Putin to EU: Dump the TTIP and embrace the Eurasian Union

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January 7, 2015

Deutsche Wirtschafts Nachrichten

Translated from German by Tom Winter

Russia has presented a surprising proposal for overcoming tensions with the EU, namely that the EU should renounce the TTIP free trade agreement with the United States and instead enter into a partnership with the newly created Eurasian Economic Union. A free trade zone with your neighbors would make more sense than a deal with the U.S.

Vladimir Chizhov, Russian Ambassador to the EU, surprised with a new proposal: renewal of the partnership between the EU and Russia. Chizhov suggests that the EU stop negotiating with the U.S. on the controversial TTIP free trade agreement, and opt instead to begin negotiations toward entering the Eurasian Economic Union, which came into force January 1.

Chizhov said to the EU Observer: “You really think it is wise to put so much political energy into a free trade agreement with the United States when one has a much more natural trade partner next door right in the neighborhood? At least we don’t treat our chickens with chlorine.”

Chizhov: “Our idea is to take up official contacts between the EU and the Eurasian Economic Union as quickly as possible. German Chancellor Angela Merkel spoke of this not too long ago. The EU sanctions against Russia are no hindrance.” The ambassador expressed that it would be reasonable to establish an ensemble economic space in the eurasian region, in which prospective member states Armenia, Azerbaijan, Beloruss, Gerogia, Moldavia, and the Ukraine could play a role. 

Chizhov said that neither the sanctions, nor the low oil prices, nor the depressed condition of the rouble would jeopardize the eurasian project. “Russia was wise enough to build up a huge reserve, which which we can resist external pressures.” In the view of the ambassador, a long-term partnership between the Eurasian Union would make sense, particulary in the energy sector.

But in the U.S. the Eurasian Economic Union is viewed as a threat. The former American ambassador in Ukraine, Steven Pifer, said on NPR that this union served only one goal, to increase Russian influence on its neighbors. “Russia is not just thinking in economic categories, but instead is trying to build its own influence in the region. By building institutions which will give Moscow more influence over Kazakhstan and Byeloruss, yet, since the Russian aggression against Ukraine, these lands are more cautious about agreements with Russia.”

Actually the proposal is an interesting approach. Under the sanctions against Russia and the Russian counter-sanctions, the EU is suffering much more than the Americans. Exporting to Russia and neighboring states is not just attractive, but it is a growth market. The American efforts to push the TTIP are similarly an attempt to deepen their market reach into Eastern Europe. The Americans thus have mostly countries like Poland, Bulgaria or Rumania in view. There is where they see, in the mid-term, a greater potential for growth than in the mature markets of Western Europe.

Discussion of low wages will be of interest in the consideration of free trade agreesment with the Eurasian Economic Union. Already, right now, many businesses are hiring workers in Eastern Europe on a large scale, since the wages are lower there. Large parts of the German automotive industry have shifted base in recent years to Eastern Europe. However it is to be expected that a free trade association with the eurasian countries could create more jobs in Western Europe, since the resident companies will be strengthened by it. In the case of the TTIP, an independent study points to a drop of almost 600,000 jobs. In addition, it is reasonable to expect that lower social standards would be exported from the U.S. to Europe. According to the study, the U.S. would be the principal beneficiary of the TTIP.

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