Regulation, Trade and the Voice of Business in the Coming Eurasian Economic Union

SlepnevMOSCOW – The countries of the Customs Union are preparing to enter a new stage of integration: the presidents of Belarus, Kazakhstan and Russia have declared that the Eurasian Economic Union must be formed by Jan. 1, 2015. Minister of Trade of the Eurasian Economic Commission Andrey Slepnev recently discussed the factors that will lead to integration success and the problems of the transition period.

Economic integration is the foundation of Eurasian integration. Motivating its expediency, experts point out that by creating a single market, Belarus, Kazakhstan and Russia will protect their national economies from the risks and shocks of global financial and economic turmoil and achieve sustainability through the orientation of their production to the needs of the large market of the Customs Union. Is this thesis confirmed by specific arguments, the dynamics of trade turnover and other indicators of economic activity?

Initially, the idea of economic integration was based on the fact that we are creating a broader and more representative and attractive market. Its capacity today exceeds 170 million consumers. And of course, the sustainability and functioning of the laws of such a big market are quite different from those of local markets.

What is the difference? First of all, these scales are attractive for organising the overall production of various goods: cars, appliances, computers and so on. And this in turn means new jobs, investments, education and quite different requirements of the workforce in terms of its competence. Thus, we have a wider palette of possibilities in terms of human capital than those offered by local markets, which have to become highly specialised in the production of a small segment of goods and services. That’s why the combined market of the Customs Union has great potential.

Now we see concrete positive effects, especially in Kazakhstan, which today is actively involved in the processes of development within the Common Economic Space.

Turnover statistics illustrate such positive effects. Last year, for example, the export volume of certain types of machinery and equipment from Kazakhstan to the CU countries increased considerably: machinery and lifting devices by 4.8 times, refrigerators and freezers by 4.5 times, rolling machines by 5.5 times and land transportation means by 2.6 times.

Last year 1,200 trucks were delivered to Russia from Kazakhstan, which is nine times higher than the figure from 2012. Mostly, these are new trucks with a capacity of 20 tonnes. Such dynamics are the result of investment projects implemented in collaboration with global companies and with companies-partners from CU countries.

In 2015, a car factory in the East Kazakhstan region with a capacity of 120,000 vehicles a year will be put into operation. Its production is oriented primarily to the market of the Customs Union. This project is implemented jointly by the Renault, Nissan and AvtoVAZ companies.

Kazakh exports of foodstuffs and raw materials to the countries of the CU grew by 2.1 times in the past year. Exports of wheat flour grew almost 10 times and a steady growth, 19 percent, was observed in exported volume of chocolate products in 2013.

The common market opens completely different opportunities in the service sector. If we speak about Kazakhstan, it is primarily connected with the transit potential of the country as a key area of the New Silk Road from China to Europe. With the intensification of trade, the sphere of transport is expanding, as well as the scope of services for traffic flows. And this is a significant segment of the economy.

Thus, today we can see a lot of practical examples that the market of the CU is becoming a priority for productions organised in Kazakhstan. Of course, there are goods with falling trade volumes. First among these are groups of raw products. But this trend is impacted by global trends. It’s not a tragedy; on the contrary, there has been a positive trend of growth in deliveries from Kazakhstan of processed products on the background of crisis processes in world trade. All this suggests that we chose the correct course.

However, despite all the benefits of the common market, we cannot deny the obvious thing: the process of regulation and development of common rules of the game and their observance is hugely complicated. And the supranational body, the Eurasian Economic Commission, must neutralise the contradictions and conflicts of interests of the parties.

That’s right. We should understand that through integration, we not only increase market volumes, but also improve regulation. We are uniting on the basis of jointly developed rules, which in turn are formed from the best practices of each country. By the way, many Kazakh developments in this sense are taken as the basis, for instance, as it was within the framework of the Customs Code’s formation.

In my opinion, a very important effect of integration is the fact that this process contributes to the quality control of our common market.

Sometimes, we withdraw certain questions from the agenda and return to experts for revision, but on the fundamental decisions we usually reach a consensus.

We deeply analyse the consequences of this or that decision for each of the national economies and try to take into consideration the interests of all parties. Regardless of the size of a particular economy, the voice of each side in our commission is equal.

Working on the Treaty of the Eurasian Economic Union, we certainly take into account the need to create new jobs that appear in the development of productions and the need to use other possibilities of the unified labour market. Particular attention is paid to additional guarantees for social security and pensions and to the free movement of workers. This is very important because new opportunities for jobs associated with the movement of the labour force will appear, and in this sense it is natural that people will plan their career trajectory.

The intensification of trade and economic ties within the CU is just one side of the coin. No less important is positioning the integration association in foreign markets. What are the priorities in this format?

We conduct a common trade policy in relation to third countries. It is clear that together it is easier to get better terms in trade with major international players. We see that many foreign trading partners are interested in our market; they seek cooperation and offer trade agreements…

A fresh example is Israel…

Not only this country. Recently, we decided to form a group for the study of free trade with India; we are holding talks with Vietnam, New Zealand and a number of European states. In total, about 30 countries and organisations have expressed interest in enhancing relations with the CU. The scale of the CU allows the creation of the best conditions for trade and the effective protection of our interests.

At the recent meeting of the dialogue platform with representatives of the business communities of the Customs Union, you talked about the new format of interaction, implying closer cooperation with business associations in decision-making. What is the expected effect of this interaction?

Our goal is to reduce the distance from the initiative to the decision. It takes a lot of coordination within the governments and between governments. Therefore, all initiatives must be discussed in a timely fashion with the involvement of all necessary specialists, agencies and parties.

For example, we raise the issue of customs duties. They’re good for those who are engaged in production and bad for buyers of imports. Therefore, it is very important to look for a compromise. Usually, it can be found through the size of the duty or specification, through selection of individual products, localisation of the issue and so on. But, for that, those who initiate the request and those who have a direct interest in the business should participate in the discussion of these regulatory decisions.

We are sure that business associations of the CU are sufficiently representative and able to provide impartial and comprehensive solutions to these issues. So, we decided to involve them in the activities of advisory committees.

Will businessmen have a real voice?

Certainly they will. We pursue a democratic approach to discussing the issues, especially as the voice of business in such things is always authoritative. Entrepreneurs provide our citizens with jobs; they are close to people. And we try to get closer to the people through them.

Another important question related to the operation of business is the desire to put in order national statistical information systems, to make them more transparent and reliable. How important is this to the functioning of the Common Economic Space market?

It is necessary to provide businesses access to international trade statistics. Businesses must respond quickly to any problematic changes that do harm or cause damage, through preparing statements on measures to protect the market.

Today, when we are limited in changing duties by WTO obligations, the only opportunity to respond to adverse changes in the market is protective measures.

The first day of January 2015 will be the starting point of the Eurasian Economic Union, which means a qualitatively new level of integration and the free movement of goods, services, capital and labour in the common market. Are we ready for the new quality of relations?

The work in this area is quite active. But it is hardly possible to say today that the creation of the Eurasian Economic Union will immediately imply a sharp surge in integration. We are not so long past the date of formation of the Common Economic Space. We also still haven’t fully used the potential of the CES and its programmes.

The new phase, of course, will be associated with the identification of new challenges and prospects for the next 5-7 years. Now, we are actively working with candidate countries Armenia and Kyrgyzstan, and we hope that during the current year the issue of the integration association’s expansion will be decided.

Actually, we will reach agreement on further liberalisation and formation of single markets in a number of sensitive sectors, first of all services and capital. This will give additional capabilities to the single market for energy to transit, which is important for Kazakhstan, in particular transport infrastructure. Many sectors will be drawn together in the regulation in order to better use the opportunities of the common market.

No less important is the institutionalisation of our integration association, which will allow full participation in world affairs and the active assertion of common interests.

All this work indicates substantial qualitative progress. Actually, it is a logical conclusion of the integration cycle, which began in 2009 when the CU and the CES were formed. Now, the integration experience will be formalised in the full-fledged union.

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