One-Way Union: Why Kazakhstan Always Loses in The EAEU

5



In early May, the Senate of the Parliament of Kazakhstan approved a law on the ratification of an agreement that simplifies the mechanism for ensuring the payment of customs payments under the customs transit procedure within the Eurasian Economic Union (EAEU). The agreement will apply when goods fall under the customs transit procedure in one EAEU state, and customs payments are made in another. For its part, the Ministry of Finance of Kazakhstan believes that the agreement will allow financial institutions to make greater use of their opportunities in the field of guarantees, as well as attract private investment in the EAEU. 

According to the Customs Code of the Economic Union, enforcement of the obligation to pay customs duties during transit can be provided to the customs authority in the country of departure or in the country of destination. The amount of security is determined based on the amount of customs payments. Yes, as is usually the case when any international agreements are adopted, they try to convince us first of all that it is beneficial for our country. 

In theory, the ratification of the document should contribute to the development of the union’s transit potential by simplifying certain customs procedures. However, it is noteworthy that the approval of the document takes place against the background of the current geopolitical tension caused by the Russian-Ukrainian military conflict. And, apparently, it was not in vain that the speaker of the Senate Maulen Ashimbaev made a reservation that “the signed agreements can be changed in the course of their operation, and if they are unprofitable for Kazakhstan, then the issue of revision will need to be raised during negotiations with foreign partners.”

Seemingly good goals

The current agreement is the next step towards the formation of a common financial market within the EAEU. However, in the opinion of an unprofessional economist, if a common financial market is created, the question of creating a single currency within the union will inevitably arise, and this, of course, will not be tenge or dram, but the ruble, the idea of ​​​​which with varying degrees of ignition and fading is promoted by Russian financiers and economists. And this, in turn, will lead to the question of the status of Kazakhstan as a sovereign state.

All this is covered up by the main stated goal of the EAEU with outwardly good intentions: the proclamation of economic integration and overall economic stability. However, if we look closely at the trade statistics of the EAEU, we will see that within the framework of this union, basically all economic ties are concentrated in Russia. And it is in the EAEU that the Russian Federation accounts for a significant share of the total regional gross domestic product and total exports of goods and services.

At the same time, the belligerent country itself is under unprecedented sanctions pressure, and from this fact the EAEU member countries are obliged to draw deep conclusions, first of all, so as not to become a risk factor due to the threat of so-called “secondary sanctions”. By the way, American emissaries spoke quite transparently about the latter during their spring visits to Astana, in particular, Assistant Secretary of the Treasury Elizabeth Rosenberg, and before her, Secretary of State Anthony Blinken. 

not in our favor

Ever since the establishment of the Customs Union first, and then the EAEU, many experts have warned about the unprofitability of this union, when the game is mostly one-sided. Let’s look at some of the reasons why participation in the EAEU does not seem to be beneficial for Kazakhstan.

  • Redistribution of sales markets. Kazakhstan is a country focused on the export of raw materials. Accession to the EAEU has reduced the economic independence of Kazakhstan, as Russia and Belarus have become the main recipients of Kazakh export goods, which means a redistribution of sales markets.
  • Various economic conditions. Russia and Belarus are large producers and exporters of many types of products, their economies have some features, such as cheap energy and raw materials, which lead to significant differences in the competitiveness of products.
  • Remaining focused on the export of commodities. Joining the EAEU slows down the development of domestic production and encourages the export of high value-added products, since the export of unprocessed natural resources will always be more profitable.
  • Problems in trade relations with EAEU member countries. During negotiations at the EAEU level, disagreements occur on a number of economic issues, which reduces the trade potential of Kazakhstan within the union and increases uncertainty for companies operating in Kazakhstan. Of course, we remember every now and then emerging “trade wars” between partner countries in the union.

In addition to the above:

  • Restrictions on freedom of choice. Within the framework of the EAEU, decisions on trade, economic and foreign policy issues are made at the level of the collegium of the Eurasian Economic Commission, which operates on the principle of unanimity. This means that Kazakhstan cannot independently make decisions in such important areas as the economy, trade, and politics.
  • Small market. The EAEU consists of only five countries, resulting in a very small overall market. This limits the ability to export Kazakh goods and services to other markets and makes it dependent on Russia.
  • Restrictions on the freedom of movement of people and capital. As part of the EAEU, there are customs barriers that restrict the freedom of movement of people and capital. This makes it difficult for business cooperation and investment in the economy of Kazakhstan from the participating countries.
  • Low level of competition. Due to restrictions on international trade in the EAEU, competition is decreasing, which makes it difficult for the economies of the participating countries to develop.
  • Barriers in the service market. Most of Kazakhstan’s economy is in the service sector, but there are many barriers to this sector in the labor markets, tourism, etc. And the declared scope of the movement of resources and services always rests on the local laws of the host country.

It’s time to decide

In any case, whether now or in the foreseeable future, the presence of Kazakhstan in the EAEU will one way or another stumble primarily on the political aspect, relegating economic issues to the background. Consequently, the country’s economy will not receive the necessary volume in the development of goods and services, since everything will rest on the current toxicity of Russia – the core and initiator of this union. And isn’t it better to transfer sluggish economic relations to a bilateral basis and agreements? Since for the second decade now we have seen that the Eurasian Economic Union has not proved and most likely will not prove its effectiveness and profitability for our country.

Source: ULYS Media