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The Eurasian Customs Union: Friend or Foe of the EU?

Summary

The Eurasian Customs Union (EACU), formed by Russia, Belarus, and Kazakhstan in 2010, is the largest customs union by territory and is becoming increasingly real. While challenges remain, the union has made progress in eliminating non-tariff barriers, moving toward a common external tariff, and refining a unified customs code. The EU should understand the EACU's development and find ways to protect its own interests, as the union's influence in Europe and globally is likely to grow.

Key Points

• Russia drives the union, but Belarus and Kazakhstan joined voluntarily, maintaining some autonomy.
• The Eurasian Economic Commission (EEC) serves as the union's single regulatory body and is the member states' representative in regional and global trade negotiations.
• The EACU is not yet a genuine customs union, as members maintain protectionist policies, resist granting supranational authority, and allow rule exemptions.
• The common external tariff (CET) has been established but is not fully harmonized across all members.
• Ukraine is a potential future member, but its decision is influenced by its choice between joining the EACU or the EU.
• The EACU aims to counterbalance China's influence in Central Asia and protect Russian economic interests.
• The EACU is not purely political; it has practical economic objectives, including improving trade flows and market access.

The EU's Undesired Reality

The EU faces a new reality in the post-Soviet space. While it remains a model for integration, some countries in Central Asia and Eastern Europe are turning to Russia as an alternative. The EACU represents a growing economic and political force that the EU must engage with. Brussels has been cautious due to historical and geopolitical concerns, but it should move beyond emotional responses and analyze the practical implications of the union.

What Is the Customs Union?

The EACU is a result of Russia's push for deeper integration in the post-Soviet space, following previous failed attempts. It was launched in 2010 and includes a common economic space with 17 agreements and 55 drafts in progress. The union aims to harmonize trade, tax, monetary, and customs policies, and establish a common competition policy. However, the level of integration remains low, and national standards still prevail.

The Rationale Behind the Customs Union

• Russia's perspective: The EACU is a strategic move to reassert influence over its neighbors, counter China's growing presence, and improve its economic position. It is seen as a way to enhance Russia's global standing and be recognized as an equal partner by the EU.
• Belarus and Kazakhstan's motivations: Both countries joined for political and economic reasons. Belarus seeks stability and financial support, while Kazakhstan aims to be remembered as the project's architect and to balance its relationship with China.

Integration in Practice

The Supranational Authority

• The Eurasian Economic Commission (EEC) was established in 2011 and functions as the union's regulatory body.
• The EEC has 23 departments covering trade, technical regulations, competition, energy, and more.
• The decision-making process is based on consensus, with each country having one vote in the Supreme Eurasian Economic Council.
• The EEC is still not fully autonomous, as member states retain significant control over key decisions.

Steps Toward Trade and Economic Integration

1. Intra-Union Trade:

   • Trade within the EACU increased by 32% in 2011 and 17.6% in the first quarter of 2012.
   • Russia accounts for two-thirds of intra-union trade due to its energy exports.
   • Trade disputes persist, especially between Russia and Belarus, over products like food, vehicles, and manufactured goods.

2. Common External Tariff (CET):

   • The CET was based on Russia's pre-WTO tariffs and has had limited impact on Moscow.
   • Belarus and Kazakhstan have not fully harmonized their tariffs, with significant increases and decreases.
   • Kazakhstan's tariffs have doubled in recent years, reflecting its economic dependence on Russia.

3. Customs Code and Revenues:

   • The customs code was adopted in 2010 and is being revised.
   • A package of 700 amendments is under discussion to simplify customs procedures.
   • Customs revenues are distributed unevenly, with Russia receiving 87.97%, Kazakhstan 7.33%, and Belarus 4.70%.

4. Trade Facilitation:

   • External borders are now managed by the EEC, with plans for an electronic system by 2013.
   • Non-tariff barriers are being addressed, but progress is slow.
   • Member states are working to align technical standards with EU and international norms, though local standards continue to dominate.

Incumbent and Future Challenges

• The EEC lacks real authority, and member states still influence decision-making.
• The transition to WTO commitments is uncertain, especially for Belarus and Kazakhstan.
• Russia's WTO accession has already impacted the CET, and future compliance remains a challenge.
• The EU must engage with the EEC at a technical level to understand its structure and ensure compliance with international standards.

Conclusions and Recommendations for the EU

• The EU should overcome fears and misperceptions about the EACU and recognize its practical nature.
• It should educate EACU officials on EU standards and encourage the application of EU-Russian trade commitments within the union.
• The EU should separate Ukraine's geopolitical concerns from its relationship with the EACU.
• The EU must reassess its approach to the post-Soviet space and accept that the European model may not be universally applicable.

Notes

• The EACU is a complex and evolving project.
• The political will of member states is crucial for its success.
• The EU's role should be one of engagement and understanding rather than confrontation.

About the Author

Olga Shumylo-Tapiola is a researcher and analyst with expertise in European and Eurasian integration. Her work focuses on the dynamics of regional cooperation and the implications for international trade and policy.

Carnegie Europe

Carnegie Europe is a policy research institution based in Brussels, dedicated to promoting peace, security, and prosperity through analysis and advocacy. This publication is part of its efforts to inform EU policy on regional integration in Eastern Europe.