The Euro-Russia row as a result of an overlap between two economic unions: lessons for a multipolar world in the wake – Executive summary –

– Executive summary –

On September 29^th, LEAP organized the second Euro-BRICS online discussion on the “The Euro-Russia row as a result of an overlap between two economic unions”. The meeting gathered around 25 participants from the European and BRICS academic and civil fields mostly. This discussion took place in the larger framework of a Euro-BRICS effort to understand the causes and consequences of the Ukrainian crisis which indeed has severely impacted the global crisis-related reorganization of the international order[1].

There are many factors which contributed to the buildup of the Ukrainian crisis. An important one is the overlap between two economic unions, the European Union and the Eurasian Economic Union, having failed to cooperate on creating the conditions of a non-conflictual co-development.

Indeed the Ukrainian crisis is the result of a territorial row between two neighbours. On the one hand, there is the European Union, a free-trade area engaged in a questionable process of never-ending extension[4]. On the other hand, there is Russia’s Eurasian Economic Union project, all of a sudden competing with the latter. In the middle was Ukraine engaged in two simultaneous but uncoordinated free-trade talks.

Knowing that the world is now a multilayer patchwork of economically integrated supra-national regions, Ukraine provides a case study of what must be avoided so the world doesn’t ultimately head into growing inter-regional conflicts and war. In view of this major failure, it behooves Europe and the BRICS to think together regarding the principles and tools of a smoothly articulated multipolar world respecting every region’s right to its economic (and political) union.

Some principles of trade negotiations taught by Ukraine

The “Ukrainian crisis deciphered” offers the following lessons when it comes to negotiating trade agreements:

• non-exclusivity: in a modern globalized system seen as a framework of reinforced cooperation, no trade deal should exclude trade relations with another entity
• equal footing: for instance, the Ukrainian government had a right to be heard when it claimed it was a matter of security for Ukraine that the European and Eurasian deals were negotiated on a tripartite basis
• limits and external relations: each economic union must be aware of its “natural” limits and be able to switch from free-trade objectives to trade facilitation as soon as it goes beyond these limits; indeed a sound basis for global trade relations is to distinguish clearly between free-trade areas (economic unions) and trans-regional trade relations based on case by case negotiated facilitation measures
• expiry dates: no signed trade agreement should be permanently binding; renegotiating deals every 10 years is a sound principle of sustainability and adaptability
• win-win philosophy: in the case of Ukraine, the free-trade negotiations should have provided the opportunity for a larger perspective on  Euro-Russian trade relations and the way to build the conditions for a win-win partnership
• collective interest: local people’s interests, instead of economic interests, must be the starting point of any future sustainable global trade system, otherwise national democracies will explode under the diverging pressure of people’s interest that nations are supposed to represent and preserve and economic interests that nations are de facto more and more legally bound to serve in the current system
• transparency of negotiations : contrary to the current trend (TTIP as a vivid example), transparency of trade negotiations must be reaffirmed as fundamental, or globalization is doomed to be enforced upon people and nations in a complete negation of democracy.

Reconnecting globalization with today’s global configuration: Towards an “organic” system of economic governance

Recognition of supra-national entities’ right to exist: to lay down the foundations of a non-conflictual world of supra-national entities, it is important to recognize each and every such entity’s right to exist. In the case of the Ukrainian crisis, Europe and the Western bloc simply refused to recognize Russia’s right to build its CIS-based economic union[2]. However, only on the basis of such recognition can the articulation between entities of the same level be negotiated and mutually beneficial results attained.

Integrating supra-national entities into the global economic structure: The fact is that globalization as we knew it, i.e. a national-based system, has become dysfunctional due to its incapacity to properly integrate mega-national emerging powers (China or India in particular) and, even more, supra-national entities (EU, CIS, Mercosur, ASEAN, etc…). This incapacity to take into account regional integration processes, so characteristic of modern history, has dramatic consequences.

The disconnect between globalization and the new characteristics of global configuration is leading to violence as proved by the Ukrainian crisis and counter-reactions worldwide: the return of politics as a result of excessive all-economic policies, growing nationalism (India, Japan, Russia…), increasing unpopularity of trans-continental or global processes (Doha round, TTIP, TPP…), illegitimacy of Western-led globalization, etc…

Therefore globalization (in the largest sense of “global system of facilitation of trade relations”), in order to resume with its aim to contribute to global shared prosperity and peace, must become capable of integrating into common decision-making systems both national (including mega-national) and supra-national entities alike.

Towards an “organic” system : Networking, new technologies and decentralization (as opposed to the centralized and pyramidal international system inherited from the XXth century) are likely to provide the right organizational engineering capable of integrating the diversity of players involved in global trade relations. Indeed an updated and adaptive system of global trade relations should combine smoothly every entity claiming some economic scope of intervention (for instance: Brazil as a nation, but also MERCOSUR and even ALBA or UNASUR…).

Coordinating a network of decentralized entities connected together through the Internet is likely to provide the light, flexible and dynamic mechanism required for a sustainable system of global economic governance.

Multipolar and multicurrency trade: As another way to reconnect global trade with reality, a multipolar global trade system must be ready to exchange on the basis of a multicurrency system, likely to turn into an integrated multi-currency based monetary system eventually. This process is ongoing as a result of China’s policy of currency swap agreements. It is now a matter of integrating this new characteristic into the next global architecture.

Conclusion
Now the question is: can WTO conduct the necessary reform of globalization principles? or does this devolve to a combination of mega-national and supra-national entities, such as the EU and the BRICS, to invent together the tools and principles of XXIst century’s global trade system? or as a combination of both, could Europe and the BRICS together provide the energy required to reform the principles and tools of WTO ?

Since 2009, LEAP is has been convinced of the viability of last two options. For this reason, we will strive for a Euro-BRICS summit to take place as a side-event of the upcoming Ufa BRICS summit (July 2015) and provide a relevant platform of discussion of these themes so vital to the building of the “post-crisis world”[3].