Uzbekistan’s pursuit of deeper integration into the Eurasian Economic Union (EAEU) and its simultaneous efforts to join the World Trade Organization (WTO) presents a complex dilemma. As Uzbekistan currently holds observer status in the EAEU, the question arises: can the country advance its economic and trade goals without jeopardizing its WTO aspirations? This feature delves into whether stepping closer to the EAEU might mean stepping back from WTO accession, examining the economic benefits, sovereignty concerns, and potential conflicts between these two strategic pathways.
Economic benefits and strategic opportunities
Full EAEU membership promises considerable economic advantages for Uzbekistan. By joining the EAEU’s customs union and benefiting from its free trade agreements, Uzbekistan could access a market of over 180 mn consumers, which would enhance its export opportunities, particularly for textiles and agriculture.
“Integration into the EAEU could lead to a 15-20% increase in Uzbek exports to the EAEU market by reducing tariffs and non-tariff barriers,” the Eurasian Development Bank stated. This expanded market access could significantly boost sectors where Uzbekistan has competitive strengths.
However, these benefits come with challenges related to WTO principles. The EAEU’s customs union and regional trade policies, which include preferential tariffs among member states, might conflict with the WTO principles of non-discrimination and most-favoured-nation treatment. The EDB cautions that “regional integration under the EAEU could pose challenges for Uzbekistan’s WTO commitments, especially regarding adherence to global trade rules”. This tension illustrates the difficulty of reconciling regional benefits with global trade obligations.
Moreover, the EAEU’s ongoing infrastructure projects align with Uzbekistan’s development goals. Investments in regional transport and logistics infrastructure could enhance connectivity, facilitating more efficient trade. The World Bank highlights that such improvements could draw additional foreign investment and support Uzbekistan’s economic growth, particularly as a landlocked nation. This infrastructure boost could be pivotal in supporting the country's development strategy and regional trade ambitions.
At first glance, I don't see any issues with Uzbekistan being a member of both organizations. Currently, the EAEU is seeking observer status at the UN General Assembly, which suggests that certain restrictions might apply to Russia but not to the EAEU, although some analysts often mistakenly conflate the two. Kazakhstan and Kyrgyzstan are members of both the WTO and the EAEU, and there are certain difficulties in this regard. However, there are many other examples in the world where a country is a member of a regional economic union while simultaneously being a member of the WTO. One of the main challenges is the presence of legal conflicts between WTO and EAEU regulations. These two systems have partially overlapping areas of regulation, such as customs-tariff and non-tariff regulations, creating uncertainty in law enforcement. For instance, the obligations undertaken by Kazakhstan and Kyrgyzstan within the WTO may not align with their obligations under the EAEU, which requires harmonization and synchronization of regulations. However, this is a fairly common practice. To be honest, I don't always understand the comparisons between the EAEU and WTO in the case of Uzbekistan's choice between the two. Kazakhstan practically became a member of both organizations with about a one-year difference between the two events
- Eldaniz Gusseinov, Non-Resident Research Fellow at Haydar Aliyev Center for Eurasian Studies of the Ibn Haldun University, Istanbul said to Daryo's correspondent.
Sovereignty and policy autonomy concerns
Despite the potential economic benefits, there are substantial concerns regarding the erosion of policy autonomy. Full EAEU membership requires consensus among its member states, which could limit Uzbekistan’s ability to independently pursue its own economic and trade policies. The International Crisis Group warns that these constraints might impede Uzbekistan’s capacity to negotiate trade agreements and implement necessary reforms, thus affecting its sovereignty.
Additionally, increased dependence on Russia presents a risk. As the dominant force within the EAEU, Russia wields considerable influence over the bloc’s economic policies. This could undermine Uzbekistan’s efforts to diversify its economic partnerships and maintain a balanced foreign policy. The Russian International Affairs Council points out that closer integration with the EAEU might expose Uzbekistan to economic and geopolitical vulnerabilities, impacting its broader international relations.
Geopolitical implications and regional dynamics
The geopolitical context adds another layer of complexity. With escalating tensions between Russia and Western countries, aligning more closely with the EAEU could strain Uzbekistan’s relationships with global powers such as the European Union and the United States. Navigating these relationships while pursuing regional integration represents a significant diplomatic challenge for Uzbekistan. Balancing regional ambitions with global diplomatic ties will be crucial as the country seeks to enhance its economic prospects without alienating key international partners.
Furthermore, Uzbekistan’s potential EAEU membership could alter regional dynamics in Central Asia. The integration of Uzbekistan into the EAEU might shift power balances within the region, influencing trade and political alliances. The Center for Strategic and International Studies notes that regional integration could either strengthen or strain relationships among Central Asian nations, depending on how Uzbekistan manages its role within the bloc.
Re-exports and sanctions evasion
Uzbekistan's role in the re-exportation of European goods to Russia has introduced a new layer of complexity to its economic landscape, especially against the backdrop of Western sanctions. In 2022, trade between Uzbekistan and Russia surged 1.5 times to $3 bn, as Uzbekistan emerged as a key channel for European products sidestepping sanctions. This shift has drawn the attention of both the European Union and the United States, which have targeted several Uzbek firms for their alleged involvement in evading export controls.
This situation underscores the intricate balance Uzbekistan must maintain: capitalizing on economic opportunities while upholding international sanctions and trade norms. The ramifications for Uzbekistan’s bid to join the WTO are profound. Engaging in sanction-evading re-exports could attract heightened scrutiny from global trade organizations, complicating the country's efforts to comply with WTO regulations that mandate strict adherence to international trade standards. The WTO’s requirement for regional trade agreements to align with global norms puts additional pressure on Uzbekistan, as it strives to harmonize regional advantages with its global trade commitments.
WTO accession: balancing global trade obligations
Uzbekistan’s ongoing WTO accession process signifies its commitment to global trade norms and liberalization. However, the EAEU’s regional trade policies, including preferential tariffs and non-tariff barriers, contrast with the WTO’s principles.
This balancing act is crucial for Uzbekistan as it seeks to harmonize its regional and global trade strategies.
"While joining the WTO is often perceived as a 'brand' that boosts investor confidence by signaling commitment to open markets and fair trade practices, it may mask deeper economic issues within Uzbekistan. Persistent monopolies and incomplete reforms in sectors such as state-owned enterprises (SOEs) could undermine the perceived benefits of WTO membership," Eldaniz Gusseinov stated.
Uzbekistan’s exploration of deeper integration into the EAEU, in conjunction with its pursuit of WTO membership, reflects a complex strategic calculation. While full EAEU membership offers substantial economic opportunities, including increased market access and investment potential, it also poses risks related to sovereignty, policy autonomy, and dependence on Russia. As Uzbekistan navigates these intertwined dynamics, its ability to balance regional integration with global trade commitments will be critical. The path forward will have profound implications for its economic development, geopolitical positioning, and international trade strategy.
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Comments (1)
A nice investigation into the issue. I assume Uzbekistan should critically evaluate the benefits and drawbacks of join any organization and think, first of all, about the advantages that are going to be brough to the nation of Uzbekistan rather than any sanctions or prohibitions to Uzbek businessmen and companies.