“To integrate or not to integrate”, this is no longer a question. History of the world development proved many times that the only meaningful and rational answer to this question is “yes”. Positive experience of European Union, NAFTA, Asian economic cooperation agreements proved to work much better than mercantilist practices of the past. Free trade, non-discriminatory access to markets, freedom of movement of capital, goods, services and labor is a must for regional and world prosperity and stability. As famous Austrian economist L. von Mises said, if goods do not cross borders armies do.  

Peculiarity of the integration context

While designing the integration pattern for Belarus, Moldova, Ukraine and Russia it is necessary to take into account the essential qualities of political, social economic and public components of these countries’ institutions. These states are typical transitional countries with the following main characteristics: 1) big structural discrepancies, low competitiveness of real sector alongside with backward financial institutions, 2) weak state institutions and deeply ingrained distrust of people to the state and political parties, 3) predominant collectivist ideology in educational institutions and among decision makers, romanticism and high expectations for “wonders” of democracy and market economy, 4) lack of independent judiciary and well-trained government employees, 5) low-quality corporate management and underestimation of importance of marketing, intellectual property rights protection and the function of the customer, 6) deficit of transparency in government and political structures finance; 7) restricted access to media market and frequent discriminatory practices of state controlled media, 8) feebly social security structures that were unable to target the most needed, 9) dominance of powerful lobbyists that represented old production structures, nomenclature and the Communist party managers who quickly adjusted to new environment and acquired the language of European social democracy: thirdwayism, gradualism in transformations, sustainable development managed by the state etc.; 10) weak civil society structures and their inability to exercise control over activities of the government and to make changes in the government in a democratic way consistent with long-term goals of the country. The degree of each characteristic may differ but they shape the political landscape of each of the country anyway.  

Hence the political and public environment in Belarus, Moldova, Ukraine and Russia was quite favorable to implementing various forms of interventionism as the target model that reforms should lead to. Dominance of welfare state model and third way ideology and philosophy in the West enhanced proponents of this particular model and reduced chances of consistent supporters of free markets and trade. In fact in most of the countries market reforms were viewed as a necessary evil. Revolutionary changes in the political and social economic system were the result of inherent weakness of socialist practices and big mistakes made by central planners. But as Ayn Rand states the only long lasting revolution is the revolution based on ideology. Educational and information institutions of the countries failed to meet the challenge of building foundations for the ideological revolution. As a result the mixture of the “best of the two worlds and systems” in the post-socialist environment led to formation of oligarkhs, nepotism, graft and wide spread corruption based on privatization of state functions in the domestic policy and protectionism in the form of tariff and non-tariff measures. Oligarkhs of the countries or their big business make the best use of the big governments to stifle competition and to restrict access to privatization and state budget resources. They were supportive of regional integration in the form of vague trade agreements and unions of all shapes and forms to reap benefits only for themselves. Being unable to build real free market economies inside their own countries, fearful of regional and international competition governments in Belarus, Ukraine, Moldova and Russia were unable to bring forth meaningful integration initiatives. Various unions were a sort of a smoke screen for special interests’ and organized crime integration. Ordinary people hardly felt the consequences of such agreements in the form of more FDI, jobs and value added goods export and import. At the same time people are getting more and more disillusioned about the idea of regional integration as they think that imitation of integration is what integration is.

Integration as any other wonderful idea can easily be misinterpreted and even perverted. The road from the idea to its full implementation into practice is long and complex. Adequate tools, institutions, methods, timing and content of integration should be chosen if it is to be a success story not just for a group of politicians in the short run but for the countries involved in the long-run. But before starting negotiations on these issues the goals and target social economic model that will be the result of integration should be agreed upon. Before going out on a long journey it is very useful not just to decide on the route but to see clearly where to go. Choices are aplenty but essentially they boil down to two basic target models: 1) free trade zone as EFTA, NAFTA and other regional agreements or 2) customs and monetary union and delegating some authorities to the central government and the Union parliament and the perspective of forming a federal state. The debate on which model Europe should choose has been going on since at least 1930-ies when new architecture of Europe was discussed. As this issue has not been decided upon in Europe one can hardly expect it to be clear among Belarus, Moldova, Ukraine and Russia. The countries spent too much time under the Soviet totalitarian regime and so called post-Soviet syndrome (blaming each other for all problems, discrimination, accusing Russia of imperialism, mixing political and economic powers, deep suspicion to one another and fear of delegating any powers to a meaningful international institution) is still strong. Overcoming this syndrome, earning credibility to policies and trust to elites and political institutions alongside with overruling national protectionist policies is the main challenge of Belarus, Moldova, Ukraine and Russia in the context of regional integration and in the face of regional and global challenges. Setting up the Commonwealth of Independent States that was chosen as a “divorce” procedure from the USSR to uncertain future proved to be a discussion club for heads of states and employment agency for a few hundred state employees with any strategic meaning whatsoever. To call a spade a spade we’d rather have a Standing Forum of Heads of States than the CIS with claims to be an effective form of regional cooperation. Declaring formation of various weak institutions (Eurasian agreement, Russian – Belarusian union, Free trade agreement of Russia, Kazakhstan, Ukraine and Belarus and others) and reluctance of national governments to finally start freeing trade among countries added to the atmosphere of distrust among the countries. Even attempts of some countries of the region to build long-term relations with European Union are interpreted by others as a challenge to regional integration. Instead of favoring integration in the region and into EU many policymakers demand “either – or” solution. Lack of clear EU policy towards Belarus, Ukraine, Moldova and Russia in terms of their theoretical possibility to joint EU adds to uncertainty of integration processes in the region.  

Regional and global factors and challenges 

If Belarus, Moldova, Ukraine and Russia want to free the potential of the system of regional division of labor before they joint EU (provided they are invited) they are bound to break trade barriers that were erected for the last 12 years. Quite a few regional and global factors and challenges urge the countries to integrate. They are

-          Globalization of the world economy, inter-country and inter-regional competition that greatly increased mobility of the main factors of production;

-          New context of the international security system after September 11, 2001 and in the global fight against terrorism;

-          Revision of the term ‘”sovereignty” in the context of globalization, security and economic development challenges and functioning international organizations;

-          Growing demographic crisis and structural problems in many EU as well as in CEE and post-Soviet countries and lack of political will and public consensus to solve domestic problems by mobilizing internal resources;

-          Uncertainty about the future of euro, architecture of the European Union (15 + 10 + (maybe) 7) in the context of growing economic and social problems in major EU countries and their reluctance to firmly stick to basic economic and monetary criteria (for example budget deficit and foreign debt criteria) and to reform old-fashioned CAP;

-          Growing ideological and trade contradictions between the USA and EU in spite of membership of the countries in WTO, “Big Eight”, OECD etc; lack of common approach to deal with global security issues: terrorism, non-proliferation of nuclear arms, regional conflicts; the crisis and waning integrity of the concept “West” in transitional countries;

-          Inability of WTO to create a real free trade zone, weakness of WTO enforcement mechanisms and a number of legalized loopholes in international law that enables the countries to exercise protectionism;

-          Ideological and scientific crisis of the major international political and economic organizations – the UN, IMF, the World Bank, conflict among international organizations and the poor developing countries on the one hand and developed counties (donors) on the other within the concept of sustainable development;

-          Growing uncertainties about single labor market in EU, attempts to solve domestic problems at the expense of centralized funds, reluctance of EU countries to solve their structural problems (agricultural production, construction, heavy and coal industries);

-          Lack of comprehensive strategy of relations between EU and Belarus, Ukraine, Moldova and Russia and the region in general and hence danger of erecting a new Visa and Trade Iron Curtain at the eastern border of Poland and the Baltic States

-          Dominance of proponents of neo-collectivist, anti-free market and mercantilist thinking among intellectual elites, decision and policy makers in most EU countries.

Taking into account all these factors and challenges it is quite safe to believe that the integration of Belarus, Moldova, Ukraine and Russia into Europe will be difficult and contradictory. Different countries will obviously take different paths. One thing is clear: they are unlikely to joint the European Union in the next 10 years. So the problem arises what these countries should do in terms of inter-state cooperation in the meantime in order to make EU accession process easier and less costly (provided all the countries have this goals to join EU). Governments of Belarus, Moldova, Ukraine and Russia can learn a lot from European integration experience.

B.U.R.M. Free Trade Area - Moving towards EU without contrasting it 

B.U.R.M stands for Belarus, Moldova, Ukraine and Russia. Ideally ensuring free movement of goods, services, capital and labor among these countries (and probably Kazakhstan) based on WTO and EU principles (without numerous loopholes and excessive regulation) will be the best way to ensure sustainable development of the countries, to catch up of Western and Central European countries and to prepare for EU membership. While working out mechanisms of integration and making decisions on the substance of integration it is reasonable to use Copenhagen criteria that were adopted in 1993 for the most recent member-countries. At the very beginning of the integration it should be stated clearly that the goal is not formation of a new federation and creating sub-national bodies of power but just free movement of all forms of capital. The countries should pass political, economic, legal and institutional criteria that should be met by the countries in the process of integration. These criteria should meet EU enlargement criteria which are - stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities; the existence of a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the EU; - the ability to take on the obligations of membership including adherence to the aims of political, economic and monetary union; - the conditions for its integration through the adjustment of its administrative structures, so that European Community legislation transposed into national legislations implemented effectively through appropriate administrative and judicial structures.

At present the four countries has various degree of readiness to meet these criteria. For example Belarus needs to hold free democratic elections of all bodies of power (based on OSCE and Council of Europe criteria), to separate powers and to ensure independence of the judiciary. Russia, Ukraine and Moldova are much more advanced in terms of meeting political criteria than Belarus. It is also true about economic criteria (price liberalization, property rights protection, macroeconomic stability, well-developed financial sector and non-discriminatory access to market). It is unreasonable and counterproductive to copy many regulatory propositions from acquis communitaire. They actually block freedom of movement of capital, goods, services and labor. Taking into account the nature of the social economic regimes in the countries that would inevitably lead to economic and social dysfunctions. Members of B.U.R.M. Free Trade Area should not compete in showing lobbying powers of various business groups but stick to principles of free trade without exceptions of any kind. The more powers a country gets in imposing tariffs and non-tariff restrictions on freedom of movement of goods, services, money and labor the less effective the agreement will be.   In order to reach the agreement on B.U.R.M. Free Trade Area the countries should arrange the activities in the following way:  

-          agree on the Concept of the Free Trade Area. It should be signed by all heads of states;

-          form a Working group on monitoring negotiation process on Chapters that determine the content of the integration and passing its mandate. The countries invite a EU representative to be an observer of the integration process and to consult the parties on various issues;

-          29 (or less depending on the number of areas to be agreed upon by the countries) Commissions are set up to negotiate on each chapter). A EU representative will be invited to take part in the work of each commission;

-          each of the commissions will agree upon the schedule when the chapters are closed by all the countries. The scope of negotiation in each chapter should be as close to acquis communitaire as possible to ease EU access later;

-          Upon revision of the state of negotiation on each chapter the Working Group proposes the date of closing negotiation on each chapter. This proposal should be passed by all heads of states -          The Working Group makes annual reports on each of the chapters on a regular basis and informs the public about the progress on the Working Group’s web site. National bodies of power make necessary amendments in the legislation in the process of negotiation;

-          After all chapters are closed and signed by heads of states B.U.R.M. Free Trade Area is finally formed. It may have a sort of Secretariat as a standing body to monitor activities of the countries and to hold various meetings;

-          Each of the countries or all of them may agree to form a Customs Union or a monetary union provided it is based on EU principles. After joining EU any of the member of the B.U.R.M. Free Trade Area quits the Customs Union that is formed between or among the countries of the region;

-          At various points Belarus, Russia, Moldova and Ukraine start negotiations with EU if the parties choose to do so. Before any of the countries join EU B.U.R.M. Free Trade Area stands.   By doing regional integration this way we will ensure stability, security and prosperity of the four countries. They will be quick to discover their comparative advantages. By working closely in the B.U.R.M. Free Trade Area they will acquire experience and culture, build up credibility and trust which are necessary for being members of the single European family without borders and trade fences.