According to calculations based on models from the German economic research institute Ifo which were published on Monday 20 February, a free trade area between the EU on one side, and Russia and the other countries of the Eurasian Economic Community on the other (Belarus, Kazakhstan, Kyrgyzstan and Tajikistan, with Uzbekistan being a self-suspended member and Armenia, Moldova and Ukraine being observers) could have economic benefits for all stakeholders.
Such an agreement could generate a 0.2% increase in real income per inhabitant in the EU (or an annual increase in income of €91 per inhabitant), and a 3% increase in real income in Russia (or an annual increase in income of €235 per inhabitant).
The potential gains result from the complementarity of all these countries' economic structures, says Ifo director for the international economy Gabriel Felbermayr, who presented this study at a conference on the common economic space from Lisbon to Vladivostok.
A free trade agreement is hardly conceivable as long as the conflict in Ukraine remains uncertain, but it could form an integral part of a new EU-Russia strategic partnership, Felbermayr states.
For Germany, a free trade agreement with Russia and the other countries in the Eurasian Economic Community could boost export growth by €31 billion. This growth would have to be offset against negative trade diversion effects amounting to €9 billion. These negative effects would be due to higher Russian exports to the EU in sectors like metal products, which would hamper Germany’s exports of such products. Other EU countries may also stand to benefit from a free trade agreement, the Ifo study states.
Ifo's calculations show that this free trade area would strengthen exports from Russia to the EU by around €71 billion. Russian exports to the rest of the world could also increase, due to the availability of cheaper machinery and intermediary products from the EU, which would strengthen Russia's global competitiveness and would give it advantages on third country markets. On a global level, Russian exports would increase by around €77 billion. Other countries from the Eurasian Economic Community would also benefit from this agreement. (Original version in French by Emmanuel Hagry)