Prospects for Free Trade Between the Eurasian Economic Union and the European Union After the Sanctions

Abstract

With growing US protectionism and uncertainties in the transatlantic relationship it is time for the EU to consider diversifying its external ties and look for other allies that support the idea of free trade gains and have a common interest in maintaining the international rules-based trading system. The Eurasian Economic Union (EEU) which shares a common neighbourhood and is a crucial supplier of raw materials interested in getting technology transfer represents a natural trading partner of the EU. While there are currently no political (sanctions against Russia) and legal (Belarus is not yet a WTO member) preconditions for starting free trade negotiations, given the high economic significance and positive security implications such a possibility should be considered. This paper undertakes a comprehensive assessment of the potential welfare effects of a possible future EU-EEU FTA based on the Sussex Framework. Such an analysis provides important information on bilateral trade patterns and insights on the economic implications that would be useful once sanctions are removed and bilateral trade relations normalized. The results show that in the long term the aim should be a deep and comprehensive free trade agreement that goes beyond mere removal of trade barriers which could however be a feasible first step.