Valdai Club Regional Conference in Singapore. Session 2. Toward The EAEU-ASEAN Free Trade Area: Opportunities and Restrictions

13.12.2016

In the beginning of the conference's second session, dedicated to the EAEU - ASEAN free trade zone, Viktor Larin, Director of the Vladivostok-based Institute of History, Archaeology and Ethnology of the Peoples of the Far East, Russian Academy of Sciences, suggested that one of the surprises awaiting the development of the world and the Asian region, may be the establishment of a free trade area between ASEAN and the EAEU. Recalling the skepticism of many experts about the prospects of such cooperation, Larin said that despite the difficulties in the implementation of this initiative, it can be regarded as quite achievable.

Sergei Afontsev, Director of the Economics Department, Primakov National Research Institute of World Economy and International Relations (IMEMO), believes that geopolitical interests of the states significantly influence the formation of economic blocs in the region. In particular, he drew attention to Donald Trump's words about his dissatisfaction with the United States’ role in the Trans-Pacific Partnership in its existing form and his intention not to participate in such kind of integration. Afontsev outlined common interests of China and Russia in the region: whereas China is committed to a comprehensive economic partnership, Russia advocates the establishment of a free trade zone on the SCO basis. He expressed confidence that with less geopolitics in the formation of trading blocs more real business needs will be taken into account.

Among the challenges for the signing of a free trade zone agreement between the EAEU and ASEAN, Afontsev pointed to the divergence of interests of various ASEAN states, the complexity of negotiations with a group of countries, the nature of the EAEU as a customs union. However, there are many formats of negotiations where such cooperation is feasible and promising. Finally, Afontsev refuted the idea that only Russia and the EAEU are interested in such cooperation: according to him, in most cases the initiators of economic cooperation agreements are third countries, such as Vietnam, Singapore, Korea, Israel and others.

Chen Kang, Professor and Director of Master in Public Administration and Management programme (MPAM) and Chinese Executive Education Programmes, Lee Kuan Yew School of Public Policy, National University of Singapore (NUS), focused on three aspects of the problem. First, Russia is a major player within the EAEU, but it is not adequately represented in the Asia-Pacific region, and is not yet a major regional trading partner, in contrast to China and other countries. The reasons are high costs of transportation, the distance between Russia and the region, the language barrier, as well as different legal and regulatory framework, which is directly connected with the investment business climate. According to Chen, the weak development of the Russian Far East, population decline and poor infrastructure also make the region unattractive to investment from the Asian countries. He also urged not to regret much that the formation of TPP is over and expressed doubt that it is a "free-trade agreement of a new era." Chen urged to wait for the results of new cooperation negotiations between the EAEU and ASEAN, which, as he thinks, will move in the right direction.

Lee Jae-Young, Vice President of the Korea Institute for International Economic Policy (KIEP) stressed the active ASEAN cooperation on the level of bilateral negotiations with neighboring countries, citing as an example the ASEAN + 6 formula. At the same time, the EAEU, according to Lee, is a relatively new player on Eastern and South-East Asian markets, and the only country with which it officially cooperates is Vietnam. The rate of trade volume growth in the ASEAN countries is three times higher than in the EAEU, while Russia's main economic partner is still the European Union.

However, Lee recalled the negotiations between the EAEU and ASEAN over a number of cooperation agreements and the creation of a new working group. The most important factor in such cooperation between ASEAN and the EAEU is the need to take into account the interests of all member states and participants in the negotiating process. According to Lee, the potential of such cooperation is huge and can become a priority in the framework of trade and economic policies of the region.

During a discussion with the audience, the speakers agreed on the need to create a favorable investment climate and conditions for trade development in the region. Afontsev stressed the need to develop the "state-business" negotiation format rather than "state-state", as well as to eliminate many barriers to do business. Lee agreed with him and called to study the EAEU investment climate to enhance cooperation with ASEAN.

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