India, Russia to negotiate on CECA with Customs Union

Chairman of the Board of the Eurasian Economic Commission, Viktor Khristenko and India’s Union Minister for Commerce, Industry and Textiles Anand Sharma agreed during their meeting in New Delhi on Tuesday to launch negotiations for a Comprehensive Economic Cooperation Agreement (CECA) with the three-nation Customs Union of Russia, Belarus and Kazakhstan to maximize the bilateral trade turnover between India and Russia.

After years of discussions, Russia, Belarus and Kazakhstan formed a Customs Union as a first step towards creating a broader EU-type economic group of former Soviet Republics in January 2010. Russia and India had decided in December 2011 to jointly study the possibility of expanding Customs Union of Russia, Belarus and Kazakhstan and signing a Comprehensive Economic Cooperation Agreement. At the time, Russia was not yet a member of the World Trade Organization (WTO), which posed a major obstacle for the two countries to sign a free trade agreement (FTA) to expand their trade and economic ties.

However, after Russia finally joined the WTO as a member, in August 2012, the door was opened for India and Russia to sign a CECA, to immensely raise the bilateral trade by providing free movement of goods, services, people and investments for the partners.

After Khristenko’s talks with Sharma, an official spokesman said the Customs Union is an important block in the CIS (the Commonwealth of Independent States) from the point of view of the India-CIS trade.

“India is of the view that the need for CECA with the Customs Union is a well established concept. We have expressed our desire to begin the negotiations for it,” Sharma said.

India and Russia signed an MoU in February, 2006 to set up a Joint Study Group (JSG) to assess the “feasibility” of signing a CECA between the two countries. The CECA is much wider in scope than a free trade agreement (FTA) as it not only includes goods, but also services and investments.

Since then, the need for a CECA with the Customs Union has always been recognised and it was conveyed during bilateral meetings held in the past with Russia, Belarus and Kazakhstan. India's total trade with the Customs Union countries was $6.5 billion in 2011 which increased to $7.4 billion in 2012.

Sharma also told Khristenko of India’s interest in creating a Joint Study Group for the negotiations of the CECA between India and the Customs Union.

The two sides also agreed to discuss the Terms of Reference for the JSG, composition of JSG and fixing the time-frames for the submission of the JSG report in June 2013, when Sharma visits St Petersburg for the International Economic Forum.

Khristenko told reporters that the meeting in June in St Petersburg was expected to consider and take final decision on all possible issues concerning the signing of a CECA. In order to clinch the consensus over the CECA, the possibility of meeting between Ministers from Russia, Belarus and Kazakhstan is also being explored.

Ever since the idea of a CECA between India and the Customs Union first came into being in December 2011 after summit-level talks between then President Dmitry Medvedev and Prime Minister Manmohan singh in Moscow, the negotiations over it have been moving at a snail’s pace.          

In order to achieve the strategic target of Indo-Russian annual trade turnover to $20 billion by 2015, the negotiations now are going to be started with more speed and vigour for the signing of a CECA, according to the head of the Eurasian Department in the Ministry of External Affairs, Ajay Bisaria. India has already signed or is negotiating FTAs or CECAs with several trading blocks and countries. Similarly, the three-nation Customs Union has also held FTA talks with Vietnam.

According to the official Russian trade figures, published in February, India-Russia bilateral trade, which stood at $7.46 billion in 2009, $8.53 billion in 2010, and $8.87 billion in 2011, has spurted to $11.04 billion in 2012, registering a 24.5 percent growth in 2012 compared to 2011.

In the run up to the Khristenko’s visit to New Delhi, India’s Ambassador to Russia, Ajai Malhotra said substantial economic opportunities have opened up that would facilitate the strengthening of Indo-Russian trade and economic ties, following Russia’s entry into the WTO. “Our aim is to start negotiations for entering into a Comprehensive Economic Cooperation Agreement with the Customs Union,” Malhotra said. “This would lead to the removal or lowering of tariff barriers, greater market accessibility to goods and services, besides increased and diversified investment opportunities for businesses on both sides.”

However, experts in Moscow believe that despite urgency of gearing up the negotiations for the CECA by Russia and India, the final agreement may still be far away. First of all, two members of the Customs Union-Belarus and Kazakhstan-have not yet joined the WTO. Belarusian Deputy Foreign Minister Alexander Guryanov told reporters on Tuesday that Minsk could join the WTO in 2015 if negotiations go well.

“Kazakhstan, judging by everything, will resolve this issue by the end of this year. We, if we pick up the pace, could join the WTO by 2015,” Interfax news agency quoted Guryanov as saying at a press conference.

He said that the main barriers to WTO accession for Belarus are bilateral negotiations with the United States and the European Union. “We need to complete a large amount of bilateral negotiations, including the United States and the EU - these are very difficult negotiations,” Guryanov noted.

Recently, WTO Director-General Pascal Lami also said Kazakhstan may join the world trade body in 2013. However, he added that Belarus was at a less advanced stage of WTO negotiations and could not specify a time-frame for its entry into WTO.

The Customs Union is also hamstrung by differences among its members. Whereas Russia and Belarus feel quite comfortable within the framework of the Customs Union,  Kazakhstan last month claimed it is being forced to manoeuvre between its stronger neighbours’ trade protection policies.

Officials in Kazakhstan seem to attribute their less than encouraging macroeconomic situation to both domestic problems (imperfect legislation and products unable to compete on external markets) and the protectionist barriers installed by Russia and Belarus.

Dadan Upadhyay is an Indian journalist based in Moscow.

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