First step towards Eurasian Union

A deal on the free trade zone was signed by CIS prime ministers in Saint-Petersburg on October 18. A video conference was organized a few days later. Experts expressed their view on prospects of the document for the CIS, and its operation and integration in post-Soviet space.

Svetlana Glinkina, Deputy Director of the Institute for the Economy of the Russian Academy of Sciences

Glinkina noted the importance of the document and its effect on integration. There is an integrational limit for trade. Viewing the CIS and EurAsEC does not show good indicators. There was a 19-81 ratio in 2009-2010, while the needed indicators for integration are 28-72. The free trade zone will activate trade limits.

Russian scientists must stop rejoicing over the Eurasian Union. There are two integration processes in post-Soviet space: the Customs Union and the Common Economic Space. The Eurasian Economic Community and the multilateral free trade zone are a prospect for free trade. A lot depends on the integration core. Modernization processes may open the way for a multilateral free trade zone. If it does not happen, there will be integration at various paces and vectors.

Moldovan officials said that they were having negotiations with Balkan, European and other states. Some other centers are possibly pulling them away from the Eurasian Union being realized by the EurAsEC.
A lot will be linked to the Customs Union. But there should be no hurry in expanding the Common Economic Space, since it is a field for competition. It is a field for developing common programs and policy. It requires a homogenous area. Achieving it would start the process of redistribution of resources, which is a complicated process Russia is not ready for, Glinkina concludes.

Sergey Glazyev, Executive Secretary of the commission of the Customs Union, Deputy Secretary General of EurAsEC

Glazyev believes that the Customs Union, as the integration core, is clear. The Common Economic Space will be formed on January 1, 2012. There will be a free market of services, capital and labour. Integration will emphasise forming new allied institutions and deeper mechanisms for support of economic activity, like Svetlana Glinkina said.

A common market would add an additional 5% to GDP. A common economic space would have the effect of adding 15% to GDP. It will be reached through the market of raw resources.

Kyrgyzstan wants to join the process. The EurAsEC includes Tajikistan, a decision on the state will be made in the coming years. The Eurasian Economic Community has existed for 10 years.

The Customs Union held a session of its supreme structure, which noted the conclusion of the union’s formation. Kazakhstan benefits from the union, such as importing goods for five years under the condition that they are consumed in Kazakhstan only.

The main achievement is mutual obligations of members of the union. Bilateral obligations were changed to multilateral ones. Sides need to take actions with mutual consent.

Integration in the Customs Union was a natural process. Its members have lived as a common economic space for a millennium. Ukraine’s part in the multilateral free trade zone, its prospects in the Eurasian Economic Union, are natural. There are thousands of cooperative links and mutual dependences.

Ukrainian Vice-Premier Kluyev said that the EU was in a hurry to allow Ukraine to join the EU free trade zone right after the signing. Only the Ukrainian president is to make his decision at this point.

Ukraine will lift duty fees. Import of Ukrainian products increases by 7%. The Ukrainian budget would lose about 0.5% due to lower taxes. This will cause a major effect on sales of products. Ukrainian goods will be replaced by European imports. Another issue is transit of European goods to Russia. There have been instances of Polish meat transported to Russia under a Ukrainian brand.

Turkey is a supplier of various products of unknown origin. Moldova is part of the free trade zone with Turkey, which would affect all states. Heads of member-states of the Customs Union announced a switch from the free trade regime to most-favoured-nation treatment, which means import fees.

It is obvious that European pressure on the Ukrainian market would grow. Ukrainian products lack competitive properties for the European market. Further steps concern members of the Customs Union.

Author: VK