1. Introduction
The EU-Russia Summit in May 2001 decided to establish a joint High-Level Group (HLG) on the common European economic space (CEES), chaired by Commissioner Patten for the EU and Deputy Prime Minister Khristenko for Russia. The EU-Russia Summit in October 2001 provided the HLG with a mandate to elaborate a concept for a closer economic relationship between Russia and the EU. This mandate and its implementation is to be reviewed not later than October 2003.
A first Report of the HLG was made to the EU-Russia Summit on 29 May 2002. This second Report details progress made since then and contains the request to the Summit to endorse the approach of the HLG in defining ultimate objectives. It fulfils the requirement of the HLG mandate that it should report the outcome of discussions to the EU-Russia Summit.
2. The approach of the HLG
The HLG at its second meeting in March 2002 adopted a work plan for the CEES, establishing a targeted approach. A list of key issues for work was agreed, with possible objectives and practical steps to achieve regulatory approximation. The list includes sectors where cooperation will boost trade and investment and where the trade interest of the EU and Russia is strong. It also reflects the achievements and experience of integration in the EU. The sectors include standards, technical regulations and conformity assessment, customs, financial services, accounting/auditing, transport, space launching services, public procurement, telecommunications, competition, industry (inter alia, ferrous and non-ferrous metals sectors) and agriculture (inter alia, the sectors of meat and meat products, grain production).
In terms of timing, the work plan sets out that the HLG should in a first stage (by the end of 2002) assess the potential impact of a CEES, both on the economy as a whole and across a range of its sectors; prepare the ground for — and launch, wherever possible — work on achieving regulatory approximation and consider the ultimate objectives of the CEES. In a second stage (to October 2003), the HLG is to consider other measures to implement the terms of reference; identify means and mechanisms to achieve common objectives and consider the time-scale for implementation.
This approach was endorsed by the Summit in May 2002.
3. Progress since the May 2002 Summit
Work since the May Summit has focussed on the priorities set out in the first stage of the work plan: impact assessment, regulatory convergence and consideration of ultimate objectives. Overall, good progress has been made and the work of the HLG is proceeding in line with the timetable of the work plan.
A third meeting of the HLG took place in Moscow on 17 October 2002 in order to address these priorities. At working level, meetings of support teams (experts on both sides) were held on 18–19 July in Moscow and on 1–2 October in Brussels.
In addition to the meetings of the HLG and its experts, the CEES was the subject of discussions at the seventh meeting of the Cooperation Committee on 23 October 2002.
The CEES has been discussed by industry and academics. The HLG welcomes statements of interest from the business community as well as representatives of civil society and intends to solicit input from such bodies by spring 2003.
A number of studies have been commissioned by the Parties from external research institutes in order to assess the impact of economic integration. Consideration has been given to the impact of regulatory convergence on a number of sectors identified in the CEES work plan and on the impact of the removal of barriers to trade and investment for the EU and Russian economies more generally.
The EU’s preliminary external study has taken a global approach, looking at the impact of economic integration on the economy as a whole. Results have been presented to the HLG.
Russia is assessing the impact of the removal of barriers to trade and investment for each of the key sectors in the work plan. In a first phase, experts from Russia’s side concentrated on pilot sectors of accounting and auditing, standards, technical regulations and conformity assessment and the aluminium sector, in line with the report of HLG to the Summit in May. A second phase of studies has now been launched and will address customs, competition, transport, ferrous and non-ferrous metals, space launching services and agriculture. The final phase – financial services, telecommunication and public procurement – will be finalized in 2003. The preliminary results of studies have been shared.
Useful work has also been undertaken by other research centres.
The HLG is satisfied with this approach and has noted that the preliminary results are positive. It has noted that particular emphasis is placed by the studies on the relevance of regulatory approximation and removal of non-tariff barriers to trade and investment, in the context of identifying obstacles to integration and elements, which will promote long-term sustained economic growth. Work will continue in 2003 with the aim of reaching a comprehensive assessment of the economic impact of the CEES.
The HLG has agreed that the overall aim of the CEES, in broad terms, is to link the EU and Russia in a privileged relationship, focussing on regulatory and legislative convergence and trade and investment facilitation. The HLG confirms that the broad objective of regulatory convergence is in itself a desirable goal that should bring substantial benefits to both the EU and Russia, not least in permitting economic agents to operate subject to common rules and conditions.
Work on this priority has thus far focussed on preparing the ground for regulatory approximation in the key sectors of the work plan. Impact assessment work, once completed, will permit the HLG to better gauge possible ambitions for regulatory convergence and include a realistic assessment of benefits, in the final concept of the CEES.
For each of the key sectors, the HLG has discussed objectives for integration, including regulatory approximation. Although good progress has been made in certain sectors, the nature and complexity of regulatory convergence is such that concrete results are likely to be apparent only in the medium-term. The focus on work has been on the sectors of accounting and auditing and standards, technical regulations and conformity assessment.
The HLG has launched discussions of the ultimate objectives of the CEES. The HLG has agreed that the overall aim is to bring the EU and Russian economies — including the rules and regulations within which they operate — closer together. This, so as to form the basis for an EU-Russia medium/long term economic integration commensurate with the size and complementarity of the EU and Russian economies, as well as their geographical proximity and the overall EU-Russia strategic partnership. This process will take into account relevant aspects of the PCA, the impact of EU enlargement on EU-Russia relations and the economic interests of both Parties as well as the priority placed on Russia’s accession to WTO.
The discussion in the HLG was prepared by means of input from Russia in the form of an expert paper. The EU has proposed objectives for each sector as well as a list of questions to be further discussed. The HLG has instructed the support teams to further consider the ultimate objectives of the CEES and to develop options for content, architecture, implementation etc.
4. Next steps
The HLG has underlined the importance of continuing – and finalising where possible – the planned expert studies in the remaining key sectors of the work plan. The results of the completed studies will be exchanged between the Parties and will also be circulated to relevant officials and ministries of both sides, where this is not already the case. This will help the HLG elaborate an agreed strategy for work in each sector and for the CEES as a whole.
Discussions on the concept of the CEES will continue, in order to further consider ultimate objectives. These discussions will take into account the results of completed studies when such become available.
A fourth meeting of the HLG will take place in spring 2003 to evaluate further work carried out under the present work plan, review the results of studies on impact assessment, guide efforts to complete the mandate of the HLG and consider steps to be taken thereafter.
The HLG plans to define the concept of the CEES by October 2003, in line with its mandate.