Results of the Meeting of the EAEC Interstate Council

A meeting of Prime Ministers of the Russian Federation, the Republic of Belarus and Kazakhstan was held on May 21, 2010. The regular session of the EAEC Council at the level of prime ministers considered introduction into effect of a number of international agreements which form a contractual and legal base of the Customs Union.


Such documents include, in particular, the Agreement of December 12, 2008 on the Rules of Determination of the Origin of Goods fr om Developing Countries and Less Developed Countries; the Agreement of January 25, 2008 on the Unified Rules of Determination of the Country of Origin of Goods; the Record of December 11, 2009 on the Procedure for Exchange of the Statistical Data on Foreign Trade and Statistical Data on Mutual Trade; the Record of December 11, 2009 on the Status of the Customs Statistics Center of the Customs Union Commission; the Agreement of January 25, 2008 on the Principles of Charging of Indirect Taxes in Exporting and Importing of Goods, Fulfillment of Jobs and Rendering of Services in the Customs Union as well as records thereto; the Agreement of January 25, 2008 on Application of Special Protection, Antidumping and Compensation Measures to Third States and other.

However, Russia, Belarus and Kazakhstan failed to come to agreement on some specific parameters of economic cooperation within the Customs Union (CU). Due to that, the Customs Union will not be able to function in full from July 1, 2010 as it was earlier planned. That stage was determined in haste; for formalization of a large number of legislative documents and approval of large number of commodity items rather tight deadlines were set.

The most sensitive issue which failed to be resolved was the agreement on application of export duties on oil delivered from Russia to Belarus, the agreement on cars import duties payable by individuals, the agreement on aircraft import duties and the agreement on the import quotas of goods brought in by individuals. If the above documents fail to be ready by July 1st the Customs Code of the Customs Union will come into effect, but issues regulated by those documents will remain at the level of national legislations of the Customs Union’s member states.

Russia which has introduced 25% import duties on new cars and prohibitive duties on used cars insists on high import duties on foreign cars, while Belarus wh ere such duties are much lower claims that such a measure will deal a blow at its people. The privileged regime of car imports to Belarus will pose a threat to the Russian automotive market because there are no customs borders between the two countries. The potential of “grey” imports from Belarus is estimated at 200,000 units a year. 

A similar situation can be seen with aircraft industry. Minsk and Astana propose annulment of import duties on such products, while the Russian authorities after introducing a short time ago protective barriers have launched restructuring of aircraft manufacturing plants in order to raise their competitive edge. 

In its turn, Belarus demand annulment of oil and petroleum products import duties introduced by Russia earlier this year. Late in January 2010, after a long dispute Moscow and Minsk signed an agreement on oil deliveries to Belarus. Lack of such an agreement posed a threat to transit of oil from Russia to Europe. Under that agreement Russia is obligated to deliver without duties 6.3 million tons of oil and another 15 million tons to be used by Belarusian refineries for production of petroleum products for export with 100% export duty, while earlier Belarus used to pay only one-third of that amount. Simultaneously, Russia started to charge export duties on petroleum products in its trade with Belarus.

Belarus claims that within the framework of the Customs Union all the deliveries are to be duty-free, while Russia is seeking to take the issue of duties on oil and petrochemicals beyond the framework of the new entity.

The dispute between Moscow and Astana concerns the existing Kazakh norm under which individuals may bring in the country up to two tons of foreign goods at a lower customs rate of Euro 0.6 without limitation of the number of such deliveries. Kazakhstan insists on preservation of that norm, while Russia believes that it may cause damage to the Russian light industry due to the influx of Chinese goods.

Within the next two weeks the prime ministers of the above countries are to find a compromise. The history of all integration unions is rather complex, and all such issues have never been resolved fast. It is to be remembered that formation of the customs union of the European Union’s member-states took a long period of time and at its initial stages it concerned only individual sectors of the economy.

The origin of the customs union of the EU dates back to 1950s. To some extent, it can be found in the Treaty on the European Coal and Steel Community (ECSC, 1951). The customs duties in the mutual trade between the six founder-states (Belgium, Italy, Luxemburg, the Netherlands, France and West Germany) as regards coal, iron ore and scrap iron were abolished from February 1953, while customs duties on steel, from May 1953. In the same period, rates of customs duties on such goods of the ECSC nomenclature as were brought in from third countries were unified.  

From January 1959, the Treaty on the European Atomic Energy Community (Euratom, 1957) abolished all the customs duties and other import and export charges, as well as quantitative limitations in trade between its member-states in nuclear cycle products. 
It was only the Treaty of Rome on the European Economic Community (from 1992 the official name – the European Union) which pursued the goal of establishment of a full-fledged customs union which would cover the entire trade in goods. The treaty provided for abandonment of import and export duties and any other duties in mutual trade between member-states, as well as replacement of national tariffs by a single customs tariff. Also, it called for pursuit of common trade policies in relations with third countries.

Under the Treaty of Rome, a switchover to the full-fledged customs union was planned to be carried out stepwise – from January 1, 1958 to January 1, 1970. The text of the treaty specified the deadlines of the beginning of each stage, as well as the goals thereof. The actual switchover was carried out a year and a half earlier, by July 1, 1968 which fact can be explained by a favorable economic situation in the European Community, as well as the member-states’ great interest in establishment of such a union.  

N.P. Volovik, Head of the Laboratory of Foreign Economic Activities