Eurasian Economic Union: One Year since Astana Treaty

In a globalised world in which the movement of goods and knowledge is a key driver of prosperity, the removal of artificial barriers is increasingly essential to economic success. In every continent, we have seen a growing commitment to economic integration and the creation of free-trade blocs.   

Not everyone, of course, sees such integration as the best way forward. And each bloc faces teething problems in its early days. The current divisions within the European Union show even long-term success does not guarantee a problem-free journey. 

So the criticism of the Eurasian Economic Union (EAEU), established under the treaty signed on May 29, 2014, in Astana, and launched in January, is not unexpected. Nor can it be denied that its first year coincided with a difficult time for the global economy.  The declining price of oil and subsequent economic slowdown have been the catalysts for credit downgrades in major oil-producing countries and a wakeup call to a number of emerging economies. Worsening relations between Russia and Europe and the U.S. have seen far-reaching sanctions imposed, which are reducing confidence and growth. 

This has given the EAEU’s critics plenty of scope to paint the initiative as doomed to fail from the start or foisted on reluctant countries by a powerful Russia. But this short-term pessimism both ignores the long-term ambitions of the new trading bloc and misrepresents its goals. Far from restricting choice or recreating the past, the EAEU increases diversity and encourages member states to modernise their economies.

For Kazakhstan, this means, above all, accelerating the switch away from a reliance on oil exports. The EAEU offers a pragmatic solution to this challenge, providing new opportunities to diversify within our region. 

A coordinated agricultural policy will bring long-term benefits by creating equal competition for agricultural products throughout the union. Plans are also in place to establish a common market for pharmaceuticals by 2016. And in the services sector, Kazakhstan is phasing in policies that will create unified markets in important areas, such as construction and electricity. 

The core objective of the EAEU is to boost trade, both within the organisation and with outside partners, not impose a new barrier. With a common market of more than 180 million people, the free movement of goods, services and capital will increase investment and prosperity. Experts predict a 25 percent growth in the member states’ GDP by 2030 – an increase equivalent to more than $600 billion.

Greater mobility and workforce diversity will further boost the positive steps Kazakhstan is taking, particularly to reduce the unemployment rate. Youth unemployment has declined rapidly since 2000 to 5.9 percent, and the EAEU will provide greater opportunities for Kazakhstan’s burgeoning young workforce. 

But while the EAEU clearly forms a major part of Kazakhstan’s economic future, its launch does not signal thatthe country is, or should be, turning its back on existing partnerships and relationships. Far from making an “either-or” choice, Kazakhstan is determined to continue pursuing economic opportunities with its immediate neighbours and with its partners further afield.      

As an example, Kazakhstan continues to strengthen its economic ties with the European Union. The EU-Kazakhstan Enhanced Partnership and Cooperation Agreement initialed in January and to be signed before the end of the year signals a continued confidence in the relationship between the EU and Kazakhstan and paves the way for the expansion of the present almost 50 billion euros in annual bilateral trade. 

Kazakhstan continues to build trading relations to the east and south as well. Transport links are being strengthened to the Middle East region while China is becoming an increasingly important partner. It is significant, in fact, that China has expressed a firm interest in forging a more formal relationship with the EAEU. Earlier this month, President Putin and Chinese leader Xi Jinping signed a document on cooperation in tying the development of the Eurasian Economic Union with the “Silk Road” economic belt project. This will enable the EAEU to reach a new level of partnership with China and eventually create a common economic space on the continent.

The Eurasian Economic Union may have been born at a turbulent time, but it is certain that it will play a big part in Kazakhstan’s future. The EAEU has great future prospects. A trade deal linking the Union with Vietnam is expected to be signed on May 29 and other accords with Turkey and India are also on the horizon. As any parent knows, the early days are hard but the rewards are worth all the difficulties.

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