DP3840 | Russia's European Economic Integration: Escapism and Realities

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23/03/2003

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Abstract

Both Russia and the EU are undertaking significant changes in foreign trade relations. Russia seeks WTO accession and the EU has concluded negotiations enlarging the union with ten new members. Against this background, what economic relationship can EU and Russia develop? The Paper analyses the asymmetric trade structure, the unstable and confused trade relation, as well as both form and content of EU?s and Russia?s options for the future. Conclusions are e.g. that (i) present EU trade policy vis-à-vis Russia is a disturbing flight to the future away from today?s concrete policy problems. The aim of a ?European Economic Space? (EES) is unrealistic for reasons of sovereignty and legality. To pursue an EES could be counter-productive for Russia from an economic perspective, since it focuses on the wrong problem. (ii) EU trade policy re-enforces Russia?s Dutch disease. (iii) With the candidate countries as EU members, Russia will meet lower tariffs but new anti-dumping measures. The asymmetry in EU-Russia trade will become more, not less, pronounced. Since Russia is hurt by the EU?s agricultural policy (CAP), Russia is likely to confront the CAP once Russia has become a member of WTO.