Alaxander Knobel: It is Feasible to Increase Economic Growth Rates through Promotion of Foreign Trade Efficiency

One of the topics of the expert discussion “The Economic Networking with Trade Partners as a Source of Russian Economic Growth” at the 9th Gaidar Forum was dedicated to identification of Russian economic growth drivers in the foreign trade. The moderator of the discussion was Alexander Knobel, Head of the Foreign Trade Department, Gaidar Institute.

At present, higher economic growth rates can be achieved, in particular, through promotion of efficiency of networking with international partners. To make non-resource-based exports grow, integration process inside the Eurasian Economic Union and with far-abroad countries more active and trade procedures less complicated amid current global integration turbulence, a well-defined strategy for promotion of Russian foreign economic activities is needed.

Participants in the discussion tried to answer the following questions: what are the most prospective lines of development and promotion of exports today; is the current freezing of mega regional initiatives a pause or a new norm; is it required to reset the Eurasian integration project; are there any ways of promoting the export potential of the Eurasian Economic Union as an integration alliance; what trade agreements does the Russian economy need; how strong is the effect of sanctions and countersanctions on the Russian economy; what is the interest of the business in the integration policy issues; what is the role of international standards in the development of the external sector.

Reports were delivered by the following speakers: Natalia Volchkova, Professor, New Economic School; Sergei Afontsev, Head of the Economic Theory Department, Institute for International Economy and International Relations, RAS; Ulf Schneider, General Director, SCHNEIDER GROUP; Andrei Lipin, Deputy Director, Monetary Policy Department, RF Central Bank; Anastasia Stepanova, Coordinator of the Challenges and Prospects of the Broader European and Eurasian Economic Space Research Project, IIASA, Austria; Vladimir Pereboeyev, Head of the Center for Integration Studies, Eurasian Development Bank; Natalia Volchkova, Professor, New Economic School; Matthias Shepp, Board Chairman, Russian-German Foreign Trade Chamber.

In his report, Ulf Schneider compared the integration in the EU and the Eurasian Economic Union and singled out the points of possible cooperation, saying that the EU had advantages in technology and industry, while the Eurasian Economic Union, in natural resources and information technologies.

Ulf Schneider’s report dealt mostly with development of the single economic space from Lisbon to Vladivostok. The speaker stressed that as abolishment of all customs duties was unlikely at the current stage, it would be expedient to focus on the following three main issues: simplification of customs procedures, harmonization of technological norms (primarily standards and certificate issuing procedures) and establishment of a visa-free regime.

In his report, Andrei Lipin touched upon the prospects and risks of internationalization of the rouble, that is, the national currency’s entering the international market. The speaker stressed that the share of the Russian Federation in the international trade amounted to less than 1%. The share of

the rouble in the trade with the Eurasian Economic Union (EEU) was equal to 10%, while in the mutual trade with the EEU, to over 70% (mainly bilateral trade with the Russian Federation). The effect related to inclusion of the RF on the currency market of other EEU member-states can be considerable because the rouble will perform all the functions of the regional currency through imports and exports contracting in roubles.

Sergei Afontsev spoke about the outputs of the research carried out by the Institute for International Economy and International Relations into the effects of global integration processes and initiatives on global economic growth. According to Sergei Afontsev, there are two factors which have an impact on the global trade integration:

The dynamics of integration processes can hardly be forecasted due to high volatility of the political agenda and its domination on economic interests;

There is a clear trend of reduction of the ratio between the global trade growth rates and the global economic growth rates.

The expert touched upon Russia’s potential in non-resource-based exports: both acceleration of the integration with the EU by 2025 and establishment of free trade zones in the Asian-Pacific Region were expected to promote GDP growth rates by 0.2%-0.25% in the long-term prospect.

Natalia Volchkova emphasized the importance of development of the non-resource-based exports both in terms of increasing the stability of consumption in the course of time and in terms of achieving higher efficiency on the back of redistribution of resources in favor of more effective sectors and enterprises. Natalia Volchkova stressed that Russian non-resource-based exports had a great potential for growth through expansion of geography and the range of products of large and mid-sized exporters. For exporters, the access to import component parts was of crucial importance and the trade policy should take this factor into account.

The integration strategy of the EEU and Russia should be aimed at establishing closer relations with countries with large sales markets and countries with a low cost of high-tech goods production. For Russia, the importance of the EEU project consists mainly in indirect effects related to gaining the experience in building integration processes, rather than direct effects from closer networking with EEU partners.

In his turn, Vladimir Pereboyev stressed that the trade integration alone was not enough for the EEU. The states should develop strategic measures of development at the level of supranational authorities in the fields of business, investments, infrastructure development and foreign trade policy. The promising lines of cooperation between the EEU and third countries are the following: 1) promotion of foreign economic ties; 2) industrial cooperation; 3) near-border cooperation.

The foreign economic policy priorities should include establishment of free trade zones and formation of mega regional treaties (with China, the ASEAN and the SCO in the near-term prospect and later with the EU). In the years to come, it is necessary to expand the set of tools of the EEU’s foreign economic cooperation, that is, measures to underpin non-resource-based exports and measures to support investors.

In this context, the Eurasian Development Bank could act as a multilateral financial institution and “anchor lender” for support of the countries’ joint projects. Promotion of non-resource-bases exports is infeasible without industrial cooperation of the EEU member-states with third countries. It is important to create new production chains and industrial sectors and develop jointly new innovative types of export-oriented products.

Also, it is important to link together a unified trade policy within the limits of the EEU, industrial cooperation and R&D policy coordination. In the advanced sectors, it would expedient to establish holdings or joint ventures of transnational companies (the space industry, the metallurgy, the chemical industry, production of fertilizers, power engineering, truck manufacturing, helicopter engineering, the aircraft industry, the agriculture and the grain-growing industry).

Establishment of transnational companies could become instrumental in reviving broken technological chains. Near-border cooperation, for example, formation of international functional regions along borders of adjacent states could promote this process further. It is necessary to work out a strategy of joint development of border regions to define the priority lines of cooperation and support to be rendered to joint projects (soft-term financing and establishment of free economic zones). Such projects should be required to promote commercial and production ties to enhance the export potential and ensure higher diversification as regards both the product range and geographic coverage.

Anastasia Stepanova’s report was based on the outputs of the project: “Challenges and Prospects of the Broader European and Eurasian Space” carried out by the International Institute for Applied Economic Analysis. The project’s main result was establishment of a common venue for researchers from different countries and representatives of international organizations to discuss at large integration issues.

Within the project’s framework, research was carried out into a broad range of lines and important issues, such as foreign direct investments, non-tariff barriers and transport infrastructure were identified. Also, it was stated that officials and business representatives took a considerable interest in economic integration between the European Union and the Eurasian Economic Union. It was specified that despite the completion of the first stage of the project it was planned to expand the formed expert community within the framework of implementation of the project’s second stage.

Presentation to the reports:

U. Shnajder. EU and EAEU – Trade as growth factor
A. Lipin. Internacionalizaciya rublya: perspektivy i riski
S. Afoncev. Regional'nye iniciativy: upushchennye i obretennye nadezhdy
N. Volchkova. Problemy razvitiya nesyr'evogo ehksporta
A. Stepanova. Challenges and Opportunities of Economic Integration within a Wider European and Eurasian Space