The document discusses the potential economic impacts of Azerbaijan entering into a free trade agreement with the EU through the Eastern Partnership initiative versus entering a customs union with Russia, Belarus, and Kazakhstan. Global simulation models are used to analyze the trade effects of zero tariffs under the two scenarios. While an FTA with the EU shows no significant trade impacts, long-term implications of joining a customs union could impose common external tariffs and energy policies that may hamper Azerbaijan's relations with the EU and Turkey. Key questions are raised about which integration path may be best for Azerbaijan.
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Socio-economic perspectives of Azerbaijan
1. FTA of EU- EaP countries
vs Customs Union
Socio-economic perspectives of
Azerbaijan
2. Presenter
• Ziya Alili;
• CFA candidate;
• Director of CESD School of European Studies;
• Econometric-Researcher at Centre for Economic and
Social Analysis;
• Consultant on EaP at Centre for Economic and Social
Development;
• BSc in Financial Management;
• MSc in Risk Management;
• Mobile: 00994 50 684 0119;
• Landline: 00994 12 497 5684;
• Email: AliliZiya@CESD.Az
• Email: Ziya.Alili@Gmail.Com
3. Agenda
• EU –Azerbaijan cooperation within EaP;
o Recent development
• EU-Azerbaijan trade turnover;
• Economic integration steps: FTA vs CU;
• Global Simulation of FTA and CU: Wealth creation
• EU-EaP FTA vs CU
• Conclusion;
5. EaP and Azerbaijan
No
development
in biopassports
3 rounds of
suc’l disc-ns
Agreement
expected by
end 2013
Visa
Facilitation
Diversification
of oil supplies
Current and
future energy
projects
Energy
Security
Compliance
with WTO
policies
100+ policy
amendments
Policy
Converges
6. Important meetings
• S.Fule, may 2013;
o Last round of visa negotiations: Agreement by end 2013
o Azerbaijan can be member of EaP and CU simultaneously;
• V.Putin, august 2013;
o No remarks on CU union accession;
• Azerbaijani delegation trip to Brussels, august 2013:
o Minister of Economic Development
o Deputy Minister of MoFA;
o Financing agreement: EUR 19.5 mln
7. EU-Azerbaijan Trade
relations
63.8%
70.7% 71.0%
67.1%
54.6%
47.7%
57.3%
27.7%
56.7%
43.6%
47.3%
57.2%
46.9%
20.1% 19.6% 19.4%
32.4%
29.2%
25.4%
28.9%
26.7% 26.7%
25.2%
23.8%
29.6%
25.4%
6.0%
3.6%
4.9% 6.1% 6.1% 7.0% 7.1%
10.8%
1.8%
6.1%
3.9%
7.2%
4.3%
26.8%
18.0%
26.1%
20.1%
23.2%
19.1%
25.2%
22.8% 22.9%
20.8%
23.5%
19.7%
18.5%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
-
5,000,000.0
10,000,000.0
15,000,000.0
20,000,000.0
25,000,000.0
30,000,000.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Azerbaijani export to EU
Azerbaijani imports from EU
EU % in total Exports, 2nd axis
EU % in total Imports, 2nd axis
CU % in total Exports, 2nd axis
CU % in total Imports, 2nd axis
Oil 840%;
Articles of iron and steel 460%;
Edible fruit and nuts 23%;
9. Economic Integration Steps
• Political Union
o MU + common politics, etc.
• Monetary Union
o EU + common currency
• Economic Union
o CU + Common economic policy
• Common Market
o CU + free movement for factors of
production
• Customs Union
o FTA + Common customs policy
• Free Trade Agreement;
o All products exempted
• Preferential FTA;
o Single product exempted
EU-EaP FTA
CU of
Russia, Belarus, Kazakhstan
Eurasian Economic Union
11. GSIM: the model
• World Bank, UNCTAD
• Available via WITS platform
o Wits.worldbank.org
• Trade Analysis and Information System
• Partial Equilibrium Model
o Imperfect substitution;
o Demand inelasticity;
o Supply inelasticity;
12. GSIM: Two Models
Parameter Model 1 Model 2
Database TRAINS
Reporter EU, EaP countries Customs Union, Azerbaijan
Partner EU, EaP countries Customs Union, Azerbaijan
Year 2012
Products Top 10 exports of Azerbaijan;
Scenario
Reporter EU. EaP CU, Azerbaijan
Partner Azerbaijan
Tariff Rates Cut by 100%;
Products Top 10 exports of Azerbaijan;
271019 Petroleum oils and preparations
271121 Natural gas in gaseous state
170199 Refined sugar, in solid form, nes
81070 Persimmons
300490 Medicaments nes, in dosage
151620 Veg fats &oils&fractions hydrogenatd,inter/re-esterifid,etc,ref'd/not
760120 Aluminium unwrought, alloyed
151219 Sunflower-sed/safflower oil&their fractions refind but nt chem modifid
390110 Polyethylene having a specific gravity of less than 0.94
13. GSIM: Results
Welfare creation Model 1 Model 2
Consumer surplus 0 0
Producer surplus 0 0
Trade creation 0 0
Trade diversion 0 0
Query ID 397826 397815
Why no effect?
Model 1: GSP of EU;
Model 2: CIS FTA;
15. Azerbaijan and CU: long term
implications
Stakeholderanalysis
International Partners
Businesses
Society
Sectorialanalysis
Energy
Agriculture
Construction, Tourism, Transp
ort
Non-oil production
16. FTA of EU-EaP or CU?
• CU will impose common external tariffs;
o Not a case in EU EaP FTA
• CU has non-trade requirements:
o Energy policy;
o Line up with common domestic energy prices;
o Not a case in EU EaP FTA
• CU may hamper Azerbaijan’s relations with EU and
Turkey;
o EU EaP FTA will not damage Azerbaijan’s relations with Russia and other
CIS members;