Common Market of Goods, Services, Capital, and Labor in the EAEU: Directions of Integration and Further Improvement

Common Market of Goods, Services, Capital, and Labor in the EAEU: Directions of Integration and Further Improvement

Vera Ozhigina (Belarus State Economic University, Belarus)
DOI: 10.4018/978-1-7998-1950-9.ch006
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The chapter examines the stages preceding creation of the common market of goods, services, capital, and labor within the EAEU, evaluates effects and proposes directions of improvement, considering the world experience. Attention is given not only to negative integration (elimination of barriers), but also to positive (signing of agreements, creation of institutions, mechanisms for cooperation, budget management and joint projects). The production cooperation, joint research, and digital economy are also considered. Based on the methodology of system analysis and integration design, the author identified problems of the EAEU common market and proposed aspects for improvement: deepening of negative integration and regulatory convergence; increasing positive integration; combination of integration with development; creation of the common system of protection; redistribution of benefits and costs; strengthening of supra-national regulation; improvement of statistics and monitoring; increasing of budget, stimulating innovations, structural changes, sustainable development and inclusive growth.
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Institutionalism is the most appropriate theoretical approach to Eurasian integration as a whole (Allais, 1959; Balassa, 1961; Tinbergen, 1965; Myrdal, 1963), focused on the dynamic aspects of integration. Later there were interdisciplinary approaches, taking into account political theories, theories of economic growth and development: open (Bergsten, 1997) and new regionalism (Hettne & Söderbaum, 1998).

The theoretical basis of the CM was studied in several works. Thus, Baldwin (2012) studied the effects of the capital and labor CMs. Wooton (1988) investigated the benefits of the CU from the transition to the CM and proved that it depends on the level of the common external tariff. Michael (1992) has proved that the win is achieved only when the level of income taxes is the same for the participating countries, so the tax harmonization is important for the creation of a CM. Nielsen & Hansen (1992) showed that the differences in national direct and indirect taxes could significantly distort trade flows and hinder their development, as well as trade barriers. Pelkmans, Chang & Hanf (2008) conducted a comparative analysis of theoretical approaches to the definition of common (internal, single) market and goals of its formation. They concluded that the markets are integrated if the economic boundaries between them are eliminated and the price indices correlate (prices of goods and services, wages in the labor market, interest rates in the capital market). This chapter fully interlacing this point of view and use this approach as the basis for the analysis of the EAEU CM.

In the world scientific literature, the experience of the EU CM has been studied most widely. In recent publications the most attention is paid to the reform of CM in connection with Brexit (Lawson, 2019), migration crisis (Ludera-Ruszel, 2017) and energy market (Iulia, 2017). Besides, the experience of CM in other groupings is generalized: CARICOM (Gupta & Sahdev, 2018), EAC (Ombudo K'Ombudo, Echandi, Kusek & Polanco, 2014), GCC (Boughanmi, Al-Shammakhi & Antimiani, 2016), MERCOSUR (Sadhna, 2018). Researchers from the EAEU are also interested in the EU experience (Mishalchenko & Alekseev, 2019). Much less often studies are devoted to the experience of CMs in other integrations (Kalinichenko, 2015; Ozhigina, 2017; Kostyunina, G.M., Lomakin, N.N., 2014).

Key Terms in this Chapter

EAEU Common Economic Space: Territory with common mechanisms of economic regulation based on market principles and harmonized legal norms; free movement of goods, services, capital, labor; single infrastructure; agreed economic policy; in a process of realization since 2012.

Negative Integration: Removing barriers and reducing discrimination between integration participants.

International Economic Integration: Interpenetration and merging of national economies into a single system of economic relations, accompanied by the signing of integration agreements, creation of integration blocs, regulated by state and joint institutions.

Positive Integration: Co-creating benefits in the integration process (goods, services, information, knowledge), development of integration institutions.

Integration Policy: Government's efforts to select and implement economic decisions at different levels of integration relations regarding the design of the integration system.

Common Market: Integration stage involving free movement of goods, services, capital and labor.

Eurasian Economic Union (EAEU): International organization of integration between Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia, established in 2014, providing for deepening integration by harmonizing economic policies and further eliminating barriers to the movement of goods, services, capital and labor.

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