Legislative coordination needed to raise intra-BRICS trade

The growth in turnover of trade is hindered by the lack of free trade agreements among member nations. Source: Vitaly Ankov / RIA Novosti

The growth in turnover of trade is hindered by the lack of free trade agreements among member nations. Source: Vitaly Ankov / RIA Novosti

Development of trade within associations like the BRICS is hindered by the lack of legislative coordination and the absence of free trade agreements. According to Russian analysts, it is not possible to improve the situation without first resolving the infrastructure problems.

For regional groupings like the Eurasian Economic Union (EEU) and BRICS (Brazil, Russia, India, China, South Africa) to work effectively, several framework measures need to be adopted, to adapt national legal systems and national jurisdictions to the new realities of integration.

Speaking at the St. Petersburg International Legal Forum, Alexander Konovalov, Russia’s Justice Minister, said member states need to adopt some framework documents and introduce national legislation changes to stimulate the growth of mutual trade within associations.

According to trade analysts, the growth in turnover of trade is hindered by the lack of free trade agreements among member nations.

“Generally, for the development of trade, countries sign contracts by which the parties grant each other preferential market access. Most commonly, it means a reduction or annulment of customs duties. In this regard, nothing prevents the conclusion of such agreements in the framework of BRICS, but such work at the organisational level has not happened,” Alexander Knobel, director of the Centre for International Trade Research, Russian Presidential Academy of National Economy and Public Administration (RANEPA), told RIR. 

Political will

According to Knobel, Russia is currently negotiating a free trade agreement with India, but work on such an agreement with China has not even been initiated. For now the parties have limited themselves to signing, in early May 2015, a memorandum of conjunction of two projects: the EEU, which unites Russia, Kazakhstan, Belarus, Armenia and Kyrgyzstan, with the Chinese “Economic times of the Silk Road” project.

“Why we have not initiated talks with China on the creation of a free trade zone is a political question. It is impossible to say who is a greater protectionist, Russia or China, but simply, there is neither command impulse yet nor the understanding of its importance,” Knobel said.

According to Artem Sohikyan, Deputy Director of the Department of direct investments, support of exports and foreign trade activities, Ministry for the Development of the Far East, Chinese partners attach great importance to the development of not only raw materials cooperation with Russia, but also infrastructure projects. In particular, we are talking about the construction of a high-speed railway from Moscow to Kazan (800 km east of the capital) and the development of priority development areas or zones with special tax regime in the Far East. According to Sohikyan, in particular, the new law on the creation of such exclusive economic zones should provide impetus to the development of the region, located near the most powerful emerging economies, like China, Japan and South Korea. 

Key obstacles

According to Wang Xiaoping, partner at Grandall Law Firm, a major obstacle to trade between China and Russia and the European countries is the lack of the necessary transport infrastructure. “The question is how to organize the delivery of cargo through ten countries; that’s the purpose of the project “Economic times of the Silk Road.”

New Chinese leaders have fine-tuned this project, and Russia is an important participant in it,” he said.

According to Yekaterina Trofimova, Vice-President of Gazprombank, the trading pair of Russia and China should have no third party that would benefit from this collaboration, and that is why the two countries should develop the rules of work together. “The experience with Chinese and Asian partners in general, is very controversial. A certain understanding has been formed that working with Asian partners is not the easiest thing,” Trofimova said. However, she said, infrastructure development projects greatly interest not only Russia but also other regions.

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