Free trade zones linking China, Russia & The Eurasian Economic Union

Tempo de leitura: 1 minuto

The increasing bilateral trade ties between Russia and China – growing at half a billion dollars a month, and set to double to US$200 billion by 2024 – are seeing a parallel interest growing in how this trade can best be serviced. Russia and China are often in the position of supplier and consumer, especially for energy, however that is now being joined by other manufacturing, IT and new hi-tech industries on both sides. 

This is partially driven by China’s Belt & Road Initiative, partially driven by a need to divest from trade with the United States (Russia and China) and partially with the EU (Russia). Both are also developing new export markets within the Eurasian Economic Union. Russia’s bilateral trade, mostly in its favor, has seen significant increases the past two years with fellow EAEU members Armenia (30%), Belarus (10%) Kazakhstan (21%), and Kyrgyzstan (17%). 

China, for its part, has also seen bilateral trade increases with Armenia (29%), Belarus (35%), Kazakhstan (48%) and Kyrgyzstan (31%). These are significant increases and can be expected to accelerate further – China is currently in the process of negotiating product tariffs on the Free Trade Agreement it signed last year with the EAEU.

This growth of trade requires free trade and related zones to be put in place, and especially near the borders of these countries. Goods from one another’s factories and suppliers can be combined without the need for duties, VAT or other taxes, and a finished product then made ready for export. If these are destined for markets with the EAEU, no further duties will be payable (as and when China agrees details to the FTA). 

Alternatively, it means that products can be sourced from less expensive labor pools with the EAEU with again the ability to reduce the overall manufacturing cost and remain competitive for both domestic EAEU markets in addition to markets nearby, such as Japan and South Korea to the East, and the European Union and Europe to the West.

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