Presentation at the 2. east forum Berlin „Eastern Partnership countries between East and West: Perspectives and challenges”

About 300 business representatives and politicians from 20 countries participated in the 2. east forum Berlin, which took place under the topic “Opportunities for an economic area from Lisbon to Vladivostok” again.In his opening speech the Federal Foreign Minister Steinmeier referred to a common economic area between Lisbon and Vladivostok as still the right objective, yet during the last weeks it receded into dim distance.Berlin Economics‘ Ricardo Giucci contributed to a sound discussion with his presentation of his analysis “Eastern Partnership countries between East and West: Perspectives and challenges”. There are not two, but three groups of countries between Lisbon and Vladivostok, said Giucci: The European Union, which forms the first trading bloc, the Customs Union between Russia, Belarus and Kazakhstan, which forms the second trading bloc. And in between there are further states that do not belong to one of the trading blocs. In particular this is about five states of the Eastern Partnership (EP): Ukraine, Moldova, Georgia, Armenia and Azerbaijan, for whom free trade with both trading blocs would be the economic best option.

Giucci pointed out that technically, free trade with both East and West was not contradictory but feasible. “A state can sign as many free trade agreements (FTA) as it wants. Parallel FTAs won’t result in juristic problem”. Regarding Ukraine from a technical point of view, speaking of an „either – or“ decision is simply wrong. However, a combination of membership in a customs union with bilateral FTAs is impossible for juristic reasons.

Furthermore, there actually are FTAs between the EP countries and the Customs Union. And in the case of Ukraine, Moldova and Georgia, signing of Deep and Comprehensive Free Trade Agreements (DCFTA) with the European Union is expected to take place in 2014. Parallel FTAs are therefore possible in the short term. In the medium term effective implementation of the agreements must take place. An additional yet important challenge for the EP countries will be to include topics such as energy, services and protection of intellectual property rights into the FTAs with the Customs Union.

Giuccis position on a free trade agreement between European Union and Customs Union aroused high interest.
The European Union has a high interest in a FTA to Vladivostok due to trading structures between the two blocs. In contrast, the CU countries mainly export commodities, for which one doesn’t need a FTA.

An EU-CU Free Trade Agreement can be realized only in the long term, explained Giucci. “A formal reason for that is first of all, that Kazakhstan and Belarus are not members of the WTO. Then, the implementation of WTO rules leaves a lot to be desired.” But the average tariff of 9,4% remains crucial, since it is very protectionistic compared to the EU average tariff of 2,7%. A FTA requires total abolishment of all tariffs, thus is not realistic in the short term.

In this context Giucci advocated a future-oriented economic and trade policy in the Customs Union to enhance modernization of the existing economic structures. To this would contribute an experts dialogue of both trading blocs that further analyzes arguments in favor of a FTA.

The Russian first Deputy Prime Minister Shuvalov and the Ukrainian Minister for Economic Development and Trade Pavlo Sheremeta showed high interest in the analysis. The event’s tenor was a sound pleading for “stability and the future of millions of people” on the whole European continent and its facilitation by free trade agreements.

The event was jointly conducted be the Committee on Eastern European Economic Relations and UniCredit.

Eastern Partnership countries between East and West: Perspectives and challenges

Free trade with “East and West”: It can be done after all!

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