The Eurasian Customs Union

11

THE EURASIAN CUSTOMS UNION

According to Dragneva and Wolczuk (2012), the Eurasian customs Unionis a custom union that covers Belarus, Kazakhstan and Russia. Themain aim of forming the customs union was to form broad EuropeanUnion with economic alliance for the former soviet states. The memberstates of the union plan to have a continued way of economicintegration and set to remove any customs borders among each other.The West has ignored the Eurasian customs Union for long but it hasrecently being brought into limelight. The Eurasian customs Union waslaunched in year 2010 and there are anticipations that it will befully-fledged as “Eurasian Union” in year 2015. Previous, Russiahas laid it attempts of creating good trading areas with customunions among all the members of the commonwealth of the IndependentStates (CIS). This project has been able to achieve an inherenteconomic and political flow that has chances of causing derail. Inthe meantime, the EU has been able to work together and partners havebeen able to work closet and have implemented the custom unions.Russia has to abide with the rules of the world trade organization(WTO) and it must respect the members and the political sovereigntyof its neighbors.

The Outlines of the Plan

The Eurasian customs Union can be stated as work in progress but amodel that is quite similar to the European Union. In the customunion, the internal trade has been liberalized (especially in sectorssuch as in sugar, alcohol, tobacco and rice). Since the year 2011,the union was able to abolish all the borders controls among themember’s states. As well, the controls were paced up on borderswith direct neighbors in the CIS that was opting to stay away fromthe policies and program of the union. The member’s states havebeen able to establish a general external trade tariffs in the year2010 and almost 85 per cent of import tariffs were synchronized(Dragneva &amp Wolczuk, 2012).

Kazakhstan is a member state that was considered to be economicallyliberal and to be part of the union it has to raise half of thetariffs. The country applied an average rate that was nearly doublingfrom 6.5 per cent to almost 12.1 per cent. Since 2012, the customunion has been operated by the “Eurasian Economic Commission”that is anticipated to be the showpiece of the ultimate EurasianUnion. This body has a role of setting all the keys rules that areapplicable for the customs union. As well, the body has a direct taskof handling and dealing with the Russian trade relations with otherthird states and has good relations with the World Trade Organization(WTO) on behalf of the other two states.

As asserted by Shadikhodjaev (2009), the plan has been designed in amanner that offers eventual hope of guaranteeing a free movement ofcapital and labor. As well, the Eurasian Union has expectation ofindicating issues of macroeconomics, financial, energy policies andcompetition of the members. As well, the commission is in charge tosynchronize the bloc’s technical and setting hygienic standardswith nonexistence of any shared and mutually recognized standards andpolicies that has been the main obstacle for achieving economicintegration.

There are some imperative differences that can be cited between theEU and the Eurasian Union. Firstly, the EU is a union of middle sizeand the small countries. On the other hand, the Eurasian Union isunbalanced over its main composition. Russia has been dominant on thecustoms unions that have overwhelmed and account for more than 86 percent on the blocs GDP and almost 84 per cent of the total population.As well, the figures of the Kazakhstan and Belarus are 8 per cent and10 percent and 5 per cent and 5 per cent respectively. Secondly, theEuropean Union has been able to attract most of the applicants with adirect prospect of membership. The Eurasian Union on the other handhas been targeting ideas of expanding by use of combined Russiansubsidies and coercion. Other states such as Moscow have beenpressing states to join the bloc and this has made Armenia andKyrgyzstan to agree and join the bloc.

Russian Trade and Custom Union

As in any other customs unions, the Eurasian Union has beenunderpinned by wide political visions. The vision of the EurasianUnion does seek to establish a new centre with power with anincreased multi-polar world. The other customs union members have notbeen sharing the Moscow deportment and the countries have beencautious of the dominance of this bloc. This is the stage the unioncovers three post soviet regimes and this countries are open by thepolitical system within the region of Russian force in participation.Additionally, there are weaknesses of political legitimacy of thisplan with underlying economic vision that is not liberal with theRussian been able to raise the protection levels after the start ofthe global financial crisis of 2008 and it forced the members toraise the tariffs (Isakova &amp Plekhanov, 2012).

The fact is that, the Eurasian Union is yet complete but whencompared with the previous Russian led regional trade initiatives, ithas effective attempts to prosper. The internal trade tension areyet to disappear and Moscow has not finally declared its option onjoining the union with ideas of introducing the occasional tradebarriers (such as in the milk products sourced from Belarus). Thereis an idea of forming a deep integration dimension of the customunion. As well, the process of harmonizing the technical standards isslower with no mutual recognition of the member’s states withdifferent standards. There are protests of establishing a freemovement of services such as labor that has been uncertain with morethan 80 per cent of the Russians current favors that target to curbthe migration and introduce visas for the Central Asians (Rilka &ampWolzcuk, 2012).

After 2011, there were tight borders controls due to the non-customsunion membership. This aspect led to an increased reduction ofimports from all other Russian neighbors. As to the informationissues by the Russian statistical agency (Rossat), in the year 2012,the level of imports from the Azerbaijan experienced a decline of 1.4per cent, from Ukraine by 10.7 per cent, Uzbekistan by 25.1 per centand Tajikistan by 24.2 per cent. There were liberalization effortsthat were placed previously and the market accesses for the exportersin countries such as Kazakhstan and Belarus gains are limited. Aswell, there are no trade growths and developments that are within thezone and can be directly being linked with the custom unions andareas (Isakova &amp Plekhanov, 2012).

As to Shumylo-Tapiola (2012), there are measurable and limited signsthat the trade will be diversified and detriment to Kazakhstan. Forinstance, the Astana has been able to import most expensive cars fromRussia and this has reduced the imports from other competitive statesfrom Germans, Japanese and the Korean cars. This has effectivelyamounted to transfer the economic level of rents for the Moscowautomobile industry. Russia has been able to back its companies withachievement of better position to hold the country main economicassets. As well, the Eurasian union is not likely to come up withlong-term economic benefits for its members. The member states of theEurasian union are neither wealthier nor being economicallycomplement. The political tension has been expected due to theincreased transfer of wealth.

As well, the Russian economy is not well developed to be able to playa crucial role compared to the one that was played by the US andCanada for Mexico in NAFTA. Studies that have been carried outindicate that there are chances of gaining an integrated moveespecially in the outside world that with each other. When the WTORules on the aspect of services liberalization, intellectualproperty, technical standards, investment and the technicalstandards, it is more essential since it will assist in developing aneffective way that will modernize and diversify the economies ofmember’s states. Economists have agreed that the Eurasian customsUnion has plans of introducing and creating great benefits to themember states where the trade regime has been more open. Generally,this means that in terms of political and economy, the Eurasian Unionhas been a ghost of the past. However, the Union cannot be ignoredany longer and must be addressed fairly with lots of attention (Rilka&amp Wolzcuk, 2012).

Eurasian Union Implication and the Outlooks

According to Tarr (2012), the initial relation between the customunion and the world trade organization has been unclear. Since year2012, Russia has been a member of the custom union and it has beenmuch slower in delivering its commitments to the union. The MoscowWTO partners are more cautious when it comes to issue of recognizingthe union as the main representation of trade region of Kazakhstanand Belarus. In case, the Armenia and the Kyrgyzstan will join thecustom union, there are chances that all other WTO members will claimfor compensation. As well, there are no guarantees that the unionwill be in a good position of gaining other members.

The Kyrgyzstan and the Armenia are thinking on the idea of gaugingthe potentiality and consequences of joining the custom union. Theissues that they are evaluating in this aspect is the loss of thecountry political autonomy, economy costs for ensuring there is moreprotection and any impact it could have to their economies and thepolitical relations that has been present in other WTO members. Aswell, there may hindrance in the union by the Russia’s militaryinterventions in the Ukraine and with other post-soviet states thatare unsettled by Moscow destructive behavior (Dreyer &amp Popescu,2014).

As asserted by Krotov (2011), Most of the trading partners in thecustoms unions have been avoiding any discrimination that can beviewed against the products and services that may be raised due tothe greater customs controls. As well, Russia has been encouraginguse of the liberalization of the tariffs and services with agenda onthe major western and with all the Asian trading partners. Russia hasa behavior of addressing the context of the customs union and may beforced to monitor with an aim of ensuring there is compliance withthe WTO policies and regulations. The Moscow recourse targets thetrade bloc for all the countries that have no will of joining theunion (such as those set against Ukraine in year 2013). The recourseand the trade blocs that are set have been contrary to the spirit andthe letter of World Trade Organization. In case Russia will raise itstariffs against the countries (such as Ukraine) after not joining theplanned comprehensive free trade agreement set by the EU. As well,the trading partners have been targeting to launch the WTO procedurethat aim to deal with the issue of trade diversion and assist thepartners who may be suffering from the Russian trade sanctions(Dragneva &amp Wolczuk, 2013).

According to de Souza (2011), Russia has certain objections that arerelated to the outlook of being swamped with Ukraine products thatare displaced in their domestic home markets with the competitiveproduct from EU region. This has not yet received basis of economicprediction for the future. There may be no significant impact toRussia especially in the impeding trade flows with the country mainlyin the light of Russia own adoption of the international and the EUnormality. There are predictions that products and goods from Ukrainemay impound the Russian market (Akhundov, 2012). In the future,there could be demand that the Belarus and Kazakhstan will have animmediate idea of requiring closing their customs border. This is anindication that the Russia will have to consider the deployment rangeand mechanisms that may target persuasion to Ukraine. This may be astrategy that will be able to reinforce the perception that willproject Russia power as the country make trials of making it hard toresist the invitation.

As to Carneiro (2013), in the near future, Russia may be forced totake some extra legal measures that may have a direct contradictionwith the WTO rules. As well, it could be challenging fro thecountries to make a choice that will be based upon the set predictionof Russia tendency of violating the norm of the organization. Thecurrent Russia campaign in Ukraine has chances of highlighting asense of uncertainty with creation of confusion to some political andeconomic players considering essentiality of Russian market. Thereare chances that in the near future there will be an increased marketaccess of products especially for the single territory within thecustom union. This will be a chance that will be granted after theproducts will offer a proof of the compliant level with requirementsthat are set by custom union and the technical regulations that areapplicable to all the products (Moshes, 2013).

By the end of year 2012, there were almost 31 customs unionstechnical regulations that were already developed and they coveredvarious differentiated type of products. Some of the technicalregulations are already in force and other are expected to beeffective by 2015. As well, there are chances that other technicalregulation targeting market access will still be developed. The legaland the institution regime of the Eurasian custom union indicatesthat there are chances of experiencing a continuity of thepredecessors with created evidences of having real efforts that willdeal with some of the real challenges (Vinokurov, 2012).

Conclusion

Generally, the custom union target to be a regional Free Trade Area(FTA) that does try to liberalize the trade exclusively between themember’s states. The customs unions include the FTA, universalexternal tariffs by extending the external trading policies. Thecustom unions are easy to administer compared to the Free Trade Unionsince they do not require agreement over rules of origin for all thetrading products. However, the customs union trade members may not beable to pursue their own tariffs and trading policies with theirthird parties. There are restrictions that are issues over nationalsovereignty that is quite challenging to accept and explaining thecustom union. Most of the projects that are undertaken by the customunions tend to be market-liberal considering the economic outlook.This may be the cause of their future failures since there areprotectionist policies that raise the level of political tensionsespecially on redistribution of the rent with failures of raisingprosperity. In such a situation, custom unions will succeed if itwill be underpinned by the wider political projects with genuinewillingness of the members to abandon the trading policies autonomyas a crucial part of the transfer of political control.

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