Statements made by Uzbek and Russian official in recent months have fueled speculation that Uzbekistan will soon join the Eurasian Economic Union (EAEU).
Uzbek President Shavkat Mirziyoyev has made regional integration and trade liberalization priorities and Uzbekistan, being the only Central Asian nation to border all the others, is a tempting prize for any trade bloc, according to Eurasianet.
The most apparent gain would be from the movement of labor. Uzbekistan has a large and growing young population and easier access to Russia’s labor market would allay pressure on Tashkent to stimulate job growth.
Eurasianet says that as far as goods are concerned, Belarus and Armenia have gained from relatively cheap access to Russian natural gas. But EAEU accession forced members (especially Kyrgyzstan and Armenia, which had liberal trade regimes with lower tariffs) to raise tariffs, making imports from outside the bloc more expensive.
Textiles and cotton comprise the majority of Uzbekistan’s exports to Russia. This industry reportedly could see new demand. On the flip side, however, Uzbekistan’s businesses have enjoyed decades of preferential treatment; opening up the domestic market to Russian competitors could hurt.
Before the EAEU, progress had reportedly been made reducing trade barriers in the former Soviet space. Aside from the Eurasian Economic Union, many Soviet successor states have pursued preferential trade agreements with each other. And other trade groups still exist. In 2013 Uzbekistan ratified membership in the Commonwealth of Independent States Free Trade Area (CISFTA), joining Armenia, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan and Ukraine. The CISFTA dropped import and export duties on about 90 percent of goods traded within the CIS. The EAEU expands the number of goods traded without exceptions, but the CISFTA is still important for trading with non-EAEU countries, such as Ukraine.
Eurasianet notes that despite promises, the EAEU has not led to a significant increase in capital flows between member states. The bulk of both Russia and Kazakhstan’s outward foreign direct investment is aimed beyond the EAEU. Uzbekistan has already managed to attract significant investment from Russia, especially in the energy sector; thanks to the country’s opening-up, this trend will likely continue with or without EAEU accession.
Meanwhile, as a member, Uzbekistan would lose control over trade policy, transferring the right to negotiate trade agreements to the bloc as a whole. According to Eurasianet, the most successful free-trade agreement the EAEU has signed thus far is with Vietnam – and the benefits to members are lopsided in favor of Russia and Kazakhstan. After accession, should Tashkent wish to liberalize its trade regime even further, it would be forbidden.
Recent internal EAEU disputes may also give Tashkent pause. The bloc reportedly faces sustained questions about its ability to mediate between members. Kazakhstan held up Kyrgyz goods in 2017, in what looked like a political gesture following bickering between the two countries’ presidents. More recently, in November, Kazakhstan complained it was losing $11 million per month owing to Russian restrictions on coal transiting to Ukraine. And this month, Russia and Belarus have been feuding over the terms of a new oil-supply contract.
It is not yet clear how hard Moscow is willing to push Tashkent to join. Russia could leverage the million-plus Uzbek labor migrants already working in Russia as well as its sizable market for Uzbek goods, since, after all, Russia comprises almost 19 percent of Uzbekistan’s total trade turnover.
