EAEU Trade Policy And Its Current Challenges

Since the establishment of EAEU in 2015 trade within member states and trade with third countries may have witnessed a fluctuation (Salsecci, 2). This may have became a result of trade policy-making which today represents a set of various tools that regulates trade within the union itself as well impacts the trade regulations with third countries. However, there have been certain limitations for trade policy development in the Union. In this research it will be argued that three factors may challenge the EAEU’s trade policy and its output development. First, Eurasian Commission may have institutional limitations for competence over trade policy’s certain aspects which may mitigate trade within EAEU and third countries (Tumanyan, 1). Namely, there are special limitations with regards to the area of services. Second, the growing number of restrictive measures considering goods from member countries of the EAEU may limit the trade with third countries. These measures include sanctions from third countries due to political reasons, harmonization of external tariffs which may became higher than before becoming a member and other measures which will be discussed further. Third, the challenge of low number of export-import relations may exist within the Union itself than it was projected when establishing the Union. The reason for low trade performance between several member states may be geography, low competitiveness of Kazakhstan goods in the Russian market or customs restrictions (Tusupbekova, 1). Therefore trade policy area may become important factor for controlling the integration of the Union and it needs to be comprehensively revised for overcoming aforementioned challenges.

TRADE POLICY MAKING IN EAEU

The problems concerning EAEU Commission’s low competence over trade policies areas may need special attention for revision of trade policy-making for development in the area of our interest. Having said that, it might be important to investigate the overall trade policy-making process with analysis on the institutions which are responsible for the issuance and key features of the trade policy cycle. Trade policy cycle has the same five stages as any other policy-making process. The initial stage - agenda setting - is made for suggesting on new policy proposal. The proposal on trade agreement can be made either by member state of EAEU, member of the Council of the Commission, or other third party. The Board of the Commission can appeal to the members the Council of the Commission with a request for the initiation of new legislation. The draft of proposal on trade is sent to the Commission. The chair of The Board of the Commission inform the member states on proposal. Member states review the proposal and inform about their positions to the Commission. If the consensus reached the proposal enters to policy formulation stage. In this stage Commission provides consideration of the proposal with the participation of consultative bodies of the Board and conducts a preliminary analysis of the economic feasibility of entering into an agreement. The Board of the Сommission prepares materials that include an analytical report on the feasibility of treaty and the draft of the treaty with translation into the working language of the union. The materials are generated as result of the work of a joint research group of representatives of Member States and representatives of a third party. The final materials and reports are then sent for approval to the Commission. If the Commission approves the draft the negotiation stage with third party starts. During the negotiations, the text of the treaty is finalized and then sent to the member states. Following the results of coordination by member States and the third party to the contract a final treaty is being prepared for consideration by the Supreme Council.

The signing of new trade policy on behalf of the union is carried out on the basis of the decision of the Supreme Council. The decision-making in the Supreme Council is done by consensus. Decision then becomes of legal framework of the Customs Union and Single Eurasian space. After the approval by Supreme Council the Board informs the third party within 10 days about the decision. Afterwards, third party should inform the Commission about implementation of domestic procedures for the entry into international treaty, whereas Commission in should inform the mentioned process the Member states. International treaties are subject to mandatory publication by the Commission. In the case of non-compliance the proposals for enforcement action by the Commission or member-states should be accepted according to the provisions of the international treaty and international law. The Commission acts as depositary of international treaties if these powers are vested to the Union. The Commission evaluates the policy effectiveness which may lead to functional spill over or the decisions to create additional policy development. Thus the decisions of imposing, applying, prolongation and cancellation of measures are taken by the Commission itself.

Having said that, it may be seen that the Commission plays a vital role in trade policy-making, however its competences is limited and decisions are usually made by intergovernmental actors. This creates a number of obstacles for improving trade policies, as there are a number of disagreements between member states due to national interests preservation over the supranational rhetorics. As EEC concluded that there are around 450 trade barriers existing between Member states of EAEU which may make protectionism of national markets to prosper. Thus, a multitude of protectionist measures prevail when introducing new policies with disregarding concerns of the member states and third parties which are in certain agreements with EAEU. This mechanism substantially hinders the mutual trade happening intra-EAEU, with limitations for transit of the goods around Eurasian Economic Space. This measures may hinder the integration process substantially. Because there is no competence of EEC for proposing the trade legislature for consolidation of mutual trade. However, EEC has some level of competence over trade agreements with third countries which created a number of positive outcomes for trade growth between EAEU and third parties (Devonshire, 1). As EEC was in control for proposals of the different types of agreements, the external trade dominates over intra-Union trade deals (Giucci, 5). Thus, EEC impact on trade policy-making is crucial as it has ambitious objections for consolidation of the integration as it may take into account the interests of the entire Union. As a result, The Eurasian Economic Union continues to establish cooperation with third countries. The first experience of creating a free trade zone with Vietnam in 2015 turned out to be positive and encouraged the member states of the Union to work actively in this direction. As a result, a temporary agreement leading to the creation of a free trade zone with Iran, as well as an agreement on trade and economic cooperation with China (Dragneva, 21). The relevant agreements are a direct continuation of the “integration competencies” of the EAEU. Therefore, for deepening integration processes, the measure of restructuring the balance of power in decision-making in trade policies with giving more competencies to EEC may be needed. This action arguably may result in developing mutual trade and external trade to the certain level comparing to status quo.

EXPORT-IMPORT RELATIONS WITHIN EAEU

As it has been reported by EEC, there is more than 450 trade barriers existing in intra-EAEU level. The barriers include non-tariff barriers which may result in limitations for recognition of certain documentations such as quotas, goods certificates. The import banning is also exercised within EAEU which may be an obstacle in trade policy development. For example, in 2015 there were a major problems regarding certain food products trade between Russia and Kazakhstan. The disruptions concerned milk, meat products and agricultural products of the member states. Thus, there were certain restrictions of import of these goods to Kazakhstan due to mechanisms of protection. This was done in regards with substantial differences in the prices of goods and Kazakhstan’s producers would not have a possibility to compete with Russian goods in retail. The second example of restrictions for development of trade freedom was the case between Russia and Belarus concerning dairy products (Giucci, 7). In 2017, Russia imposed the restriction on importing dairy products from Belarus with citing the non-compliance of the goods with the regulations and quality comparing to domestic goods. This may show the position of Russia towards implying regulatory barriers in favor to support domestic producers although it may hinder the other EAEU ally state. In addition for supportive objections of Russian domestic markets, the regulatory acts use were the responsive measure for diminishing the supply of EU contraband goods which may be mislabeled as products from Belarus. It was reported that the volume of of contraband may consists of hundreds of million dollars. This disputes are extremely important indicators of limitations concerning economic development and integration of the Union. Because, Russia is the member where 87% of total GDP of the Union is allocated and owns a dominant position in the EAEU (Giucci, 3). Thus, the restrictions implied by Russia substantially affects the whole Union and the integration nature in the region.

There may be other mechanisms which hinder the intra-EAEU trade developments such as single customs tariffs. The exemptions are made only for 30% of the goods nomenclatures which may be extremely low in regards to the vision of the free trade policy of the EAEU (Giucci, 6). This may affect that the border controls between member states will have substantial work to do with comprehensive supervision over the goods transportation in intra-EAEU level. The non-tariff barriers increase transaction costs due to keeping goods in the border, comprehensive documentation maintenance and more. This may again make the trade relations to be restricted and create sceptic opinion on the Union exercised by the corporations and businesses. Therefore, it may be necessary to take measures related to the simplification of customs procedures and tariff barriers and the development of the so-called “single window” system (Vinokurov, 16). The “single window” system is a way of interaction between government regulatory bodies and participants of foreign economic activity, which allows the latter to submit documents once in a standardized form through a single pass channel for subsequent use by interested parties in accordance with their competence when monitoring foreign economic activity . There is no doubts that the effective implementation and use of this system can significantly reduce the transaction costs of companies, and thus accelerate the development of regional production chains by simplifying logistics procedures for transporting final and intermediate goods between borders.

TRADE AGREEMENTS WITH THIRD PARTIES

It has been noted previously that Russia plays a vital role for the EAEU and its relations with external actors has high importance for the other member states. Due to political reasons, United States followed by European Union introduced sanctions against Russian goods, whereas they did not do the same for other EAEU members (Sargsyan, 1). Russia in return announced so-called “anti-sanctions” against Western economies with restrictions of food products to the territory of Russian Federation (Salsecci, 11). Although, Russia has a major role in EAEU other member states did not introduce the same banning of food goods coming from EU, US, Canada and Australia. Because sanctions were introduced only to Russia and did not affect to the trade relations with EAEU-members as a whole. Thus Western goods may enter to Russia through other member states and the sanctions will not hinder the economy of third parties despite the measures introduced. Therefore, sanctions continue to exist without without the possibility of release. Since the sanctions introduction, it may be seen that Russia may have got substantial losses from this mechanism. For possible disclaiming of sanctions, the whole Union should introduce sanctions against West, but it is not likely to happen. Because member states economy will be threatened from this measures. Russia may take efforts to influence the member states to enter the sanctions (Papava, 1). Because the existent situation fully contradicts the claims of EAEU treaty on common customs Union. But this action may further diminish the integration process which may be already endangered to some extent. Therefore, there are two-fold mechanisms which may diminish the trade relations within EAEU and with external parties and comprehensive solution should be introduced, if the member states are willing to continue the integration process.

It is noteworthy, that relations with third parties plays a vital role for increasing trade and results in deepening integration within EAEU members. The EEC may have foreseen these advantages of constructing closer ties with third countries and certain agreements were achieved up until today. These agreements include free trade agreements with Vietnam, preferential agreements with China and there are more negotiations happening with states such as Singapore, Serbia, Egypt and Israel (Dragneva, 26). These agreements may have affected positively for integrating process of EAEU and introduced customs union for the five members. However, not all members benefited from such agreements and custom union. For example, due to harmonization of import tariffs with increasing costs Kazakhstan, Armenia, Kyrgyzstan had experienced obstacles with states modernizations due to increased rates for goods from external parties. Specifically, Kyrgyzstan before joining the customs union and introducing legal basis for commodity circulation with China had lower import tariffs and chinese products were less expensive which preserved purchasing rates in the country with stabilizing economy (Giucci,4). As Kyrgyzstan joined the customs union the import tariffs for Chinese products substantially increased because of harmonization processes (Movchan, 1). The import tariffs for the Union were introduced with regards to Russia’s previous high tariffs and therefore adjusted with regards to it. Therefore, the common common external tariff should experience certain adjustments which will be beneficial for the Union and members as well (Movchan, 13). EEC should foresee possible solutions and a example could be introduction more flexible preferential trade agreements which will comply not only the notion on trade negotiations alone. These agreements should introduce several negotiations on investment policies, modernization plans, technical regulations which will mutually benefits the Union and third parties and economy in the developing states of EAEU.

PRELIMINARY ACTIONS FOR OVERCOMING TRADE CHALLENGES

Although, there are a multitude of problems with regards to intra-EAEU and external trade the EEC and other institutions work on the solutions for a developments in the sphere. There were very few examples of integration models and these concludes the fact that the model of EAEU de facto has to overcome a number of challenges in order to achieve its goals. There are projects introduced which full realization is yet to come, but the results may be beneficial to the Union as a whole and to the national interests of member states. Firstly, there should be improvements in trade within intra-EAEU through introduction of mutually beneficial conditions. This may be done through simplifying the procedure of customs regulations within movements of goods from one member state to another with removal of trade barriers. This will decrease transaction costs and encourage member state businesses and corporations to involve in the trade with member states intensively. It is also worth noting, that some level of exemption of trade barrier was already introduced in EAEU. Namely, Supreme Council leaders mentioned multiple times that liberalization of the conditions of economic activities and the complete abolition of exemptions and restrictions on the movement of goods within the Union should be implemented. Currently the Commision in cooperation with member states is making consistent efforts in this direction. The preliminary results of such measures is that from 23 previously outstanding issues in the customs sphere remains 8, 4 are further working out, and 3 are in the process of eliminating. These measures may speed up the integration processes within the countries of the EAEU, and thus may bring trade relations with third countries to a new level.

Secondly, after removal of intra-EAEU trade barriers for increasing trade there should be development of preferential trade agreements and search for more markets for partnerships. EEC should have a clear understanding of the methods for achieving such agreement and absolutely ensure that member states benefit from such measures. This strategy through complex interactions between EAEU and regional partners and trade organizations will contribute to internal development and modernization and strengthening of the export potential of the Union.

CONCLUSION

To conclude, the coordination of the trade policy of the EAEU is indeed becoming one of the most pressing issues for discussion and requires flexible, well-considered decisions. The issues, as it has been discussed, include lack of competence of the ECE on some issues of trade policy (in particular in the services sector), the increase in the number of restrictive measures in relation to goods from the EAEU members, lack of export-import relations within the Union (low competitiveness of Kazakhstan goods on the Russian market, customs restrictions and efforts for domestic market protections etc.) and limits in trade relations with third parties due to Western sanctions and customs union high tariffs. Therefore the measures for eliminating the barriers which diminish the trade relations should be introduced. These include the policy making towards introduction of simplified custom regulations and elimination of protectionism. In regards for policy-making towards agreements with third parties the Union should be in favor of preferential agreements with notion not only on trade, but mutual investments, technological regulations which will result in greater economic results (Bordachev, 1). Thus, introducing aforementioned measures may strengthen the trade within EAEU and international trade and eventually may lead for stronger integration process within the Union.

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