Official website of the President of Russia

1. Introduction

The EU-Russia Summit in May 2001 decided to establish a joint High-Level Group (HLG) on the common European economic space (CEES), chaired by Commissioner Patten for the EU and Deputy Prime Minister Khristenko for Russia.

The EU-Russia Summit in October 2001 provided the HLG with a mandate to elaborate a concept for a closer economic relationship between Russia and the EU, based on the wider goal of bringing the EU and Russia closer together. The HLG is to define the core elements which need to be put in place in order to create a CEES, the aim of which is to bring the EU and Russian economies — including the rules and regulations within which they operate — closer together and form the basis for an EU-Russia medium/long term economic cooperation strategy. form the basis for an EU-Russia medium/long term economic cooperation strategy.

The HLG was tasked to consider the opportunities offered by greater economic integration and legislative approximation and assess options for further work. It was also tasked to identify means and mechanisms to achieve common objectives and consider the time-scale for implementation.

The mandate and its implementation is to be reviewed by the EU-Russia Summit not later than October 2003.

This Report fulfils the requirement of the mandate that the HLG should report the outcome of discussions to the EU-Russia Summit.

2. Defining the common European economic space

The HLG has agreed that the overall objective of the CEES, in broad terms, is to link the EU and Russia in a privileged relationship commensurate with their proximity to each other and interdependence in trade and economic terms, focussing on regulatory and legislative convergence and trade and investment facilitation. The shaping of the CEES may in the longer run serve as a major area of the strategic partnership between the EU and Russia.

The aim should be to bolster EU and Russian long-term sustained economic growth for the benefit of all. Ultimately, economic agents should be able to operate subject to common rules and conditions in their respective fields of activity throughout the enlarged EU and Russia (a potential combined market of up to 600 million consumers).

It has been agreed that the work on the CES concept will continue, involving experts of both sides. In so doing, it will be necessary to take into consideration the development of integration processes in Europe and the world, including all relevant experience of the EU and Russia.

The HLG has discussed the need to define the eventual form and structure of the CEES. It has agreed that the outcome of its further discussions on these matters will take into account relevant aspects of the PCA, the impact of EU enlargement on EU-Russia relations and the economic interests of both Parties as well as progress in Russia’s WTO accession negotiations.

Further reflection will be necessary, following the outcome of studies on the economic effects of regulatory convergence and liberalisation on growth, competitiveness and trade and investment flows.

3. Progress since the October 2001 Summit

Considerable progress has been achieved since the Summit in October 2001.

The first meeting of the HLG took place in Moscow on 5 December 2001. At that time, the HLG decided to designate an informal group of experts to support its activities, in particular by taking forward technical work. This group of experts subsequently met three times: on 19 December and 28–29 January in Brussels and on 6–7 March in Moscow.

Following the formal establishment of the HLG by the Co-operation Council, a second meeting of the HLG took place in Brussels on 26 March 2002. It approved a work plan for CEES activities up to end-2003, including areas of mutual interest with possible objectives and practical steps to achieve regulatory convergence. The work plan also notes the importance of identifying obstacles to integration as well as the means and mechanisms to achieve common objectives.

The HLG has decided to pursue a targeted approach. A list of key issues for work has been agreed, which includes sectors where cooperation will boost trade and investment and where the trade interest of the EU and Russia is strong. The list also reflects the achievements and experience of integration in the EU, in particular the creation of the EU’s Single Market. The sectors include standards, technical regulations and conformity assessment, customs, financial services, accounting/auditing, transport, space launching services, public procurement, telecoms and competition.

There will be two stages of work. In a first stage (until end 2002), the EU and Russia will consider the ultimate objectives of the CEES and in parallel prepare the ground for — and launch, wherever possible — work to achieve regulatory convergence as well as measures to facilitate trade and investment. Work will assess the potential impact of a CEES, both on the economy as a whole and across a range of its sectors. It will also identify obstacles to integration as well as fields where convergence and the removal of identified obstacles will facilitate trade and investment. Relevant studies have been commissioned by Russia as well as the EU.

In a second stage (to October 2003), the HLG will consider other measures to implement the terms of reference, identify means and mechanisms to achieve common objectives and consider the time-scale for implementation.

In addition to the meetings of the HLG and its experts, the CEES was the subject of discussions at the fifth Cooperation Committee on 29 November 2001 and fourth Cooperation Council meeting on 16 April. Specific aspects have been discussed in relevant PCA sub-committee meetings.

The work of the HLG has been welcomed by EU and Russian industry. The conclusions of the 4th meeting of the EU-Russia Round Table of Industrialists called for the development of a detailed and realistic programme of integration between Russia and the EU, with reference to the CEES.

The HLG welcomes statements of interest from the business community as well as representatives of civil society and will in due course provide the opportunity for such bodies to make input.

4. Next steps

A third meeting of the HLG will take place in autumn 2002 to evaluate progress in implementing the agreed work plan.

The HLG will consider the outcome of studies on the impact of regulatory convergence and the removal of barriers to trade and investment between the EU and Russia. It will also take stock of the launching of regulatory convergence work in the key sectors. Concrete work should be started in the fields of accounting and auditing and standards, technical regulations and conformity assessment.

A detailed report will be made to the Summit in autumn 2002 on progress in each of the key sectors including the studies, to allow further consideration of the long term prospects for EU-Russia economic integration.

The HLG requests the Summit to endorse this approach.

EU-Russia common European economic space (CEES) work plan

The High Level Group (HLG) has agreed on the following work plan for implementation of the mandate given to it by the EU-Russia Summit in October 2001.

General approach

Work on the CEES will be based on the following principles:

- There will be two stages of work.

- Work will initially focus on a number of key issues. These include horizontal issues such as standards, technical regulations and conformity assessment, customs, public procurement and competition, as well as certain service, industrial and agricultural sectors of the economy.

- The impact of economic integration (in terms of both benefits and costs) will be assessed and measures to achieve regulatory convergence launched, wherever possible.

- Wherever possible, PCA institutions may be involved in taking forward work.

Stages of work

In a first stage (until end 2002), the EU and Russia will consider the ultimate objectives of the CEES and in parallel prepare the ground for — and launch, wherever possible — work to achieve regulatory convergence. Work will assess the potential impact of a CEES, both on the economy as a whole and across a range of its sectors.

In a second stage (to October 2003), the HLG will consider other measures to implement the terms of reference, identify means and mechanisms to achieve common objectives and consider the time-scale for implementation.

Key issues and sectors

Work as described above will be carried out in the following key issues/sectors:

Standardisation, technical regulations and conformity assessment, SPS issues: identify and prioritise sectors of greatest mutual interest, with the aim to decrease additional burdens on trade through approximation of standards and technical regulations and rules/practice in conformity assessment. Examine ways to involve Russia in work of CEN, CENELEC, ETSI, as well as of possibilities and conditions for undertaking additional steps in order to enhance equivalence in the field of conformity assessment, with a view to ultimate mutual recognition.

Customs: identify areas for approximation of legislation in key customs legislation fields. Experts should meet to examine the impact on trade of simplified procedures, particularly concerning rules of origin and customs valuation, use of the SAD by Russia, possible Russian accession to conventions on common transit and application of an integrated data transmission system.

Public procurement: identify areas for approximation of EU and Russian legislation and practice. Aim is to promote competitiveness and value for money, as well as assess the feasibility of establishing a public procurement tender database in Russia.

Competition: identify areas for approximation of rules governing anti-competitive behaviour of companies and disciplines on state aids with a view to achieving an equivalent level of effective competition. Create appropriate institutional structures and strengthen enforcement and appeal procedures.

Services:

- financial services (banking, insurance and securities) – identify areas for approximation of legislation, including prudential requirements, and establish effective regulatory and supervisory bodies, train personnel;

- accounting and auditing – focus should be on areas for harmonising financial information to facilitate trade and investment; examine benefits of adopting European/international accounting standards and appropriate rules on corporate governance, including protection of minority shareholders;

- transport – identify areas for harmonising standards and procedures, look at possible transport policy co-ordination, with the aim in particular of simplifying freight transport.

- space launching services – experts will study what steps could be taken to facilitate cooperation and trade in these services.

- telecommunications – identify areas for the approximation of standards to facilitate interoperability of Russian and EU telecoms sectors, especially in the fields of GSM and UMTS and establish an appropriate, impartial, regulatory framework; promote e-commerce.

Industry: inter alia in the ferrous and non-ferrous metals sectors, aircraft building, car manufacturing.

Agriculture: inter alia in the sectors of meat and meat products, grain production.

Impact assessment

Impact assessment studies should allow Russia and the EU to better define the level of ambition of the CEES. Such analysis should assess the economic effects of regulatory convergence and liberalisation on growth, competitiveness and trade and investment flows. It should also, wherever possible, identify obstacles to integration as well as fields where convergence will facilitate trade and investment. External experts, organisations and business associations may be involved in these studies, inter alia through the use of appropriate technical assistance.