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Experts say China’s proposal on free trade area within SCO needs careful study

December 16, 2015, 18:44 UTC+3 Alexandrova Lyudmila
Container ship at the Port of Qingdao, China

Container ship at the Port of Qingdao, China

© EPA/STRINGER

MOSCOW, December 16. /TASS/. Russia should carefully study China’s initiative to establish a free trade area within the Shanghai Cooperation Organization (SCO), considering China’s powerful export potential, before making a decision, Russian experts say.

China has proposed establishing an SCO free trade area, China’s Premier Li Keqiang said at an enlarged session of the Council of the SCO Heads of Governments on Tuesday.

‘We have just agreed during a narrow-format session to give instructions to trade and economy ministers to elaborate serious and specific measures for establishing an SCO free trade zone to create more favorable conditions for trade development," Li Keqiang said.

According to the Chinese premier, the SCO member states will be able to switch to free trade by 2020.

"Li Keqiang has outlined the possibility of the governments’ expert work on assessing and forecasting possible interaction among the sides in this sphere," SCO Secretary-General Dmitry Mezentsev told TASS.

"I believe that such expert work will be carried out and its results will surely be presented to the public at large, after it is completed," the expert said.

Uzbekistan has already reacted to China’s proposal. The country is unprepared for establishing a free trade area within the SCO, Uzbekistani First Deputy Prime Minister, Finance Minister Rustam Azimov said.

The Shanghai Cooperation Organization was established by Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. In 2015, the SCO launched procedures for admitting India and Pakistan to the organization.

"China is not abandoning its efforts to secure its positions as a leading country in the SCO," the Free Press web portal quoted Head of the Finance and Economy Group at the Institute of Contemporary Development Nikita Maslennikov as saying.

"It is understandable that Russia should treat such China’s aspirations with caution. That is why, I don’t rule out that we’ll advance a counter-proposal to the Beijing initiative," he added.

According to the expert, "both Russia and other players have to calculate everything carefully. This is why, a free trade zone within the Shanghai Cooperation Organization looks unrealistic by 2020, the expert said.

It is first necessary to study carefully how much Russia is ready for this, Professor of the Higher School of Economics Alexei Portansky told TASS.

"For example, the proposal on a free trade area with the EU has been on the table since the 1990s but we have not established it to this day. Since 2010, China has been the world’s top exporter of goods. That is why, we need to analyze, which parameters of a free trade zone are advantageous for us and it is not an established fact that we’ll agree. In any case, it is obvious that this proposal will be studied and analyzed for a long time," the expert said.

"This idea proposed by China is disadvantageous for Russia, to my mind," Associate Professor of the Higher School of Economics Pyotr Mozias told TASS.

"A free trade zone implies liberalization of mutual trade flows. Meanwhile, China has a safety margin of price competitiveness as Chinese goods are cheaper. Besides, Chinese exports are more diversified and China has well-established channels of merchandise sale on foreign markets. That is why, the establishment of a free trade zone makes the Russian economy unprotected from the Chinese expansion," the expert said.

This does not mean that economic cooperation should not be developed within the Shanghai Cooperation Organization, the expert said.

"But it can be developed in other formats. Meanwhile, our tasks of modernizing the Russian economy should be resolved not through liberalization but, on the contrary, by way of strengthening the protection of domestic producers," he said.

It is hardly likely that the idea of creating an SCO free trade zone may be carried through by 2020, expert in Chinese studies Mikhail Karpov said.

"I believe that not only Russia but also many other countries fear China’s economic expansion," he said.

TASS may not share the opinions of its contributors