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Tigran Sargsyan: "Deep integration of economies of EAEU countries should be improved taking into account world trend for protectionism"

Tigran Sargsyan: "Deep integration of economies of EAEU countries should be improved taking into account world trend for protectionism"

9/12/2018
The Eurasian Economic Union (EAEU) is moving along the path of deep integration, and this integration model should be improved taking into account world trends in which one can see elements of increased protectionism. This was stated by the Chairman of the Board of the Eurasian Economic Commission (EEC) Tigran Sargsyan during the discussion "Modern integration agenda of the APR: openness or protectionism. Lessons for the EAEU" held within the framework of the Eastern Economic Forum in Vladivostok on September 12.
 
The event’s participants, including Member of the EEC Board Veronika Nikishina, the Director of the Institute of Trade Policy of the Higher School of Economics Alexander Daniltsev, the President of the Russian Union of Industrialists and Entrepreneurs Alexander Shokhin and others, discussed the latest trends in the current integration agenda and the Eurasian Economic Union’s behavior amid the changes in trade and economic processes. On the one hand, today in the Asia-Pacific Region (APR) and beyond protectionist sentiments are growing and trade conflicts are escalating, on the other hand, adherence to the principles of joint economic development through economic integration remains.
 
"Today, the APR is at the forefront of global changes being in focus of literally all the world’s economies, because it is the main driver of global economic growth. This trend will continue in the next decade which means that the forms of cooperation with the region will heighten interest", - noted Tigran Sargsyan. - The EAEU is a rather young association. It is obvious that the model that we have adopted as a basis, namely, the deep integration of the five economies with the formation of a supranational body, should be improved taking into account global trends so that our association will get maximum economic benefits".

The Chairman of the EEC Board recalled the fundamental changes taking place in the world, including the "freezing" of agreements on the Trans-Pacific and Trans-Atlantic partnerships.
 
According to Tigran Sargsyan, the EAEU is on the path of integration, this is the mission of the Union. "We are striving to remove barriers, exceptions and restrictions, we see in this the potential for economic growth, however, there are global trends that cannot but affect our economies", - noted the Chairman of the EEC Board.
 
The Director of the Institute of Trade Policy of the Higher School of Economics (HSE) Alexander Daniltsev emphasized that the EAEU countries and the main partners of the Union are, first of all, trade and export nations that are interested in exports and adhere to the dynamic development of international trade. At the same time, the Union is now influenced by negative factors associated with both objective reasons – the consequences of a series of economic crises, and subjective ones – the US policies.
 
"The trade war is a struggle for conditions in the post-war period", - noted Alexander Daniltsev. - "Nowadays the US, through the use of power-based trade methods, is striving to create conditions for the subsequent transition to a new wave of liberalization for the main player which, of course, is a negative factor for the international trade".

According to the expert, the HSE conducted a study, which revealed that after the EAEU was established and the single market was formed in all the five countries, there was a sharp increase in quality indicators of trade, although since 2001 there had been a clear negative trend.

"It is very important to preserve the unity of those States that are interested in stability and in the dynamic development of trade. The future belongs to sufficiently deep cooperation agreements that intend investing, i.e., creating the conditions for resource exchange and not just trade cooperation. Trade liberalization without any integration component is no longer efficient. The integration interaction should be aimed at developing human capital", - concluded Alexander Daniltsev.

Veronika Nikishina, Member of the Board – Minister in charge of Trade of the EEC, reported about the impact of protectionist measures on global trade and EAEU’s trade policy. "According to the available estimates, up to 3% of world exports of goods fell under the "sanctions exchange" of protective measures, - said Veronika Nikishina. - "This figure is likely to increase, it will also have a proportional negative impact on trade in services – there will be a decrease in circulation of goods, less need for insurance, financing, transportation and so on".

According to various estimates, tariff wars can affect up to 8.3% of world imports of goods which is comparable to the overall growth in trade in 2017. A dangerous situation is created when restrictive measures are taken with disregard for the generally recognized norms of international trade law. Such voluntarism creates instability, entails justified response actions. There are no absolute winners in trade wars, their members are always de facto losers.

"We are committed to deepening integration both within the EAEU and with our external partners – those who are willing to work honestly on equal and mutually beneficial terms", - noted the EEC minister. - We see the unconditional expediency of deepening cooperation with the countries of the APR Region. There is an important objective factor here – the trade with APEC participating economies makes up about a third of the entire EAEU’s foreign trade. However, the similarity of our approaches is also important. At the same time, we are open to a dialogue with other major markets. With no doubt, we speak about the EU and the US ones".
 
According to Alexander Shokhin, President of the Russian Union of Industrialists and Entrepreneurs (RUIE), the world is now at a turning point when, on the one hand, for many years the policy of openness and liberalization has been proclaimed, and on the other hand, the number of protectionist measures adopted by States has grown rapidly.

"As a result of the US Administration’s actions, States are abandoning globalization, liberalization of foreign trade and investment. "America first" – this is the slogan that broke this trend, - stated Alexander Shokhin. - "At the same time, we see that, despite the erosion of earlier agreements, the eleven remaining countries of the Trans-Pacific Partnership signed a new agreement thus actually saving everything that was in this partnership".

He also noted that the WTO began to lose its influence due to the emergence of new regional partnerships that either assumed some of the WTO competencies or went beyond them – in terms of investment policy, protection of intellectual property rights. Alexander Shokhin expressed his confidence that free trade zones remain one of the main tools here. Today, there are about 300 such zones worldwide, 83 of them exist in the APR countries and 97 – in Europe, and the number of such agreements is constantly rising. However, the existence of numerous trade areas sometimes leads to the effect of a "bowl of spaghetti", since many of these agreements apply simultaneously.

"We would like to actually overcome the transition process while maintaining the high status of universal institutions, and we also want numerous partnerships to include more advanced items compared to the WTO, however, ultimately leading to an expansion of the WTO's mandate", - summarized Alexander Shokhin.

Andrey Slepnev, Director General of the Russian Export Center (REC), spoke about the need for deepening cooperation between the EAEU and APR countries in the context of increased protectionism in the world.

"The trade standard has developed in the APR, the region is in fact the center for free trade, the main flows pass through these channels", - noted the REC representative. - And if we are talking about integration in the APR, of course, no matter if we want it or not, we need to move to the free trade regime. The EEC is already negotiating on this issue. An agreement has been concluded with Vietnam, a number of other countries are waiting for their turn. Of course, holding such negotiations is not an easy task, however, apparently, there is no alternative".
 
Antonio Fallico, President of Conoscere Eurasia Association, expressed his confidence that, despite its youth, the EAEU could eventually become an important link in constructive cooperation throughout the Greater Eurasia – from the Atlantic to the Pacific.
 
"The EAEU is becoming an indispensable participant in the construction of common, or at least compatible, economic space in Greater Eurasia. This territory is one of the most reliable transport corridors deprived of military and political risks between Europe and Asia. The participating countries are becoming competitive manufacturers, centers for entering the markets of third countries", - noted Antonio Fallico. - "In such conditions, dialogue between the EAEU and other regional associations, individual countries and groups of countries is of particular importance".
 
He stressed that a dialogue on the establishment of free trade zones offering excellent prospects for business has been successfully developing with ASEAN, China, Egypt, Iran and other countries. Unfortunately, this has not yet happened in relations with the European Union that for a number of political reasons refrains from a full-fledged dialogue with the EAEU, limiting itself to rare contacts at the technical level.
 
"Such a dialogue would be in the interests of European business that supports both the establishment of understandable rules of the market game and the development of joint regulatory standards", - declared Antonio Fallico. - "This will help it successfully operate on the EAEU markets, involve Eurasian partners and projects in Europe and go through them to the markets of more distant countries of Asia. The choice of the European business is unequivocal – we should strive to develop joint rules of the game on the market throughout the Eurasian space – from the Atlantic to the Pacific – and not build new barriers on it. The barriers, among other things, include Brussels's demonstrative reluctance to be involved in dialogue, apparently with the hope that this young organization will collapse".
 
In response to this thesis, Tigran Sargsyan noted that European politicians, unlike the Eurasian Union, did not hear the voice of European business. "We are not closed, we remain open to you. We will build single canons, standards, we will build this space", - he emphasized.
 
According to Antonio Fallico, the EAEU needs to demonstrate openness, readiness for an equitable dialogue, yet, at the same time it needs to defend itself from unfriendly steps in the field of economy. "Creation of a free trade zone with the maximum number of countries and associations, conjugation of large projects, development of joint initiatives, interaction within the framework of the international division of labor is the best strategy in modern conditions. If some markets are closed, you need to look for others, - summed up Antonio Fallico. - It is necessary to support each other's economy in difficult conditions. So it will be possible to restructure the production chains, to preserve the benefits of the division of labor, to build a new efficient economic model. "
 
Lee Jae-Yong, President of the Korea Institute of International Economic Policy, reported on South Korea's plans to expand trade ties. According to him, today the share of China in the specific weight of the country's exports is about 40%, this concentration being dangerous for the economy. Lee Jae-Yong recalled that a technical justification for the feasibility of concluding a free trade zone agreement between the EAEU and South Korea had already been prepared, and although negotiations on this matter dragged on, he expressed the hope for their soon completion.
 
For reference
The Eastern Economic Forum has been held annually since 2015, it is a platform for discussing key issues of the world economy, regional integration, development of new industries and technologies, as well as global challenges Russia and other countries of the world face. The business program of the forum includes a number of business dialogues with leading partner countries in the Asia-Pacific Region as well as with ASEAN, a key integration group of actively developing countries in South-East Asia.