institute for Applied Systems Analysis (IIASA). Report given at the KAS School of Excellence 2018 “Eastern Partnership: Challenges, Chances and Perspectives”. Chisinau, 9 November 2018.*

Unfortunately in the West, especially in the “new European” countries, there is yet very little information about the aims and workings of the Eurasian Union. And most of the existing coverage is biased due to purely ideological reasons._-_-_-_.jpgThe Eurasian Union can best be understood from a liberal intergovernmental approach. As stated in the Astana Treaty from 2014, the Union’s objectives are purely economic:
  • to create proper conditions for sustainable economic development of the member states in order to improve the living standards of their population;
  • to seek the creation of a common market for goods, services, capital and labor within the Union;
  • to ensure comprehensive modernization, cooperation and competitiveness of national economies within the global economy.
The Eurasian integration project is modeled along the European experience. It is based on the principles of: superiority of national sovereignty, voluntariness, equal representation, openness and the market economy. Each member state has an equal voting right, independent of economic and population size, and all decisions are made solely by consensus. The main bodies of the EAEU are mainly intergovernmental with three supranational exceptions: the Eurasian Economic Commission (EEC), based in Moscow; the Court of the EAEU, based in Minsk; and the loosely affiliated Eurasian Development Bank (EDB), based in Almaty.Some of the main benefits that have already been achieved by the Eurasian Economic Union can be summed up as follows:
  • creation of a common domestic market with the four freedoms of movement for over 184 mln people;
  • promoting an increase of mutual trade between member states of the Union (e.g. mutual exports rose from 10.9% in 2015 to 14% in I-II 2018);
  • promoting an increase in the share of goods with higher added value in mutual trade (e.g., the share of imports of industrial products from third countries decreased from 24.6% in 2015 to 22.8% in 2017);
  • building of interstate technological production chains (for example, in 2017 cooperative supplies between the member states in the manufacturing industry increased by 30%, while imports of components from third countries increased only by 21.6%);
  • acting as a driver for the implementation of the world’s most progressive economic policies, standards, rules and governance models;
  • strengthening of the bargaining power of the member states in trade negotiations with third parties;
  • promoting a network of free trade areas with a wide range of countries and economic blocks (Vietnam – 2015; Iran – 2018; China – 2018, non-preferential; India, Singapore, Serbia and others – planned for 2019);
  • helping Armenia overcome its trade isolation and making it an attractive location for European companies due to its membership in the EAEU, enhanced partnership with the EU and the EAEU’s FTA with Iran;
  • acting as a multilateral leverage institute for Belarus in trade disputes with Russia (apart from being Belarus’ key export destination);
  • helping Kazakhstan overcome its geographic isolation by increasing continental connectivity and the creation of a common transport market;
  • acting as Kyrgyzstan’s key export location for agro-food products and human labor;
  • providing cheap labor, necessary for a sustained economic growth of the Russian economy, as well as promoting a “cordon of economic stability” around Russia’s borders.
Despite of the current Ukrainian crisis and crisis in EU-Russia relations, there are significant benefits that the European Union could gain from deeper cooperation with its neighbor to the East:
  • The EAEU has a large market for the export of EU manufactured goods and food products (over 184 mln people)
  • The EAEU is a source of cheap resources (oil, gas, coal, lumber, metals, etc.) which is very important for keeping the EU economy competitive in the global market.
  • The EAEU has a relatively high-qualified labor force, e.g. in the IT sector, where the EAEU implements an ambitious “Digital Agenda by 2025”.
Econometric models created by the Munich-based Ifo Institute in 2016 have shown, that the Eastern European “shared neighborhood” countries would benefit the most from the creation of a free trade area “from Lisbon to Vladivostok”:
  • The three Baltic states (Estonia, Latvia, Lithuania): An increase of exports to the EAEU by 80% (10% in overall exports). GPD growth by 1.2% to 1.8%, i.e. 200 Euro per capita.
  • Poland: An increase of exports to the EAEU by 70% (5% in overall exports). GPD growth by 0.5%, i.e. 50 Euro per capita.
  • Belarus: An increase of exports to the EU by 109% (46% in overall exports). GPD growth by 5%, i.e. 290 Euro per capita. (!)
  • Ukraine: An increase of overall exports by 26%. GPD growth by 5%, i.e. 90 Euro per capita.
Moldova would benefit significantly from a more unified EU – EAEU/CIS free trade area. In case of such a scenario, real GDP per capita in Moldova would increase by 6.3% (98 euros), incomes would increase by 6.9%, and inflation would decrease by 2.8%. The sectors of the Moldovan economy that would benefit the most would be the garment industry, agriculture and retail trade.In September 2018 the EU finally published a common strategy concept on enhancing connectivity in the wider Eurasian space. It successfully lays out sound common principles and general areas for cooperation.However, by 2018 the Eurasian Economic Union has irrevocably become a reality and a player that Brussels has to deal with in Eastern Europe; if it wants to or not. In order to revive the Eastern Partnership program, which has been stagnating in recent years, the EU would need let go of its zero-sum game mentality and its approach of projecting its own agenda against that of the EAEU.Given the political will, mutually beneficial cooperation would be quite simple to achieve in the shared neighborhood area.The establishment of a tripartite EU – EaP – EAEU negotiation platform might help to achieve this goal. Its first task could be to find common and mutually acceptable approaches to such issues as technical regulations, customs procedures and rules of origin.
* Disclaimer: Views expressed in this article may not represent that of the Konrad-Adenauer-Stifung or of other organizations mentioned.
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