Trade Negotiations: Geo-economics and Geopolitics

Trade negotiations have been increasingly used as a
political tool. This is the first thing that comes to mind when one is
trying to understand what is happening around the trade war unleashed by
the administration of Donald Trump practically on all fronts: against
the EU, China, Russia, Mexico and Canada.

On the eve of a visit to Washington of the European Commission
President Jean-Claude Juncker, Donald Trump suggested that the EU, at
the same time as the USA, abandon customs duties, barriers and
subsidies. He said in his Twitter account that he suggests this because
they will refuse just the same …

The visit ended with the conclusion of a trade deal, including the
deal on duties on car industry products, but the question remained: of
course, geo-economics and geopolitics are strongly interrelated, but is
it permissible to use trade negotiations as an instrument of political
bargaining, and why do we increasingly see this?

Just before Junker’s visit the European Union and Japan signed
world’s largest free trade agreement, the volume of which is estimated
at one-third of the World gross product (GWP), and which directly
affects about 600 million people. In contrast to the actions of the
Trump Administration, which recently tightened import tariffs, this was
seen as an important step in protecting free trade.

It was also reported that the European Commission is completing
negotiations on the establishment of a free trade zone (FTA) with
MERCOSUR, which in its scale can exceed the FTA with Japan (the members
of this trade and economic union account for 250 million people and over
75% of Latin America’s total GDP ). Again, the question arises: is
there still an immediate political context here, since the negotiations
on the establishment of the FTA have been going on for years, if not for
decades, and why is it announced right now about their triumphant
conclusion?

The USA has a recent experience of large-scale trade negotiations,
the politicization of which ended in a fiasco. The issue is the
establishment of the Trans-Pacific Partnership (TTP), which implied the
borders expansion and the deepening of interstate agreements on the
unification of the legal field. It was planned to supplement the
agreements on the liberalization of trade in goods and services under
the norms of free trade agreements with the legal regulations on
investment, innovation exchanges, protection of intellectual property,
labor relations, management of migration flows, environmental standards
and competition standards.

The USA tried to involve many Asian and Pacific countries in the
creation of the TTP, but China, the main economic entity in Asia, was
excluded from this union. For China, with its state protectionism in
sensitive industries that provide economic growth and employment (and
therefore important for political stability), the conditions of the TTP
were initially unacceptable. Beijing, not without reason, suspected that
the USA wanted to create a trade bloc in Asia without the participation
of the PRC in order to kick China out of integration processes. That’s
why China has tried to create an alternative to the TTP by promoting its
project – the Regional Comprehensive Economic Partnership (RCEP).

As we recall, Donald Trump “buried” the TTP as a legacy of Barack
Obama, and now this partnership under the “TTP Plus” brand is already
living its life without the participation of the United States. The main
thing is that after the TTP deal any other initiative of this kind (for
example, the idea of the Indo-Pacific partnership) automatically raises
fears among its potential participants: whether they will be drawn into
confronting China, whose trade and economic relations are so important
for many countries in South-East and South Asia.

The experience and lessons of US trade negotiations are, of course,
important for Russia, but mainly in “how not to do.” In the same
Asia-Pacific region, a large number of trade agreements operate,
differing in the depth of liberalization and in the number of
participants, which creates the potential danger of dividing the region
into separate competing associations. Therefore, for Russian
participants in trade negotiations, the choice is unambiguous: to avoid
their unnecessary politicization and to act on the basis of transparency
and openness, with mutual consideration of the interests and
capabilities of the parties, by relating any possible agreements with
the multilateral trading system of the WTO.

Russia’s participation in the negotiations on the creation of free
trade zones and integration projects is determined by its long-term
geo-economic and geopolitical considerations, and at present, when
Russia is in search of an “entry point” to this process, the latter can
be assessed as the most relevant.

Equally, and perhaps even more important for Russia is the fact that,
unlike such trade and economic “giants” as the United States and China,
it is now not so much interested in the development of liberalization
of regional trade (trade liberalization), as in the strengthening of its
transparency and trade-economic interconnection (trade facilitation),
the creation of a fair, stable and balanced trade and economic system,
including in Eurasia and the Asia-Pacific region, which responds to the
priorities and development level of the Russian economy, especially its
export-oriented commodity-producing industries.

That is why Russia has taken a course in upholding the priorities of
transparency and interrelatedness of trade and economic relations since
this is what helps it become an active and interested participant in the
discussion of new rules for regional and world trade.

Such a course is consistent with the long-term geo-economic and
geopolitical interests of Russia, primarily in such a priority area as
Eurasian integration and the development of the Eurasian Economic Union
(EEU).

And here it is necessary to remember the lessons of the recent past
connected with excessive politicization. The intensification of Russia’s
and the EU policy towards the countries of the region of their “common
neighborhood” led to the fact that some of them (Ukraine, Georgia,
Moldova) were faced with a tough choice in favor of the priority
development of relations with the EU or the Eurasian association. In a
number of countries, this has greatly reduced the opportunities for the
traditionally conducted by their governments maneuvering strategy
between Moscow and Brussels and led to an internal political escalation.

In Moscow, this was well understood, and there were no contradictions
between the processes of Eurasian integration and the development of
relations with the European Union, if the EEU and the European Union
began to base their interaction on the principles of free trade and
compatible regulatory systems.

However, the European Union held the view that the obligations within
the framework of the Customs Union exclude for its members the very
possibility of introducing a free trade zone (FTA) with the European
Union – in contrast to the CIS Multilateral Free Trade Zone (based on a
treaty signed in October 2011 by Kazakhstan, Russia, Byelorussia,
Kyrgyzstan, Tajikistan, Armenia, Moldova and Ukraine), which does not
presuppose the work of supranational bodies. From Moscow’s point of
view, such obstacles can be lifted if one follows the path of
establishing an FTA between the EU and the EEU.

In the article published by the German newspaper  “Süddeutsche
Zeitung” in November 2010, Vladimir Putin (at that time the Russian
prime minister) put forward a long-term plan for the construction of a
free trade zone between Russia and the EU (by the way, at that time the
World political vocabulary acquired the term “conjugation”).

Unfortunately, this idea, dictated by absolutely economic logic, was
coolly received in European political circles, and the reply from
Brussels was, not without political arrogance, that the EU’s relations
with the above countries do not require Russia’s participation. Show
Europe then a little more foresight, many undesirable events in the
post-Soviet space could have been avoided …

Russia is still trying to convince its partners to abandon the
opposition of European and Eurasian integration in favor of conjugating
both projects. So far, unfortunately, neither the post-Soviet
integration, nor the EU is consistent with these aspirations.

However, the dynamic development of integration processes in the
Asia-Pacific Region offers Europe and Eurasia a new challenge. Given the
geographical situation of the post-Soviet countries between Europe and
Asia, the development of infrastructure networks and cross-border
transport projects with access to China and other countries, the APR
would create conditions that would ensure a more favorable external
environment for the conjugation of Eurasian and European integration and
strengthen the competitiveness of these integration entities.

And here economic logic would help to gradually overcome political
contradictions. The solution of the accumulated geopolitical problems
could be the creation of a common free trade zone of the EU, the EEU,
Ukraine and other Eastern Partnership countries associated with the EU.
However, in addition to political will, it takes time to solve a large
number of purely economic and technical issues. Effectively, such a
project can be facilitated by the fact that all the countries involved
are either WTO members or are planning to become them in the near
future.