Integration of Integrations

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Integration of Integrations 24.05.2016 15:59

Russia - ASEAN summit was held 19-20 May 2016 in Sochi, the. In the framework ofthe summit, Deputy Russian Foreign Minister Igor Morgulov said:

“The Free Trade Area with ASEAN –is a big question. Integration trends are enhancing universally in the world. We are aware of the EAEC, which is actively developing. There are ASEAN integration processes - ASEAN Community was launched in November 201. Logically, there is the idea of linking of these processes - a kind of “integration of integrations”.

As noted by Igor Morgulov, May 3, 2015 an agreement on free trade zone between the Eurasian Economic Union (EAEU) and Vietnam was signed. A similar intention was expressed by other countries in Southeast Asia: Cambodia, Thailand, Singapore and Indonesia. This involves not only the liberalization of trade relations, but also establishment of a broad partnership between the EAEU, ASEAN and the Shanghai Cooperation Organization (SCO).

It was the development of a proposal which the President of Russia V.V. Putin expressed the in his annual address to the Federal Assembly on December 3, 2015:

“I propose, together with counterparts of the Eurasian Economic Union to start consultations with the SCO and ASEAN members, as well as with the countries that join the SCO, on the formation of a possible economic partnership”. As he noted, such a partnership initially could focus on the issues of “investment protection, optimization of the movement of goods across the border procedures, joint development of technical standards for the production of next-generation technology, on mutual access to the services and capital markets”. In fact, even then it was a question on creation of free trade zone, based on the principles of equality and mutual interest.

Earlier on May 8, 2015 the Russian President Vladimir Putin and Chinese President Xi Jinping agreed on the linking of the Eurasian Economic Union and “Silk Road” Economic Belt zone” (SREB). While this process has not yet given its results, including the Chinese side of the fault, which is interested in the establishment of free trade areas not with EAEC as a whole but with individual countries that are members of this organization. In particular, Kazakhstan and Kyrgyzstan it agreed to it, they intend to make a decision on his participation in the China’s SREB. Obviously, this does not contribute to the development of the Eurasian integration.

Nevertheless, there are opportunities for building cooperation between the EAEU and SREB. The basis for this is the fact that there are no deep or antagonistic contradictions between the major Eurasian states (primarily between Russia and China). Thus, development objectives of Russia do not require a conflict with China for Central Asia, and vice versa. According to Russian experts, the two powers are looking for different resources and opportunities in the general vicinity - labor in one case and space for investment expansion in the other. Both Russia and China are vitally interested in regional security and stability of the current political regime.

The main goal of Russia is to make SREB a tool to strengthen and improve the EAEU, to prevent them from competition, and in the future - to put resources of SREB for the basis of formation of the economic and political Eurasia. Another absolute priority for Eurasian integration may be the development of meridional transport and logistics corridors, meaning cross-border cooperation clusters.

Russian experts note the need to strengthen the policy coordination institutions of the EAEU participating countries and China within SREB (and such coordination can be carried out on the basis of the SCO). In particular, the institution of permanent representatives of the EAEU member countries is proposed to be established within the Eurasian Economic Commission (EEC), as well as to create a new EAEU permanent intergovernmental committee for linking. At the time of negotiations on the EAEU-China agreement the role of such a coordinating body negotiating delegation could perform. In the future, perhaps it could be institutionalized.

There is no doubt that Washington made a bet on containing and limiting the influence of Beijing. And regardless of the outcome of the upcoming presidential elections in the US, competition between China the United States at the global and regional levels will continue to grow. In such circumstances, Beijing is extremely interested in a safe and friendly environment in Eurasia. Therefore, for China the linking between EAEU and SREB is no less important than for Russia.

As it was noted earlier, there is a risk of the translation of EAEU and SREB linking to a  bilateral basis. This is compounded by the passive attitude of the Eurasian Economic Commission (EEC), which has limited powers in this sphere. The reason for this lies in the fact that guidelines for the conduct relevant negotiations by EEC were not yet adopted by the Eurasian Intergovernmental Council.

It should also be noted that the basis of SREB constitute infrastructure projects that cannot be subject for the regulation under the trade agreements. Therefore, standardization and finance in should be the foreground interface of the EAEU and SREB linking. In this sphere EAEU has important advantages. Thus, art. 52 of the Treaty on the Eurasian Economic Union defined as the main objective of technical regulation “security of consumer, health and life”. However, it is not a strong point of Chinese economic model, which requires the adoption of the EAEC regulations by China.

Another advantage of the EAEU is the unity tariff and non-tariff policy. Thus, tariff regulation is used to correct the calculation of customs duties on the movement of goods from China to the territory of the EAEU, and non-tariff regulation is a technical regulation, that is, the rules of the interstate power transmission and access to services of natural monopolies.

Thus, the linking of the EAEU and SREB is possible, but it is necessary to take into account China’s interest for the long term (for at least 20 years) investments, which must be protected throughout the Eurasian region. So, between Russia and China, there is an agreement on investment protection, which provides the opportunity of addressing international arbitration. However, still there was no case of implementation of the agreement. One solution to this problem may be, for example, the creation of a special arbitration under the auspices of the Shanghai Cooperation Organization.

Given the above Moscow hopes that Beijing will start negotiations on a free trade zone between China and EAEU in the near future. Devaluation of the ruble has created certain advantages for the Russian business, enhanced the competitiveness of certain industries, even in comparison with Chinese companies, as well as created the foundation for the promotion of the Chinese market products. Overall, however, Russia is still not ready for the establishment of a full-fledged free trade zone with China. In Beijing, on the contrary, one considers it as the next step of EAEU and SREB linking.

Observing the difficulty of creation of a free trade zone in the Eurasian space, there is a question about the expediency of this process between Russia (EAEU in general) and the ASEAN countries. On the one hand, this contributes to the absence of China which is unrelated with Russia in its economic potential. On the other hand, there is serious competition from the Trans-Pacific Partnership. Realizing this, the Russian side proposed the complex nature of the relationship to ASEAN including the political dialogue and security issues in it. In particular, Igor Morgulov said: “Here we are, together with ASEAN are interested in creating a regional architecture of equal and impartible security, which would be based on equality. As in South-East Asia the issue of structure, which is beginning to emerge, created around ASEAN, an organization for us is a natural partner”.

Consequently, the creation of free trade zones as between the EAEU and the PRC, as well as between Russia (EAEU) and ASEAN is still a prospect. While we are not yet ready for the so-called “integration of integrations”. But this does not prevent the strengthening of relations between the EAEU, SCO and ASEAN, which fully meet the interests of both individual states and these organizations as a whole.