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Eurasian Economic Union Soon to be a Reality
May 27, 2014

Kazakhstan, Russia and Belarus plan to adopt a treaty on the Eurasian Economic Union and will work together to build a new structure, while at the same maintaining their status as independent states in Central Asia.

The idea and necessity of creating the Eurasian Union was first mooted by Kazakhstan's President, Nursultan Nazarbayev, in 1994. Then, he appealed to the intellectual elite of the Commonwealth of Independent States (CIS) to withdraw from the stupor of the multilateral integration process, and meet the objective requirement of integrating participating countries. He called for a new inter-state association that would operate on clear principles.


The initiative by President Nazarbayev led to the creation of several successful inter-state structures, including the Eurasian Economic Community, the Customs Union and the Common Economic Space of Belarus, Kazakhstan and Russia. It took two decades to reach an agreement on a multilateral international document to establish a free trade zone in the CIS. It was only in 2011, that eight of the CIS countries implemented the agreement. This was followed by the creation of a Customs Union. 


The decision to take this path was made at an informal summit of EurAsEC member states in 2006, but it wasn't until January 1, 2010 that Belarus, Kazakhstan and Russia created a Customs Union of their own. On July 1, 2011 internal customs borders between the three states were removed.


The close cooperation between member states of the Customs Union has resulted in a significant increase in mutual trade turnover as well as an improvement in performance indicators for economic development. In 2013, despite the on-going turbulence in the global economy, trade turnover between the three countries increased, reaching USD 64.1 billion. The structure of bilateral trade has also changed with the share of raw materials in export-import operations declining, while the volume of technological products with high added value has increased.


The implementation of a single customs territory has created a single market for goods where there are no tariff and non-tariff barriers. This has given Kazakh products greater access to a larger market. The creation of joint ventures and cooperatives has intensified, new jobs have been created, and the range of social products has expanded.


Business conditions are also improving noticeably. The members of the Customs Union have seen an increase in their rankings in the World Bank's 'Ease of Doing Business' Index.


With Belarus, Kazakhstan and the Russian Federation entering a third stage of integration through the Common Economic Space (CES) in January 2012, the free movement of goods, services, capital and labour within the single economic space has provided significant potential for the economies of member states.


Since January 1, 2014, the CES states have also introduced changes into their national public procurement regime that enable Kazakh suppliers to participate in state and municipal tenders in Russia and Belarus, on a par with local suppliers. International financial institutions have also praised the effectiveness of the Customs Union and the Common Economic Space.


The European Bank for Reconstruction and Development's Transition Report 2012 described the formation of the Customs Union and the Common Economic Space as the first successful example of regional integration in the post-Soviet region.


Leaders of these countries have agreed to ensure (1) effective functioning of the common market for goods, services, capital and labour and (2) the formation of a coherent industrial, transport, energy and agricultural policy, and the deepening of industrial cooperation, including the possible creation of joint transnational corporations.


They now hope to create a Eurasian Economic Union by January 1, 2015. Reaching this goal requires agreement on a number of issues such as: (1) Sustainable macroeconomic, fiscal and competition policy (2) Structural reforms of labour markets, capital, goods and services and (3) The creation of Eurasian networks in the fields of energy, transport and telecommunications.

 

 


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