Friday, 02 May 2014 14:56

The Importance of the Eurasian Development for the European Economy

by Spyridon St. Kogas, Chief Executive Officer of Knowledge Industry Group

The era of transcontinental economies
We live in an era of a globalized market, every specialist of the economy, every analyst of international relations, every Chief Executive Officer all around the world, accept and feel this undoubted fact every minute in his life, in his action, in his professional relations.

But this is the surface of what's going on the global economy. The serious issues are not linked with the fact, with the globalization's myth, but with the dynamic trends, the unseen economic powers, which this globalization erected. All of us need to be more specific when we speak about globalization, what we mean and what we want from it.

Thus, the ongoing economic crisis that have begun in 2008 accelerate the globalization process on directions unknown yet. From this point of view this crisis has not only similarities with the crisis of 1929, similarities of destructive consequences, but push the world economy to transit to a new phase of development.

A phase that combines the following processes:
. The crisis of European Union Structure
. The general crisis of the West and the simultaneous rising of the Rest
. The formation of the multipolar coordination of BRICS

From these three geo-economic processes we get into the phase of a "transcontinentalisation" of the globalization, which means not only we finish with the one-polar economic drivers but also the whole project of globalization getting more and more dependent to the intercontinental cooperation forms of market.

These forms will give to the term of "regionalism" a different meaning, more long-termed and complicated. Products of this transitional phase of the globalization process is the efforts of USA to propose and prepare the opening of a common Transatlantic economic zone with the European Union and on the other hand the project of the Eurasian Economic Union which expresses an initiative for a broad development on a continental level of the core countries of the Commonwealth of Independent Countries to expand the potential of Europe and Asian markets on an institutional level.

The question is how much aware we are for the importance of these ongoing projects for the course of the world economy not only for the next twenty or ten years but for its immediate situation. We need to approach the new situation with a realistic point of view, abandon the old stereotypes of the one-polar era and at the same time abandon ideological taboos, which have already faded away from the world's economy.

This is the strongest argument of defense of this new multipolar economic era. The point is to understand its potentials in order to exploit practically the unimaginable chances for growth.

The Eurasian Development: The old paradigm and the new challenge

It's a common ground to speak about the geo-economical and geopolitical importance of the Eurasia, for the development of economy, politics or world hegemony generally. Today we are in front of concrete facts in the broad Eurasian area. First we live the re-emergence of Russia and China on the economic and political field worldwide and especially on the broad Eurasian zone.

Secondly, we live the crisis of European Union project. We have an example of an old paradigm but with an extreme value of experience, knowledge and tools for every new super-periphery project and on the other hand we can see the new challenge of the Eurasian Development with few steps, not so much experience and of course a more ambitious vision for the future.

Unfortunately, the importance of the Eurasian Development has been distorted from the political propaganda or the ideological tools of the previous century. But the economic reality is hard, real and more progressive from any political approach.

The economic priorities of the Eurasian Giants as Russia have extreme importance for the future of the European Economy. Why?
. Because the investment orientation is concentrated on Infrastructures Industry.
. Because their Research orientation is concentrated on the support of Industry and Science.
. Because the Trade flows from the Eurasia spreading in the world market with unstoppable rhythms.

These orientations are strongly linked with the European Economy. For example see the trade relations of European Union with Russia:
. Russia is the third trading partner of the EU and the EU is the first trading partner of Russia.
. Trade between the two economies showed steep growth rates until mid-2008 when the trend was interrupted by the economic crisis and unilateral measures adopted by Russia, which had a negative impact on EU-Russia trade. Since 2010 mutual trade has resumed its growth reaching record levels in 2012.
. EU exports to Russia are dominated by machinery and transport equipment, chemicals, medicines and agricultural products.
. EU imports from Russia are dominated by raw materials, in particular, oil (crude and refined) and gas. For these products, as well as for other important raw materials, Russia has committed in the WTO to freeze or reduce its export duties.

The EU is the most important investor in Russia. It is estimated that up to 75% of Foreign Direct Investment stocks in Russia come from EU Member States (including Cyprus).

Or the Trade of EU with China:
. EU-China trade has increased dramatically in recent years. China is the EU's biggest source of imports by far, and has also become one of the EU's fastest growing export markets. The EU has also become China's biggest source of imports. China and Europe now trade well over €1 billion a day.
. EU imports from China are dominated by industrial and consumer goods: machinery and equipment, footwear and clothing, furniture and lamps, and toys. EU exports to China are concentrated on machinery and equipment, motor vehicles, aircraft, and chemicals.
. Bilateral trade in services, however, only amounts to 1/10 of total trade in goods, and the EU's exports of services only amount to 20% of EU's exports of goods.
. As a result, the EU records a significant trade deficit with China. This is in part a reflection of global and Asian value chains, but in part also due to remaining market access barriers in China.
. Investment flows also show vast untapped potential, especially when taking into account the size of our respective economies. China accounts for just 2-3% of overall European investments abroad, whereas Chinese investments in Europe are rising, but from an even lower base.

If we study closer the above data and try to draw out conclusions about the total numbers of the economic relations of the European Economy with the two Eurasian giants, it will be undoubted to support the Eurasian Development as something absolutely vital for the everyday normality of the European economies. Every slowdown on the economic indicators of Eurasian giants has tremendous consequences for the European Economy. Europe was really lucky that during those years of its economic crisis Russia and China were not under the same disastrous economic situation.

Infrastructures, Transportation, Trade .... The corridors for the unification of European Market with the Asia.

Today, when we speak about open regionalism and transcontinentalization of Eurasian Development, we are referring to the possibilities, which are already in process because of the implementation of Plans in the triptych of Infrastructures, Transportation, Trade. These triple strategy of development is the distinct characteristic of the explosive growth of the Eurasian economies the last seven years, and this triple –oriented strategy re-evaluate the economic methods and approaches that dominated the international economic agenda the last two decades.

No, the point today is not to speak generally about the free market values. No, the point is not to be trapped in the dilemma between austerity religion and neo-keynsianism practice. Today the power of the globalized market, the unification of the mega-spatial zones of economy and the connection of the world human talent pool , bring forward something different. The need today is to exploit and bring together the Scientific Knowledge with the Technological Tools in order to create new products and new transportation routes for these products. The meaning of investments changed on this level. The Infrastructures –Transportation and Trade triptych are the essential investment pools for the global growth.

This logic is not theoretical any more. "In 2007, 17.7 million TEU were transported from Asia to Europe, and 10 million TEU from Europe to Asia. The difference of 7.7 million TEU represents empty containers returning to their point of origin. However, container shipment via the Suez Canal is limited. According to UN ESCAP (2007:39), by 2015 containerised transportation from Asia to Europe and from Europe to Asia will reach 26.1 million TEU and 17.7 million TEU respectively."(1)

The China's Leap Forward unified transport strategy and Go West program to develop its western provinces will have the effect of increasing cargo flows to Europe via Kazakhstan and Russia.

Let's think again what is beneficial for the European Economy
Thus, it will be reasonable to ask if European Economy has been planning its own strategy for the unification of its market with the Eurasian core. How much it will invest on infrastructures, transportation and trade the next years; Is in position the European Union to have a cohesive strategy of reorientation of the European economy or is so much stuck it to the institutional and economic crisis of Eurozone?

We should be more daring and support initiatives that will support a European Business trend to the Eurasian Development. In all over the Continent, from the United Kingdom to Greece and from Italy to Sweden, there are companies, funds, economic executives and businessman who have daily relations with the Eurasian Market. We can see this intense interesting in the conferences and business events that spreading in all over the Europe about the relations of Eurasian development with the European Economy.

The choice of Eurasian Development is full of pragmatism and does not exclude simultaneously the enforcement of economic relations of European Economy with other poles of global economy as USA, South America or Africa. This is obvious and reasonable for every serious economic power. Such a kind of cooperation doesn't need to start with an institutional extinction of the European Union or with the rescission of the Eurasian Economic Union. A third road of cooperation, common areas of economic action, joint projects of scientific research, is a realistic alternative. The formation of custom's platforms, the systematic networking and lobbying of Companies and Businessmen from Europe and Eurasia , are also need to enforced more.

The Europe has to seize the advantage of its geo-economical position on the world map of Economy and transform its own self in a real worldwide economic giant through the unification of its market with the broad Eurasian area. This perspective is a real challenge for every CEO, businessman, Academic Researcher, State official. The benefits would be multiple and with long-term value.

The point is to understand them and support the analogous economic action. The vision of the Schuman Declaration for one single economic and political Europe could be transformed and extended. A Europe, center of a great Eurasian Economic Transcontinental Zone, heart of a market from Lisbon to Vladivostok, it is the historic challenge for the European Economy.

 

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