1. Evaluation of the integration process of the EAEU
The results of the integration process of the EAEU are as follows: first, the EAEU has created an institutional foundation as an economic integrator. Second, the EAEU has enacted new tariff laws and laid the foundation for creating a common market in finance, electricity, petroleum and petroleum products, gas, and transportation services. Third, the effect of the integration of EAEU began to emerge as GDP and trade volume increased since 2017 gradually. Fourth, the EAEU has signed free trade agreements or trade and economic treaties with several non-member countries. Notwithstanding these achievements, the limitations of the EAEU are as follows: first, the EAEU has structural limitations in functioning as a trans-national economic integrator. Second, due to the EAEU’s low level of tariff harmonization, it remains in a “limited customs union,” and the complete single market of the EAEU has not yet been visible. Third, the limitations in Russia’s leadership have weakened the drive for the integration of the EAEU. Fourth, the protective features of the EAEU result in poor performance in economic integration.
Considering these achievements and limitations of EAEU, the prospects for developing the integration process of the EAEU will be as follows: first, it is unlikely that the EAEU will be dissolved, but it is difficult for the EAEU to achieve a high level of economic integration. If the common market is fully operational, the government procurements could be activated, and macroeconomic stability could be maintained, and regional trade could be further promoted. Third, to strengthen the macroeconomic potential, it would be required of the enlargement of EU with securing new member states. South Korea is pushing for a “New Northern Policy” to expand economic cooperation with the former Soviet countries. Therefore, the EAEU is believed to become a partner in developing and diversifying trade, and creating new growth engines for Korea.
2. Strategy and measures for Korea-EAEU economic cooperation
1) Korea-EAEU Economic Cooperation Strategy
This report proposes a private and market-driven strategy as the economic cooperation strategy between Korea and EAEU. It suggests identifying and supporting the industrial cooperation-focused areas in the current market, selecting and supporting future-oriented industrial cooperation, and promoting Korea-EAEU FTA.
2) Cooperation plan in areas focused on industrial cooperation in the current market
Korea’s major export industries are already showing results in the market, including the EAEU vertical division (minerals, coke, oil, nuclear fuel, metals, etc.) and industries imported from other regions and consumed as domestic demand in both regions. In other words, market-led and private-led trade cooperation structures and systems are working, so they were selected as the focus areas for industrial cooperation in Chapter 3.
The measures to strengthen industrial cooperation in these industrial groups are as follows: first, from the perspective of intergovernmental cooperation, the government should continue to work together to address the constraints of trade potential in both regions and institutionalize communication systems. Second, it is suggested to make efforts to reduce tariffs on Korea’s imports of EAEU and EAEU’s imports of Korea. Third, it is recommended to implement projects to transfer export capabilities of EAEU countries, support projects to revitalize trade sources such as customs and strengthen market economy capabilities by utilizing existing ODA programs.
3) Future-oriented industrial cooperation areas and cooperation measures
EAEU countries are currently facing the challenges of growing their economies through industrialization and fostering a digital economy and new industries in line with changes in the Fourth Industrial Revolution age. Korea, a country with already achieved industrialization, needs to strengthen industrial cooperation with EAEU countries for a cooperative partnership to grow small and medium-sized enterprises facing limitations in the domestic market.
Besides, fostering the digital economy at the overall level of the EAEU is a critical task. By strengthening cooperation with leading countries within the EAEU, such as Russia, it is necessary to build a digital economy infrastructure and establish a collaborative industrial ecosystem in various fields in self-driving cars, artificial intelligence(AI), and the cloud.
In the recent Covid 19 pandemic, cooperation in the medical and health sectors has become more critical than ever. Considering the high possibility of developing the medical system, medicine, and medical device markets in EAEU countries, the outlook for Korean medical institutions’ management consulting, consignment management, and medical device and drug exports is bright.
4) Strategies and cooperation measures for the Korea-EAEU FTA
Considering the environment of the two countries’ industries, it is necessary to push for the Korea-EAEU FTA in a direction that benefits each other through phased discussions.
According to a CGE study, the effect of the FTA will slightly increase Korea’s GDP, but the impact of each industry is different. If the Korea-EAEU FTA goes into effect, the damage to the Korean grain industry is the biggest, and it is expected to have a negative effect on the metal, electricity, electronics, and machinery industries, especially among the manufacturing sectors. On the other hand, it is expected to positively affect the meat, processed foods, and transportation equipment industries. As a result of analyzing the extent of the FTA’s impact by dividing the service industry into wholesale and retail, transportation, health and welfare, and business services, the service industry’s production is expected to increase in general. Among EAEU countries, Russia and Kyrgyzstan’s GDP increases, while Kazakhstan, Belarus, and Armenia’s GDP decrease. Industrial production in the manufacturing and service industries of EAEU countries is expected to decline, and precise cooperation measures in these areas need to be sought in future FTA or economic cooperation.
Taken together, the two should seek ways to cooperate through the FTA, as the Korea-EAEU FTA has no unilaterally favorable results for only one country. In particular, cooperative relations between the two countries should be formed to boost technical support, new technology cooperation projects, and ODA in the highly competitive transportation equipment industry and minimize damage to particular industries in Korea.