CONSEQUENCES OF ASYMMETRIC DEEPER EURASIAN ECONOMIC INTEGRATION

Arman Mazhikeyev and Terence Edwards

No 8365, EcoMod2015 from EcoMod

Abstract: A period of new Eurasian Regional Integration has already begun in parts of the For- mer Soviet Union. Following the experience of European Union, the `troika' (namely, Kaza- khstan, Russia and Belarus) are working toward establishment of a Eurasian Union. The troika have taken serious steps, in a speedy manner, toward the formation of an Eurasian region (the Eurasian Customs Union, the CIS Free Trade Agreement, and the Single Eco- nomic Space, and the Eurasian Economic Union). However, whether all the members and the entire region will achieve the gains from fast EU like integration and the union will be marked as successful one is yet being questioned. Studies believe that the union has more of a political rather than an economic motivation, that could result in negative economic externalities rather then gains.This study attempt to assess the impact of asymmetry and symmetry in bargaining in deeper Eurasian regional integration. The analysis carried out using the modern multi- country multi-sector CGE approach with suitable specications with a number of trade costs measures using the gravity concept. The novelty in this study is the use of implicit trade costs obtained using Overall Trade Cost Index (Novy [69]) which then has been decomposed into policy (tari and non-tari), non-policy (markups and value added costs) and transport costs econometrically. We rstly performed shallow integration scenario simulation with actual changes in tari rates from 2009 to (expected rates for) 2015 of the troika, rest of CIS and aggregate ROW multilaterally. Further we used Overall Trade Cost Indices for EU and CIS countries from the WB-ESCAP trade costs database to make assumptions regarding multilateral changes in NTBs, border, transport and other costs in two deeper integration scenarios of equal and unequal (bias toward Russia) treatment of members.Based on the results of simulation work, we can conclude that if there will be equal treatment of members of the new integration, the members will likely benet from the gains and positive externalities of deeper integration in the future. However, if we take account of the Russian bargaining power and future asymmetric treatment of members, smaller members Kazakhstan, Belarus, plus other joiners are less likely receive expected gains. This work does not take account of other changes in policies (Russia's WTO assessment, sanctions against Russia by the Western Bloc, impact of situations in Ukraine-Russian borders etc.) but changes in trade costs (NTBs, taris, transport and border costs and value added costs).

Keywords: UK; Modeling: new developments; General equilibrium modeling (CGE) (search for similar items in EconPapers)
Date: 2015-07-01
New Economics Papers: this item is included in nep-cis, nep-cmp, nep-cwa and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:ekd:008007:8365

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