The Eurasian Economic Union (EAEU) and the Shanghai Cooperation Organization (SCO) will work on the preparation of an agreement on economic continental partnership. This was announced by the First Deputy Head of the Ministry of Economic Development of the Russian Federation Alexei Likhachev. The agreement will provide for freedom of movement of goods, promotion of trade and freedom of movement of capital. Some analysts see a lot of positives in the likely upcoming merger. Others are full of skepticism.
The EAEU and the SCO will begin work on the preparation of an agreement on economic continental partnership, said Alexei Likhachev, First Deputy Head of the Ministry of Economic Development of the Russian Federation, speaking at the first Russian-Chinese construction forum in Moscow.
“In December 2015, at the council of the heads of the SCO, an idea was voiced from our Kazakhstani partners to seriously think about the SCO free trade zone,” he is quoted as saying. “We did not just accept together with the Chinese delegation, we developed this idea to the following one: in fact, we will now prepare approaches to some kind of economic continental partnership, to a comprehensive agreement within the framework of the SCO.”
He outlined the promising "boundaries" of the SCO: "Moreover, we understand that today the SCO outlines countries - such as China and Russia, the countries of Central Asia, but also involves in this work, on the one hand, Armenia and Belarus, which are members of the EAEU, on the other sides, India and Pakistan, which started a difficult, but, I think, in the future successful way of joining the Shanghai Organization. So, just think, about half of the world's population will be part of this huge agreement."
According to Likhachev, the following components are seen in the agreement: freedom of movement of goods, freedom of movement of capital and investment, a comfortable environment for increasing the share of settlements in national currencies, preferential access to service markets, in particular, to construction.
Discussion of the contours of the future agreement is scheduled for March 17 at a meeting of the ministers of economics and trade in Moscow.
Work on the preparation of the agreement will be carried out within the framework of the Eurasian Union and within the framework of bilateral contacts between China and Russia. “I would like to emphasize that this task has been reported to our leaders - the Chairman of the People's Republic of China, the President of the Russian Federation. I think that the final point at the beginning of these negotiations, in the creation of this, perhaps, the most ambitious trade agreement in the world, will be set at a meeting of the heads of state of the Shanghai Cooperation Organization, ”Likhachev quotes.
Later, Likhachev told reporters, the agency notes, that by the next meeting of the SCO heads of government, the economy ministers should propose a "road map" for preparing an agreement.
He cites his words, spoken to journalists on the sidelines of the forum: "We invite all SCO economic ministers to Alexei Valentinovich Ulyukaev on March 17 to discuss the substantive of this agreement."
What do Russian experts think about this?
Research Center Director East Asia and SCO MGIMO Alexander Lukin is full of skepticism.
“I perceive the current statement by Alexei Likhachev as quite bold,” he said. - The Shanghai Cooperation Organization consists of many countries. Even Russia is having a hard time with China to have a free trade zone. For Tajikistan and Kyrgyzstan, the creation of a free trade zone will mean the elimination of the remnants of any production. Will countries go for it? Kyrgyzstan, say, is a member of the WTO, but there are heated discussions within the country about this as well.”
The expert strongly doubts that “in the near future free zone trade".
On the contrary, the idea of future integration is approved by Vladimir Mantusov, head of the world economy department at the Diplomatic Academy of the Russian Foreign Ministry.
“The idea of integrating the SCO and the EAEU is clear to me and seems attractive,” he told a SP correspondent. - What will happen in practice? We need to look at specific agreements. Maybe this will be the first stage of international economic integration, that is, a free trade zone. Maybe it will even be a customs union that will grow into an economic union.”
According to the expert, the two associations have thought about formalizing their economic relations, which de facto already exist, and this is good. “Almost half of the members of one association are simultaneously members of another,” the scientist explained. - Say, Belarus is a member of the EAEU, but it is not in the SCO, but Russia and Kyrgyzstan are included in two structures. The very idea of integration is correct.”
The expert explained the likely benefits for the parties to the agreement using an example: “Suppose there are agricultural products that are expensive to produce. Theoretically, oranges and bananas can be grown in Russia, but this is impractical. But we have products that are needed in China. The PRC produces goods that we and the Belarusians do not have. And so the need for products from a particular country determines the preferential trade regime for deliveries from abroad to the domestic market.
Alexander Lukin is much more categorical and sees no reason for optimism: “There may be limited agreements, but this is not a free trade zone. We do not know what will happen in 20 and 30 years. But now there will be no free trade zone.”
The idea of economic partnership (integration) between the EAEU and the SCO, let us add on our own, has actually been voiced before.
On February 11, the Kazakh news portal published a statement by Chairman of the Supreme Eurasian Economic Council Nursultan Nazarbayev, with which he addressed the heads of the EAEU member states.
According to him, the EAEU is organically integrated into the world economic system as a reliable bridge between Asia and Europe. This year, according to the head of Kazakhstan, should initiate work on the formation of a free trade zone of the EAEU and SCO states in the future.
Nazarbayev also proposed declaring 2016 the year of deepening economic relations between the EAEU and third countries and major integration associations.
On February 18, an article by Marat Yelemesov appeared on the website of a Kazakh social and political newspaper under the heading “Kazakhstan proposes to create a free trade zone between the SCO and the EAEU.”
The journalist asked experts to evaluate Nazarbayev's proposal to create a free trade zone between the SCO and the EAEU.
Yury Solozobov, Director for International Projects at the National Strategy Institute, recalled the turning point in the global economy: “The point is that today the global economy is going through a turning point. The US and the EU are preparing to sign an agreement on the Transatlantic Trade and Investment Partnership (TTIP), which will create a common market for goods and services of 800 million people. Recently, 11 countries of the Pacific coast and the United States, providing 40% of world GDP, signed an agreement on the Trans-Pacific Partnership (TPP). These two major agreements, TTIP and TPP, have the potential to destroy WTO rules. They can impose their obviously unfavorable rules of the game on the participants in the world economy. Washington is the locomotive of these "marine" integration projects, which can lead to the rupture of Eurasia into two parts. There is an urgent need for a new integration program for the continental countries of Eurasia, which would take into account the interests of China, Russia, Kazakhstan, Iran and India as the main world players of the 21st century. Together, these countries already account for almost a third of the world economy in purchasing power parity terms, and their importance in global affairs will only grow.”
Associate Professor of the Department of Financial Markets and Financial Engineering of the RANEPA Sergey Khestanov told the correspondent that the economy of the EAEU member countries is noticeably slowing down. The Chinese economy is also slowing down, but its growth rates remain significant (+6.9%). This means that strategic cooperation with the SCO looks promising. Yes, the FTA between the EAEU and the SCO carries the risks of increased competition with Chinese producers, but it also provides an opportunity to enter the Chinese market. The expert believes that producers of raw materials and foodstuffs will benefit from such a free trade zone. In addition, the FTA will clearly stimulate the arrival of Chinese investors, and this is also a plus.
Researcher at the Institute of Economics of the Russian Academy of Sciences Alexander Karavaev believes that the enlargement of the EAEU FTA is a forced measure. This is one of the ways to preserve the integration association during the crisis.
Thus, the opinions of experts on the possible integration of the EAEU and the SCO and the creation of a free trade zone differ. Some believe that the consolidation of associations is forced in a crisis, and they do not believe in an FTA at all; others welcome integration and believe that the preferential trade regime and the diversity of the economies of the participating countries will lead to positive results of cooperation.
The emergence of the Silk Road Economic Belt project has caused a lot of controversy about whether Russia and China will be able to harmonize their integration and infrastructure projects in Central Asia. About how Chinese initiatives correlate with Russian policy in the region, to a correspondent of a Chinese magazineInternationalHeraldleadertold and.about. Director of the Institute Far East RAS, RIAC expert Sergey Luzyanin.
How does Russia generally assess China's recently adopted "One Belt, One Road" policy? Is it compatible with the Eurasian Union that Russian President Vladimir Putin is seeking to create?
It is obvious that, in addition to possible risks, the creation of the Silk Road Economic Belt will serve as a constructive economic incentive for Russia. In particular, there will be a need for active investment, trade and economic policy with regard to the groups involved, including in particular the expansion of the construction of railways and highways - an example of such activity is the reconstruction of the Moscow-Kazan railway line and the construction of a high-speed railway between Moscow and Beijing. In the future, as Beijing plans, the integrated transport network will create a transport corridor connecting the Asia-Pacific region with the countries Western Europe. Such a network will link 18 Asian and European countries, covering a total area of 50 million square kilometers with a population of 3 billion people. Over the past 10 years, the annual growth of China's trade with countries along the Belt was about 19%, and China's trade turnover with these countries in 2014 reached more than 600 billion US dollars.
The idea of the Belt, put forward by Chairman Xi Jinping, was initially perceived in Russia and a number of other countries of the Customs Union that existed at that time, rather cautiously. Row Russian experts it has even been argued that the project is a PRC response to the slow pace of development of the SCO and that the Silk Road is an alternative option for accelerating development for Central Asia and neighboring regions.
As it has now become apparent, the situation is not so critical. Undoubtedly, Xi Jinping's project is extremely ambitious, designed for the long term, and reflects the growth rate of China's influence and the nature of this growth as a new economic power. In the context of the Great Silk Road project, China's tasks in the Eurasian space are quite clearly visible. On the other hand, it is just as obvious that this project does not hinder and is not intended to hinder the implementation of the other two plans - the development of the SCO, within which China and Russia continue to play a central role, and the Eurasian Economic Union. At the moment, the Chinese projects (Economic Belt and Silk Road) seem to be an important strategic initiative of the country's leadership, which, however, has not received institutional formalization.
Thus, in the context of these projects, Russia is by no means a passive observer in terms of the multilateral or bilateral format of cooperation with China. While China is actively promoting its project, Russia, if we talk about the SCO format, is interested in finding (political and expert) ways and opportunities for developing interaction or bringing the SCO closer to the Silk Road project. Russia's interest in developing cooperation between the SCO, both with the Eurasian Economic Union and with the Silk Road project, can be seen quite clearly. In this case, there are a number of options / scenarios that can be implemented in this process: ( a) development of integration/rapprochement along the “Northern Route” (SCO – EAEU) with the strengthening of the Eurasian Development Bank by attracting Chinese resources – or (b) along the “Southern Route” (SCO – Silk Road), which, however, is presented as more late in terms of possible periods and implementation possibilities. At the same time, parallel development of all three projects cannot be ruled out.
How will Russia build its relations with the five countries of Central Asia if they decide to cooperate with China within the framework of the “one belt, one road” concept?
The strategy chosen by China to implement the One Belt, One Road policy will not create a conflict of interest between Russia and China in Central Asia. Some Western experts believe that all Central Asian countries will join the Chinese Silk Road project and forget about Russia and its projects altogether. However, this is not the case: there is a close relationship between China, Russia and the countries of Central Asia, due to their membership in the Shanghai Cooperation Organization (SCO). The only state in Central Asia that is not a member of the SCO, Turkmenistan, does not play an important political role in the region. Thus, we see the possibility of multilateral cooperation within the framework of the Chinese Economic Belt and the SCO, their rapprochement, as well as active participation Central Asian countries in general cooperation in the field of economy and transport.
The first Russian-Chinese construction forum, held on Wednesday, March 2, in Moscow, brought news related not only to the construction and development of cooperation between the Russian Federation and China. According to the First Deputy Minister economic development Alexey Likhachev, the countries of the Eurasian Economic Union (EAEU) and the Shanghai Cooperation Organization (SCO) are preparing an agreement on economic continental partnership, which also implies a free trade zone.
"In fact, we will now prepare approaches to some kind of economic continental partnership, a comprehensive agreement within the framework of the SCO. Moreover, we understand that today the SCO outlines countries such as, of course, China and Russia, the countries of Central Asia, but also involves them in this work, on the one hand, Armenia and Belarus, which are members of the EurAsEC, on the other hand, India, Pakistan, which have begun a difficult, but in the future, I think, a successful path of joining the Shanghai Organization," Likhachev explained. The Deputy Minister emphasized that about half of the world's population will become parties to this agreement.
The initiative of the SCO and the EAEU is not only a response to the largest US economic projects - the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), which are clearly directed against China and Russia. This is also a natural stage in the development of cooperation in the Eurasian space. It is no coincidence that three organizations actually participated in the summit in Ufa on July 8-10, 2015 - the SCO, BRICS and the Eurasian Economic Union.
The trade agreement between the SCO and the EAEU could indeed become the most ambitious in the world. The SCO member countries are Russia, China, India, Pakistan, Kazakhstan, Uzbekistan, Tajikistan and Kyrgyzstan, Iran may join. The total territory of the SCO countries is 60% of the territory of Eurasia, the total population is 3 billion 40 million people. Members of the EAEU - the Russian Federation, Armenia, Belarus, Kazakhstan, Kyrgyzstan, a candidate for entry - Tajikistan. The total population of the union is 183 million people, the territory is the first in the world, and the GDP is the fifth in the world.
On March 17, the agreement is scheduled to be discussed by the ministers of economy of the SCO countries, and the final point in its creation will be put at the meeting of the heads of state of the Shanghai Cooperation Organization on October 22, 2016 in Tashkent. While there are no details of the future agreement, Alexei Likhachev only outlined its contours. According to the official, there are at least three major components: freedom of movement of goods, promotion of trade, issues of the movement of capital, investment, a comfortable environment for increasing the share in national currencies and preferential access to Russian market services.
"We will carry out a huge amount of work both within the framework of the Eurasian Union and within the framework of bilateral contacts between the People's Republic of China and Russia," Likhachev said, adding that "it will be broader than an FTA." Earlier, Beijing advocated the creation of a free trade area (FTA) within the framework of the SCO.
Obviously, Russia and China will be the informal leaders of the partnership, and its success largely depends on how Russian-Chinese bilateral relations develop and whether the countries find an optimal balance of interests.
On May 17, 2018, during the economic forum in Astana, an agreement was signed between the People's Republic of China and the Eurasian Economic Union on economic and trade cooperation. This document, according to the Chinese side, is an important milestone in the promotion of the PRC's "One Belt - One Road" initiative. The process of ratifying the treaty may drag on for many months, but China is in no hurry: cooperation with the EAEU is not the only way for Beijing to engage in trade and economic interaction with the Eurasian states.
The scope of the agreement was 13 chapters. The document defines the activities of the PRC and the EAEU in the framework of customs cooperation and trade facilitation, intellectual property rights, establishes the basis for departmental cooperation and public procurement, and also establishes rules for conducting electronic commerce, considers issues related to competition in the markets.
The parties agreed on further simplification of customs clearance procedures and reduction of associated costs in the course of trade.
It is planned to create favorable conditions for industrial development, to promote the deepening of economic relations between the PRC and the EAEU, as well as its member states within the framework of bilateral relations with the PRC.
The road to an agreement began in May 2015. Since then, five rounds of negotiations, three working group meetings, and two ministerial consultations have taken place. Agreement opens new stage relations between the PRC and the EAEU, as well as cooperation within the framework of the EAEU interface policy and the Belt and Road Initiative.
China emphasizes that, despite the absence of tariff cuts under the agreement, it is based on the rules and norms of the WTO. This view allows us to speak about two aspects of the developing trade and economic interaction between China and the EAEU. On the one hand, trade and economic relations between the PRC and the EAEU should be within the framework of the WTO rules and regulations, which indicates that China is not striving to create a parallel global trade and economic system based on relations with the EAEU. On the other hand, China is making an attempt to seize primacy in the WTO from Western countries, to emphasize its commitment to the established rules of trade and economic relations in the world.
It should be noted that China is in no hurry to assess the agreement on trade and economic cooperation with the EAEU. The process of ratifying the agreement in all EAEU member countries may take more than six months, which means that the possibility of a real assessment of the document and its significance for the parties will open no earlier than 2019.
In China, they talk about the elitist nature of the agreement. It was noted that during the entire period of interaction between the EAEU and the PRC in matters of trade and economic relations, as well as in issues of conjugation of the EAEU and the Belt and Road initiative, the leaders of the states played the first violin. As a result, thanks to the significant personal support of the President of the People's Republic of China and the leaders of the EAEU member countries, it became possible to complete the negotiations on the agreement.
The document is considered as part of China's policy in the framework of relations with the countries participating in the Belt and Road Initiative. The agreement is called an important milestone in the construction and development of the Chinese initiative. Listing aspects of the agreement affecting cooperation in the field of trade, intellectual property, public procurement and e-commerce, it is emphasized that the integration of the EAEU and China, more broadly - the Belt and Road initiative, allows Chinese enterprises to further develop their export potential in relation to member countries. EAEU.
China sees the agreement on trade and economic cooperation not only as a document organizing a system of multilateral cooperation between the EAEU countries and China, but also as a basis for the further development of trade and economic relations with them. The agreement between the EAEU and China was mentioned in joint statements with Russia and Kazakhstan on the eve of the SCO summit.
Speaking about China's bilateral cooperation on the example of Russia, the agreement has not yet been marked as a breakthrough or a primary document. On the contrary, the document is named among the routine practices of bilateral interaction, which, despite significant progress, require additional efforts and consolidation of results.
Speaking about the view of the Chinese press and analytical centers on the possibilities of trade and economic interaction in Eurasia, it is not the EAEU that comes to the fore, but the SCO, which is gradually gaining more and more importance in the framework of China's foreign economic strategy.
Of interest is the material on promoting the deepening of economic cooperation in the SCO, published on the eve of the organization's summit in Qingdao.
The goal of developing economic cooperation in the SCO is to promote regional trade facilitation and liberalization of institutional mechanisms.
The importance of the Belt and Road Initiative for the development of the SCO and the need to strive for the creation of an SCO FTA were emphasized. Achieving this result is possible through reforming the commercial system of countries, strengthening the legal structure, as well as jointly fighting corruption and moving towards economic cooperation. The feasibility of the SCO FTA is seen through the synergy of the organization and the Chinese initiative.
The SCO is also seen as the basis of a regional "community of common destiny". The SCO is a new type of international relations based on respect, fairness and mutual benefit. A new type of international political and economic relations in the SCO has been formed by the "Shanghai Spirit", which is based on trust, mutual benefit, equality, respect for various civilizations and the desire for common development.
The SCO promotes economic cooperation and forms a community of economic interests. Thanks to the Belt and Road Initiative, the infrastructure of the region has been improved, which affects the development of trade of the member countries of the organization.
The development of humanitarian cooperation was emphasized. Activities are being carried out to cultural exchange and exchange in education and science. Thanks to this, the social basis for the development of a society that shares a “common destiny” is formed.
The interaction between the PRC and the EAEU depends on many factors, both in domestic politics and in international relations. The EAEU is not the only platform considered by the PRC as a basis for economic interaction with post-Soviet Eurasia.
There are active attempts to put forward the economic agenda in the first place within the framework of the SCO. The main nuance is that all possible mechanisms of interaction are in the context of the development of the Belt and Road initiative, which, according to the PRC, is beginning to act as a measure of economic integration in Eurasia.
Recently, experts have begun to talk more often about the formation of new centers of the multipolar world. Today, Russia, the countries of Central Asia, China, and the countries of South Asia are a new pole of growth, as well as a base for integration. It should be noted that the Western countries were very skeptical about education and BRICS. There was an opinion that new integration associations were not viable. We can say that the Eurasian Economic Union is already being taken more seriously. However, this attitude is evident in the criticism of integration, which spiteful critics associate with "Putin's imperial ambitions", despite the fact that the unification was initiated by Nursultan Nazarbayev. At the same time, the integration of Russia, Kazakhstan and Belarus into, as well as the established BRICS, are already competitive on the world stage.
According to many rating agencies, the economies of the BRICS countries by 2050 will exceed the economies of the G7. This is due to the fact that BRICS has several notable advantages over the Western countries. Firstly, the countries that are integrated into the organization are rich in natural resources, the extraction of which is directed, among other things, to export, which serves as an economic basis on which the rest of the economy is built. At the same time, China and India have significant production resources, complementing the BRICS. The total population of the organization is 43% of the total world population, which implies the availability of cheap labor resources. It is assumed that Russia and Brazil will act as global suppliers of resources, while China and India will be major production sites.
If the BRICS countries are increasing their political cooperation, being already essentially a political bloc, then the Shanghai Cooperation Organization has an economic focus. It can be said that the world powers today are waging an unspoken struggle for a sphere of influence in the countries of Central Asia. However, this region has already made its choice towards major regional players - Russia and China. By the way, the recent gas contract between them confirmed the understanding that the countries are increasing cooperation. The countries of Central Asia will have to act on a par with China and Russia. At the same time, their economies are quite comparable. Production sites are located on the territory of the Central Asian region, the countries are rich in raw materials, and also have great labor potential. Russia and China (as well as India if they join) are already acting as a powerful catalyst for the economies of the Central Asian countries. Since its inception, experts have noted the growth of the investment component in Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. Additionally, it acts as a guarantor of stability and security for the countries of the Central Asian region. Despite the fact that there are radical organizations in the region (in Afghanistan), the forecast for the stabilization of the situation in the region is optimistic. A safe environment is beneficial both to the major players in the region, which are closing in a ring (Russia, India, China), and to the countries of Central Asia themselves, since political stability leads to economic growth and the development of industrial production.
The youngest association in the region is. This is already a closer organization, which implies a tight integration of the countries' economies. The prospects in the region are more than impressive. has already proved that the integration of neighboring countries is beneficial from an economic point of view. Close integration into the single market will help ensure that Russia, Kazakhstan and Belarus (as well as potential new members - Armenia, Kyrgyzstan and Tajikistan) will act as one (single) player in large alliances. For example, in the BRICS system, the countries of the Eurasian Union are able to provide the market with all mineral resources as well as labor force. At the same time, Kazakhstan and Belarus are able to act within the market, ensuring the self-sufficiency of the region, due to the fact that the integration of economies is very strong. This means that countries are able to act as a single player on the world stage, and, at the same time, provide for the domestic market. the widest range domestic products. That is, it can be a supplier of resources, but not a raw materials appendage.
Thus, the existing integration associations function in the same way, complementing each other. Different directions and forms of integration contribute to strengthening the influence of states on the world stage. This is confirmed by the actions of the West, which is already wary of the countries of Central Asia, trying to increase the degree of presence in the region. However, both the countries of the Central Asian region, and Russia and China today are aimed at strengthening regional integration. We can say that this is the only way to bring the region to a leading world position in economic and political aspects.
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