The EU and the Eurasian Economic Union: Dealing
with a Common Chinese Challenge
In 2015 the Eurasian Economic Union (EAEU)
became the latest version of integration in the post-soviet space, bringing together Russia,
Kazakhstan, Belarus, Armenia and Kyrgyzstan in a Union, taking the European Union as its model.
However, five years later the EAEU is still suffering from a number of structural weaknesses, which
have restrained the organisation from becoming much more than a Customs Union with little prospects
to fully implement the free movement of goods, capital, services, and labour and develop deeper
economic integration between its members. As Ukraine's refusal to align itself with the EAEU,
signing an Association Agreement with the EU instead, had directly contributed to Russia's
aggressive behaviour towards its neighbour, the EU refrained from establishing any formal
relationship with the EAEU. The organisation was mainly viewed as a Russian-dominated geopolitical
instrument to re-establish its hegemony in the post-soviet space. In this context, the EU has
restricted its relations with Russia and strongly preferred to deal with the other EAEU member
states on a bilateral basis.
However, as the crisis between Russia and the West stagnated,
in some EU member states, including Germany and Austria, politicians and business circles argued
that a constructive relationship between the EU and the EAEU might pave the way for a broader
political solution. In practice, only some informal contacts between both Commissions were
established. Recently, the debate on the perspectives for dialogue and cooperation between the EU
and the EAEU has returned. Most prominent was President Macron's intervention, who referred to it in
his meetings with President Putin last year. Whereas some experts have argued that it would indeed
be "time to let down the drawbridge", [1]
others are convinced that a Europe "from Lisbon to Vladivostok" remains an illusion. [2] Only
a few have suggested a more integrated EU-approach towards connectivity across the Eurasian
continent, linking Europe to China "from Lisbon to Shanghai", [3]
although the common challenge China is posing to both the EU and Russia seemed to have been one of
President Macron's considerations to include EU-EAEU dialogue as a possible area for selective
cooperation.
This article will investigate how the Chinese Belt and Road Initiative (BRI)
could change both the EU's current relations with the EAEU member states and with the Eurasian
Economic Commission. In particular, it will look into possible options to merge the current parallel
dialogues on technical standardisation with China and the EAEU to prevent the emergence of (new)
non-tariff trade barriers across the Eurasian continent and increase connectivity. It will conclude
with some recommendations for the EU to elaborate a more comprehensive strategic approach towards
sustainable and rules-based connectivity across Eurasia and to include the EAEU in the EU-China
Connectivity Platform.
Bilateral relations between the EU and
individual EAEU member states
As already indicated, the EU has always strongly
preferred to deal with EAEU member states on a bilateral basis, rather than through the EAEU. In
this context, the EU has been especially successful in reaching comprehensive cooperation agreements
with Kazakhstan and Armenia. Both the Enhanced Partnership and Cooperation Agreement with Kazakhstan
(2015) and the Comprehensive and Enhanced Partnership Agreement with Armenia (2017) respect the
obligations of these countries as EAEU member states and WTO law is used to avoid any collision
between their obligations towards the EU or the EAEU. [4]
Such a bilateralisation of EU-relations with individual EAEU member states is further enhanced by
two factors: the incomplete nature of EAEU-integration and centrifugal tendencies within the EAEU,
which leads member states towards hedging or balancing their relations with Russia by simultaneously
developing closer relations with other outside partners, like the EU and China.
As Russian
EAEU-expert Vinokurov argues about the Eurasian Economic Commission (EEC): "Importantly, as of today
in its negotiations to establish a free trade area with third parties, the EEC only has a mandate to
discuss a trade block for goods, while the issues of investment and trade in services, which provide
an FTA's greatest economic effect, remain strictly within the competence of the member states". [5]
Whereas the EAEU (and certainly Russia) would like to fully implement the four freedoms in its
internal market and become a full-fledged Economic Union, the EAEU at present mainly operates as a
Customs Union in external trade relations and integration in many areas is still far from
completion. In principle, this offers opportunities for the EU to develop closer cooperation with
individual EAEU member states on issues, which at present would not fall within the competence of
the EAEU, like developing better "digital connectivity".
The incomplete character of
EAEU-integration is also reinforced by diverging views among its members on the desirability of
deeper integration with Russia. In principle, Russia would prefer to broaden and deepen integration
within the EAEU, in order to strengthen its own geopolitical and geo-economic position towards its
biggest trading partners: the EU and China. For Moscow, this translates into a protectionist
approach and a preference to negotiate with the EU or China in the context of the EAEU. However,
most EAEU member states prefer not to be locked up in a Russia-dominated framework and pursue
simultaneously close relations with other external partners. This provides states, like Belarus,
Kazakhstan or Armenia with additional opportunities to better serve their national interests, while
using their veto powers within the EAEU to counter any Russian moves, which are viewed as not being
in the interest of these smaller powers. [6]
The EU could use such room of manoeuvre to deepen cooperation with these EAEU member states on
issues outside the competence of the EAEU.
However, nowadays both these EAEU-member states
(especially in Central Asia) and Russia are increasingly facing a strong Chinese push for a wider
Eurasian integration, serving primarily Chinese geopolitical and geo-economic interests. The Belt
and Road Initiative serves as the main vehicle for these ambitions. In this context, all EAEU member
states have an interest in deepening their cooperation with the EU, in order to escape the
tightening Chinese grip on greater Eurasia. [7]
Even for Russia, which has recently developed a more intensive strategic relationship with China, an
improvement in relations with the EU would not only better serve its interests in Central Asia, but
also its broader economic interests in Europe, for which China has not offered a reasonable
alternative over the past five years. In the end, "Russia and China are not and will not be able to
replace the EU as the other's indispensable economic partner". [8]
As Moscow's willingness seems to be diminishing to become Beijing's junior partner in most global
value chains and delivering mostly energy resources and raw materials to China, shifting power
relations could assist the EU to reposition itself as a more geopolitical and geo-economic power in
its own right on the Eurasian continent. This could simultaneously affect the EU's relations with
Russia and with other EAEU member states and open opportunities for the EU to bring all EAEU member
states together in broader multilateral (regional) frameworks, in which the EU could act as a
balancing power.
EU-EAEU dialogue on technical norms and
standards
In spite of the EU's strong preference to
bilateralise relations with individual EAEU member states, the European Commission has had an
informal expert dialogue with the Eurasian Economic Commission on approximation of technical norms
and standards. Such a dialogue was unavoidable, as the Eurasian Economic Commission has a broad
mandate on behalf of EAEU member states to modernise technical regulations and harmonise product
standards to bring them in conformity with international standards and more developed EU
regulations. In these areas, the Eurasian Economic Commission is fully competent and could not be
circumvented by addressing individual member states. [9]
It also constitutes an area, in which the EU could profit from its leading position in
setting technical product standards based on the "Brussels effect": because of the EU's market size
and its advanced regulatory system, other countries are quite willing to adopt EU-standards as their
own. [10] This
effect also applies to the EAEU: about 80% of EAEU standards are voluntarily adopted EU standards.
[11]
As the EAEU is presently working on a closer internal integration in additional sectors, like
integration of energy markets (to be accomplished by 2025), the EU has a special interest in
following these developments closely, as energy relations with especially Russia and Kazakhstan
constitute a crucial area of broader economic relations with the EU. [12]
This informal EU-EAEU dialogue has enabled member states to prevent an increase in
non-tariff trade barriers and avoid a binary choice between either having good trade relations with
the EU or with the EAEU. In an earlier Clingendael report on EU-EAEU relations, such an approach has
been called "tentative compatibility" in an attempt to prevent the emergence of diverging or even
conflicting Unions and to keep the options open to establish a broader EU-EAEU Free Trade Agreement,
if and when political circumstances would allow so in future. [13]
In principle, such a dialogue could be further enhanced and institutionalised and move to a more
ambitious level from approximation to increased harmonisation of technical norms and standards. This
would become even more important, as such standards could be increasingly challenged by diverging
norms and standards, applied by China in the context of BRI.
The Chinese challenge to global
standards and connectivity across Eurasia
For the EAEU and its constituent members China
poses a multifaceted challenge, especially in connection with Beijing's BRI which is promoting wider
Eurasian connectivity based on Chinese standards and rules. Beijing attempts to promote its
initiative as a win-win for the global community, but in reality it is first and foremost based on
Chinese economic (and geopolitical) interests, working with Chinese loans, Chinese workers and
serving China-based value- and production- chains.
In order to strengthen its own
geo-economic negotiating power towards China and the BRI, Russia has promoted better coordination
and cooperation between the EAEU and BRI, resulting in two agreements which have been signed in 2015
and 2018, aimed at reducing trade barriers, simplifying customs procedures and creating the
foundations for deeper integration. These agreements should also lead to a coordinated
multi-stakeholder approach by the EAEU and its member states towards transport infrastructure
projects, identified in the context of BRI. However, these agreements are still far removed from a
full-fledged Free Trade Agreement, as Russia and other EAEU member states fear Chinese competition
on their markets. Furthermore, most EAEU member states, like Kazakhstan, have preferred to negotiate
their own bilateral deals on BRI with China instead of working through the EAEU. [14]
A major challenge for both the EAEU and for the EU would be a divergence between European
standards and Chinese ones, especially regarding new technologies, such as in digital connectivity
and artificial intelligence. As two high-level Chinese experts were quoted: "Who shapes the
standards, shapes the present and future" and "We need to speed up the development of Chinese
standards. International market competition is competition for standards and rules". [15]
The EU has responded to this challenge with its own EU-AsiaConnectivity Strategy,
[16]
in which it underlines the need for sustainable and rules-based connectivity and reaches out to
China to discuss such issues in the context of the EU-China Connectivity Platform. A recent report
by the Heinrich Böll Foundation recommended to push this standards dimension further within this
Platform and help China to better integrate into the existing international frameworks for
standardisation and refrain from setting up alternative frameworks. It also recommends to raise
awareness in other countries along the BRI about the possible consequences of alternative
standard-setting. [17]
Against this background, an expert working for the German think tank DGAP has recently
proposed to enlarge the EU-China Connectivity Platform to include the EAEU, which could then "focus
on issues of regulatory convergence, harmonization, and standardization of customs clearance
procedures for trans-continental traffic" and "could tackle the coordination of investment policies
in infrastructural bottlenecks". [18]
Such a trilateral format could open up new opportunities for the EU and EAEU to cooperate more
closely on issues of common concern and provide EAEU member states with other options than bilateral
cooperation on Chinese conditions. It would be especially relevant for the EU's Central Asian
partners, as the EU and China have already identified options for jointly financed infrastructure
projects, which could be extended to Central Asia in the context of the EU Strategy for Central
Asia. [19]
Conclusions and recommendations
This article has argued that it would be in the EU's best interest to
simultaneously upgrade its relations with individual EAEU member states and with the Eurasian
Economic Commission, in order to ensure that broader connectivity across Eurasia would develop
in a sustainable manner and based on international standards. In this context, it offers the
following recommendations:
The EU should continue to deepen cooperation with EAEU member states on a bilateral
basis, especially in those areas presently outside EAEU-integration, like digital
connectivity.
When EAEU integration would be further deepened, the European Commission would have to
work closely with EAEU member states, using their willingness to balance or hedge
against Chinese (or Russian) pressure to involve them more closely in broader
multilateral (regional) frameworks to increase connectivity, like in the context of the
EU's Central Asia strategy or its updated Eastern Partnership policies.
The current informal EU-EAEU dialogue on approximation of technical standards should be
enhanced and institutionalised and should be aimed at further harmonisation of such
standards, including in those areas in which the EAEU strives to deepen integration of
its internal markets, like in energy.
The EU should include the EAEU in the EU-China Connectivity Platform to prevent the
development of diverging (Chinese) standards, especially in transport infrastructure and
in digital connectivity. Central Asia could be an area where the EU and China could
cooperate also in jointly financed projects.
The EU should develop a more integrated and strategic approach towards Eurasia as a
whole, covering China, Russia, the EAEU and both Central Asian and Eastern Partnership
countries. First steps in this direction could already be made during the German EU
Presidency in the second half of 2020.