Perspectives | Russia’s (not so free) trade agenda

Perspectives | Russia’s (not so free) trade agenda
Non-tariff barriers ahead.
By Aruzhan Meirkhanova for Eurasianet October 19, 2021

Russian words and actions are diverging on Eurasian integration. President Vladimir Putin recently outlined a grand integrationist vision for the region, but on a basic level, Russia is hindering regional cooperation with the selective and rigid application of trade regulations.

Russia’s treatment of food exports in recent weeks from Central Asian states, especially Kazakhstan and Kyrgyzstan, highlight the dichotomy between Moscow’s expressed desire for closer economic ties and how it hampers commerce. All three states are members of the Eurasian Economic Union (EEU), a Russian-dominated regional organisation established in 2015 ostensibly to facilitate regional trade.

During the first two weeks of September, 475 tonnes of agricultural products destined for Russia’s Orenburg Region – including dried fruits, beans, vegetables, nuts and rice – were rejected by customs officials and returned to Kazakhstan and Kyrgyzstan. Citing improper labelling and invalid phytosanitary certificates, among other things, Rosselkhoznadzor, the Russian agricultural regulatory agency, deemed the imports to be in violation of EEU standards. A few days later, the agency barred the import of 65 tonnes of “high-risk” Kazakhstani and Kyrgyz agricultural products headed for the Altai Region, again citing invalid certification. These decisions followed the rejection of 72 tonnes of Kazakhstani plant-based products bound for Astrakhan due to “improper labelling.”

Exporters are responsible for complying with EEU export-import regulations. At the same time, the frequency with which the Russian food regulator blocks products from EEU neighbours makes it clear the system isn’t working efficiently. The unanswered question is why? Some experts wonder if Russian regulators are making things more difficult than necessary.

Russia’s strict regulatory stance within the EEU seems to work at cross-purposes with Putin’s views voiced during a September 17 meeting of the Shanghai Cooperation Organization (SCO). The Russian leader called for a “Greater Eurasian Partnership,” involving the closer cooperation of EEU and SCO members, as well as other nations in East and South Asia.

“The convergence of various integration processes in Eurasia and establishing a common space of open, equal and mutually beneficial cooperation meets the interests of all our countries," Putin said. 

The EEU’s regulatory obstacle course has hampered trade from the start. In May, a top Eurasian Economic Commission official proudly claimed that the union had eliminated 81% of trade restrictions between 2016 and 2020. Yet, the reality on the ground is less impressive. As old barriers are lowered, new hurdles appear. Almost half of the 58 obstacles to free trade recorded in this year’s registry have resulted from complaints about sanitary and phytosanitary measures, technical regulations, and other forms of non-tariff barriers (NTBs).

Writing for Kapital.kz in August, Yevgeniy Vinokurov, chief economist at the Eurasian Development Bank, argued that NTBs pose a greater hinderance to EEU trade than moderate custom tariffs. Yuri Kofner of the Institute for Market Integration and Economic Policy in Munich estimated that NTBs increase the cost of trade by 32%. At the same time, Kofner told Izvestia that the number of non-tariff barriers has fallen from 71 to 59 since 2019.

The founding EEU treaty allows members to enforce sanitary and phytosanitary measures, provided the rules are applied evenly. However, member states have occasionally reverted to manipulating stringent and divergent standards, using them as cover for protectionist motives. In particular, Rosselkhoznadzor has a record of weaponising such regulations to limit foreign competition and shield local producers.

For instance, in 2018, the Russian agency played a leading role in the “dairy wars” between Russia and Belarus. The temporary ban for dairy imports from Belarus was announced almost immediately after then-prime minister Dmitry Medvedev visited Tatarstan and emphasized the need to support a local producer. Eventually, the EEU Commission concluded that the Russian agency improperly applied union regulations.

Last December, Rosselkhoznadzor temporarily restricted the import of Kazakhstani tomatoes and bell peppers supposedly infected with a fruit virus. After domestic and foreign labs failed to detect the virus, Kazakhstan’s Trade Ministry threatened retaliatory action. Eventually, the EEU Collegium called on Russia to lift the ban.  

While Russia’s EEU actions can rankle its neighbours, Central Asian officials remain committed to the regional trade organisation. In March, Kazakh Trade Minister Bakhyt Sultanov acknowledged various problems within the EEU but concluded that the “benefits, both economic and non-economic, outweigh” the EEU’s present disadvantages.

Russia’s commitment to promoting free trade within the EEU remains open to debate. The Kremlin projects a preference for integration, but Rosselkhoznadzor’s repeated import blocks, the persistence of non-tariff restrictions and the sluggish pace of harmonisation attest to the contrary.

Aruzhan Meirkhanova is a master’s student at Harvard University’s Davis Center for Russian and Eurasian Studies. 

This article originally appeared here on Eurasianet.

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