Eurasian Economic Integration

2014

EDB Centre for Integration Studies

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Section I. Eurasian Economic Integration and its institutions

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Regional integration stages

STAGESSUPRANATIONAL

REGULATORY BODY

Economic Union

Single Economic Space

Customs Union

Free Trade Zone

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History of Eurasian integration

CU: Russia - Belarus

CU: Russia - Kazakhstan

Agreement on deeper

integration

Treaty on the Customs

Union and SES

Treaty on the establishment

of EurAsEC

SES PROJECT Belarus,

Kazakhstan, Russia

Decision of IGC to form the CU as a

part of EurAsEc

FORMATION OF THE CU

FORMATION OF THE SES

COMMENCEMENT OF EEC OPERATION

FORMATION OF THE EURASIAN ECONOMIC

UNION (EEU)

SINGLE CODED DOCUMENT

no later than 01.2015

NO INTERNATIONAL ORGANIZATION AND LEGAL PERSONALITY

INTERNATIONAL ORGANIZATION AND LEGAL PERSONALITY EXISTS

INTEGRATION STRUCTURES CREATED

EurAsEc structures: IGC, IC, IPA, IC Secretariat

CU Structures: SACU, CUC, CUC Secretariat

SES structures: SEEC, EEC

Court

EEU structures: SEES, EEC, Court,

Assembly

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Treaty on the Eurasian Economic Union

The Treaty (signed May 29th 2014, functional January 1st 2015) establishes the Eurasian Economic Union (EEU)

• EEU ensures free movement of goods, services, capital and labor• Coordinated, coherent or uniform policy in economy sectors • The Union is an international organization of regional economic integration, which has

international legal personality

The Union operates on the basis of the following principles:

• Respect for universally recognized principles of international law • Respect for difference of political structure of the Member States • Promotion of mutually beneficial cooperation, equality and consideration of national interests • Compliance with the principles of market economy and fair competition • Operation of the Customs Union without exceptions and limitations after the transition periods

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Goals of establishing the EEU

• Creation of conditions for stable development of economies of the Member States in order to improve the living standards of their population

• Aspiration to create a single market for goods, services, capital and labor within the Union

• Comprehensive modernization, cooperation and improvement of competitiveness of national economies in the context of the global economy.

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EEU bodies

Supreme Eurasian Economic Council (Supreme Council)

Eurasian Intergovernmental Council

(Intergovernmental Council)

Eurasian Economic Commission

(Commission, EEC)

Eurasian Economic Union Court

(Union Court)

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EEU management bodies

Council of the Commission 3 Council members, one Vice Prime Minister of each Party EEC

Supreme Eurasian Economic Union (Heads of State Parties)

(9 Board Members, 3 per each Party)

Member of the Board (Minister)

for Competition and Antitrust Regulation

Member of the Board (Minister) for Economics

and Financial Policy

Member of the Board (Minister)

for Industry and Agroindustrial

Complex

Member of the Board (Minister) for Trade

Member of the Board (Minister)

for Technical Regulation –

Member of the Board (Minister)

for Customs Cooperation–

Member of the Board (Minister)

for Energy and Infrastructure

Member of the Board (Minister) for main areas of

integration and macroeconomics

Departments

Chairman of the Board

Commission Board

Departments Departments

Advisorybodies

Advisorybodies

Eurasian Intergovernmental Council (Heads of Governments of the Parties)

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EEU budget

RUSSIA

KAZAKHSTAN

BELARUS

Proportional to standard distribution of import customs duties for each party (Treaty on the Eurasian Economic

Commission)

ASSESSED CONTRIBUTIONS OF THE PARTIES

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Customs Union

Single customs area

Abandonment of customs clearance of goods in mutual trade

Uniform Customs Code

Single trade regime with third countries

Transfer of customs controls to the external borders

Single customs tariff and non-tariff regulation system

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Provisions of the Treaty relating to the Customs Union

Information exchange and statistics

Operation of the Customs Union

Regulation of trade of medications and medical products

Foreign trade policy

Technical regulation

Sanitary, veterinary-sanitary and phytosanitary quarantine measures

Consumer protection

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Single Economic Space (SES)

Implementation of "four freedoms": free movement of goods, services, capital and labor

Harmonization and unification of the rules of economic regulation in key areas (competition, subsidies, government procurement, technical regulation, activities of natural monopolies,

protection of intellectual property, etc.)

Implementation of coordinated macroeconomic and monetary policy

Formation of integrated sectoral markets

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Provisions of the Treaty relating to SES

MACROECONOMIC MONETARY POLICY

TRADE IN SERVICES, INSTITUTION, OPERATION

AND INVESTMENT ACTIVITIES

REGULATION OF FINANCIAL SERVICES

TAXES AND TAXATION GENERAL PRINCIPLES

AND RULES OF COMPETITION

LABOUR MIGRATION INDUSTRY

TRANSPORTGOVERNMENT

PROCUREMENT

INTELLECTUAL

PROPERTYENERGY

NATURAL

MONOPOLY

AGRICULTURAL

COMPLEX

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MACROECONOMIC POLICY

Main macroeconomic indicators of sustainable economic development

Annual consolidated budget deficit of the

country does not exceed 3% of GDP

State debt does not exceed 50% of GDP

Inflation in annual terms does not exceed by more

than 5 percentage points the level of

inflation in the Member State in

which this index has the smallest value.

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Labour migration in the EEU

• Workers of the Member States are not required to obtain permits for work in the State of employment.

• The State of employment recognizes documents confirming education , with no recognition procedures applied for these documents (exception - educational, legal, medical, pharmaceutical activities).

• The period of temporary stay (residence) of a Member State worker and his family members in the State of employment is determined by the period of employment or a civil contract.

• Social security (social insurance) (except pension) is provided for Member State workers and their family members on the same terms and in the same manner as for the citizens of the state of employment

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Transitional provisions of the EEU Treaty

2016

Common market for medications and medical products

2019

Common electric power market

2025

Creation of a supranational regulatory authority for financial markets

Common market for gas, oil and petroleum products

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Section II. Permanent projects of the EDB Centre for Integration Studies

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EDB Centre for Integration Studies

• Centre for Integration Studies was founded in 2011

• It is a structural unit of the EDB

• Focus on application quantitative studies: macroeconomic modeling, databases, calculation of economic effects

• Located in St. Petersburg

• 7 employees, outsourcing is actively used

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Evaluation of long-term trends and the current state of SES economies;

Coordination of efforts and positions on the development of short-and medium-term outlook, as well as scenarios for the development of economic situation;

Forming proposals and recommendations on monetary, fiscal and policy based on the results of forecasting;

The work is carried out in collaboration with EEC and national authorities (Belarus)

EEU macroeconomic policies analysis and forecasting system

Countries

• Armenia, Belarus, Kyrgyzstan, Kazakhstan, Russia

Type

• DSGE• Financial Programming • Econometrics

Imple-menta-tion

• Quarterly data• MatLab and IRIS• Multi-country model and 5 country models

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Monitoring of mutual direct investments (MMI) in the CIS

• MM is the largest international database on mutual direct investment in the CIS region

• MMI CIS uses only public information sources of various types

• The database has structured information on 1060 projects since 1992

Russian FDI stock by countries CBR and MMI CIS data

Country FDI stock, $ billion (CBR data)

FDI stock, $ billion (MMI CIS data)

Total, CIS and Georgia

Ukraine

Belarus

Kazakhstan

Armenia

Uzbekistan

Tajikistan

Moldova

Georgia (excluding Abkhazia and South Ossetia)

Kyrgyzstan

Azerbaijan

Turkmenistan

* Preliminary estimate by adding to the data at the beginning of 2012 information on net inflow in 2012 published by CBR on 11 June 2013.

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Monitoring of direct investment of SES and Ukraine in Eurasia

• Based on improved methodology;• Geographical coverage - the whole of Europe, Turkey, China,

Mongolia, both Koreas, Japan, and Vietnam; • More than 300 transactions, though dominated by Russia.

Country

Kazakhstan

number of transactions in the database

number of transactions with FDI from $ 100 million to $ 1 billion (end of 2012)

number of transactions in the

database

number of transactions with FDI over S1 billion (end

of 2012)

FDI stock at the end of 2012, S billion

Belarus

Total

Russia

Ukraine

Jointprojects

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EDB Integration Barometer: attitude to the CU and SES in member states

2012

2013

2012

2013

2012

2013

80%

73%

72%

67%

60%

65%

10%

15%

17%

24%

28%

23%

4%

6%

5%

5%

6%

3%

6%

7%

6%

3%

6%

9%

Безусловно положительно / Скорее положительно Безразлично

Скорее отрицательно / Безусловно отрицательно Затрудняюсь ответить

Kazakhstan

Belarus

Russia

• In use from 2012. A monitoring study of integration preferences of the former Soviet Union population (11 CIS countries and Georgia)

• In 2013, 12 countries participated in the survey.

• More than 14 thousand people interviewed (from 1000 to 2000 in each country).

Absolutely positive/ mostly positiveIndifferentMostly negative/ absolutely negativeNot sure

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EDB Integration Barometer: attitude to the CU and SES in third countries

Узбекистан

Таджикистан

Кыргызстан

Армения

Грузия

Молдова

Украина

Туркменистан

Азербайджан

77%

75%

72%

67%

59%

54%

50%

50%

37%

7%

14%

12%

19%

9%

11%

12%

13%

6%

5%

3%

14%

5%

16%

24%

28%

9%

53%

11%

9%

3%

10%

16%

11%

9%

27%

4%

Безусловно да / Скорее да Мне безразлично Скорее нет / Безусловно нетЗатрудняюсь ответить

Uzbekistan

Tajikistan

Kyrgyzstan

Armenia

Georgia

Moldova

Ukraine

Turkmenistan

Azerbaijan

Absolutely positive/ mostly positive

Mostly negative/ absolutely negative

Indifferent

Not sure

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EDB Integration Barometer: general preference indicators

Economy

Uzbekistan

Kazakhstan

Kyrgyzstan

UkraineRussia

MoldovaGeorgiaBelarusArmenia

Azerbaijan

Tajikistan

Turkmenistan

Culture

Turkmenistan

Kazakhstan

Tajikistan

UkraineRussia

MoldovaGeorgiaBelarusArmenia

Azerbaijan

Kyrgyzstan

Uzbekistan

Policy

Turkmenistan

Kazakhstan

Tajikistan

UkraineRussia

MoldovaGeorgiaBelarusArmenia

Azerbaijan

Kyrgyzstan

Uzbekistan

All areas

Turkmenistan

Kazakhstan

Tajikistan

UkraineRussia

MoldovaGeorgia

BelarusAzerbaijan

Kyrgyzstan

UzbekistanArmenia

Vector "Former USSR countries"

Vector "EU countries"

Vector"Other countries"

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Eurasian Integration Indicators System

• Indicators system shows long-term integration trends of the CIS-12 region • The purpose of the composite index is to combine various aspects of regional cooperation into a

single indicator reflecting the degree of integration of each country with CIS-12 • To determine the composite index the nine integration indices of each country were normalized

with the CIS-12 Region, from macroeconomics and trade to labor migration and academic mobility • EIIS was republished twice - in 2009 and 2013

Росси

я

Белар

усь

Каза

хста

н

Украи

на

Мол

дова

Узбек

иста

н

Таджик

иста

н

Азерб

айдж

ан

Груз

ия

Туркм

енис

тан

Армен

ия

Кырг

ызста

н-1

-0.6

-0.2

0.2

0.6

1

2002 2008 2012

Russia

Belar

usKaz

akhs

tan

Ukrain

eM

oldo

vaUzb

ekist

anTa

jikist

anAze

rbai

jan

Geo

rgia

Turk

men

istan

Armen

iaKyr

gyzs

tan

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Database of regional economic organizations: global experience for EEU

RIOPower index

(cinc)

Population (Total)

GDP per capita

(current US$)

GDP per capita,

PPP (current

international $)

Exports of goods

and services

(% of GDP)

Imports of goods

and services

(% of GDP)

Total trade, bln

$GDP, bln $

CAN 0,0029 103680776 6601,7211 9881,3679 23,189838 23,322026 275,72 684,48

CACM 0,0005 40113099 3693,145 5934,4515 33,890266 45,49147 94,65 148,13

COMESA 0,0017 469492802 1317,5201 2293,5952 26,348766 34,573136 302,78 607,82

ECOWAS 0,001 318500013 1242,2 2120,8 49,1 30,7 290,05 395,67

MERCOSUR

0,007 279780342 11383,5 12652,7 15,7 16,2 803,02 3184,87

EEA   514412456 33448,5 33927,8 43 40,9 11673,59 17146,43

• Regularly updated open database on 80 regional economic integration associations / arrangements;

• Comparative analysis of 110 indicators (database fragment) :

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Regarding westwards direction, the possibility of economic integration with the EU is being studied

As to eastwards direction, China, India, Vietnam, and other countries are important

Important areas of continental integration:

EEU - West EEU - East

Eurasian continental integration

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Single Economic Space from the Atlantic to the Pacific

EU

Common internal market

Customs union

Free trade area

Economic union

Single economic space

Customs union

Free trade area

APEC

Creation of four common spaces

Liberalization of trade, including creation of free

trade regimes

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Շնորհակալություն ուշադրության.համար

Дзякую за ўвагу! Назар аудар андары ыз а рахмет!ғ ң ғ Thank you for your attention!

Centre for Integration Studies Eurasian Development Bank

Russian Federation, 191014 Saint-Petersburg 7 Paradnaya str.Tel.: +7 (812) 320 44 41Fax: +7 (812) 329-40-41www.eabr.org

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FOREIGN TRADE POLICY

• The union may grant tariff preferences in respect of the goods from developing and least developed countries

• Uniform rules apply for determining the origin of goods imported into the customs territory

• Introduction of counter measures in the customs territory of the Union carried out by the Commission, including by increasing the rates of import customs duties and introduction of quantitative restrictions, temporary suspension of preferences

• Joint measures to promote exports include, in particular, insurance and export credits, international leasing, promoting the concept of "Eurasian Economic Union Product" and introduction of single labeling for the goods of the Union, organization of fairs and exhibitions, advertising and branding activities abroad

• In the customs territory of the Union the single Commodity Nomenclature of Foreign Economic Activity of the Eurasian Economic Union and the Common Customs Tariff of the Eurasian Economic Union apply, which are approved by the Commission and used as trade policy instruments of the Union

• Measures can be introduced to protect the domestic market with respect to the goods originating in third countries and imported into the customs territory of the Union, in the form of special protective, antidumping and countervailing measures

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Key powers of the Eurasian Economic Commission

Macroeconomics

natural monopolies

government procurement

competition

Railway transport

competition

Industrial subsidies

Determination of scenario parameters for forecasts of socio-economic development for the 3-year period

Making decisions to expand the spheres of natural monopolies

Decision to cancel the exemption from national treatment Making decisions to correct the fact of violation of obligations to implement the Agreement

Cancellation of decisions on introduction of state price regulation. Approval of extension of the terms for introduction of state price regulation

Approval of application of exceptional rates Making decisions on suspension / cancellation of decisions on tariff changes

Decisions to apply sanctions and fines. Decisions on restraint of violations

Decisions on the admissibility of providing specific subsidies

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EEU effects for membership candidate countries

Armenia:• In case of Armenia's accession to the CU short-term effects

will be about 4% of GDP; • Attracting major targeted investments in the Armenian

economy.

Tajikistan: • Additional increase in potential GDP growth by 3.5% in

Tajikistan in the medium term.

Kyrgyzstan: • Potential stable GDP growth to 6%; • Increase in remittances from labour migrants (in 2012

amounted up to 29% of GDP of Kyrgyzstan); • Improvement of the investment attractiveness of Kyrgyzstan.