B. Trade expansion

Encouragingly, there are positive signs arising out of the current crisis. First, not all multilateral processes have broken down. In the LAC region, SICA has increased coordination and tried to put forward a common response to the challenges the region is facing. MERCOSUR has made an active effort to keep goods flowing between its member States even as most land borders have been closed. The institutional foundations of Eurasian integration have also proved effective in this moment of crisis. Through the Eurasian Economic Commission, supranational measures of middle and long-term support were promptly adopted. The earliest response included a temporary export ban and a lowering of import duties on products vital to preventing the virus’ spread and ensuring care for those infected and guaranteeing economic and food security (e.g., personal protective equipment, diagnostic reagents personal protective equipment and diagnostic reagents, as well as certain types of basic foodstuffs). Furthermore, those products were subject to import procedure simplification, such as simplifying the process for submitting certificates of origin. In April 2020, the Eurasian Intergovernmental Council adopted a decree containing measures aimed at ensuring macroeconomic stability and supporting economic growth: the measures proposed were meant to assist EAEU governments in developing and reinforcing measures to localize the spread of coronavirus and minimize the pandemic’s social and economic consequences. The propositions include permission to import goods initially intended for third countries even without the necessary labelling. In the sphere of economic recovery, the recommendations foster e-commerce and digitalize clearing procedures, but also aim to accelerate free trade negotiations. Importantly, the short- and long-term EAEU recovery measures adopted at the supranational level were elaborated based on EEC research identifying the depth and peculiarities of the economic crisis while considering what a new world order will be like. The growth forecasts and the major conclusions were stated in the EEC report “Mechanisms to address the threats to macroeconomic stability in the face of global economic crisis provoked by pandemic” (EEC, 2020b). There have been several examples of positive cooperation in working to overcome the current crisis. China and Mexico arranged an airlift through which deliveries of Chinese emergency goods began to arrive in Mexico once the crisis had begun to ebb in the former country and was still on the upswing in the latter. Before the health crisis was strongly felt in the Russian Federation, it sent emergency aid to hard-hit Northern Italy. These are just two examples of the many forms of positive cooperation between distant and very distinct countries, many of which are also examples of South-South cooperation. Much of the LAC region is aligned with EAEU member States in their support of and belief in the multilateral system. The two regions should be able to benefit from further cooperation in international institutions that support and coordinate the COVID-19 response and preparedness for future pandemics. The United Nations and its agencies are the obvious avenue through which such cooperation should take place. Cooperation to strengthen and, if necessary, reform international institutions should be given a prominent spot on the common policy agenda of the two regions.

The significant peculiarity of the currently observed structure of trade between EAEU and LAC region is the fact that member States have not been equally advanced in identifying and benefiting from diverse market niches in geographically distant countries. For some EAEU States, including Armenia and Kyrgyzstan, this is evident from the ever-changing trade that

appears to be an aggregation of one-off or ‘tentative’ exports that are not renewed over periods of three to four years. In contrast, there are the examples of countries, including the Russian Federation and Belarus, which have had an established trade structure dominated by constant deliveries of a limited number of products of specialization. However, in each of these two cases, as well as in trade between the two regions in general, trade is mainly oriented towards primary or low value-added products. The observed result primarily stems from the complexity of ensuring the competitiveness of products supplied from far-distant production units: high transportation costs and a lack of necessary infrastructure negatively impact the final the price. To overcome competition from geographically closer partners, the remote supplier should either ensure the peculiarities of its product compensate the higher price, or be able to decrease other costs or lower margins in order to compete pricewise, although the latter option considerably undercuts the appeal of a trade expansion strategy. In other words, the prospects for expanding trade might be identified in spheres where either price elasticity to transportation cost or consumer demand elasticity to price are low. • The price factor does not determine the product’s attractiveness to consumers if the quality or certain characteristics make the exported product stand out from the substitutes. Importantly, this might be the case for high value added merchandise produced with advanced technologies not accessible to competitors. Examples of the former include artificially produced precious stones from EAEU, while the latter might comprise Latin American coffee and wines from Armenia. • Logistical cost escalation does not severely affect the product’s final price in two cases. The first is ‘invisible’ trade, i.e. trade in services, which in most cases it is not affected by increasing distances. From this perspective, ITC services are a particularly promising area for cooperation as they do not involve movement on the part of the supplier or consumer, band involve a nascent industry with competitive advantages for countries such as Argentina, Belarus, Brazil or the Russian Federation, among others. The examples listed above are drawn from the analysis of spheres in which the two regions are actively trading with other developing countries and are essentially failing to engage in mutual trade with one another. The fact that businesses have not yet leveraged these and other opportunities that can be revealed analytically might stem from a lack of awareness of existing opportunities or the peculiarities of doing business overseas. However, there is a long list of other reasons, such as internal barriers (poor logistics within the country of origin, a lack of government support relative to what competitors enjoy, etc.) and external ones, including tariff and non-tariff trade restrictions. As revealed in the present report, the two regions’ trade policy regulations comprise quantitative restrictions (imposed by both regions), contingent trade protection measures (enforced against EAEU countries) and non-tariff barriers on certain types of products. Importantly, these measures, except for the contingent ones, are not specific to these regions, but rather are found worldwide. Provided the considerations above, the area of transport and logistics is of particular importance. It is necessary to seek optimal options for reducing transport and logistics costs, possibly including government incentives. Public efforts in trade regulation, infrastructure projects and ensuring prospective partners’ access to urgent information on doing business overseas are promising areas for public cooperation. However, public efforts should be complemented with close interaction with business representatives and private sector initiatives to improve trade relations among both regions.