The prospect of bringing the European Union and Russia closer together within a Common European Economic Space (CEES) tops the agenda in the EU-Russia dialogue, confirming that the EU views Russia as a strategic partner. 1 This article argues that the CEES is not only positive for Russian economic growth, but that it is a condition for acceleration of sustainable growth and higher productivity in Russia. The aim of the EU in building the CEES is not to force Russia into a particular mould, but to offer a model for economic and legal integration, which can help to boost Russian economic performance. Both the EU and Russia have achieved internal unities, bringing together huge diversities of nations, cultures, and religions. The time has now come to close the gap opened between Russia and the rest of Europe at the beginning of the last century. Integration within the CEES opens the way to this objective.Like the European Economic Area (EEA) for the EEC and EFTA, the CEES is a pragmatic approach to solving the problems of increasing trade and investments between Russia and the EU. We will therefore offer a preliminary analysis of the problems of EU-Russian trade, and the importance for the Russian economy of improving productivity and achieving sustainable growth. It will then be shown that prospects of imminent EU enlargement strengthen the need for the EU-Russia CEES.
The shift towards another growth model of the Russian economyRussia's macroeconomic situation since 1999 appears fairly healthy. Russian growth is mainly powered by exports: the increase in the trade surplus since 1998 has been 2-2.5 times greater than the rise in GDP. However, as two thirds of Russian exports are primary goods, Russia's growth depends on evolution of world market prices. The point is confirmed by the fact that imports, particularly imports of machinery and equipment, have not increased significantly. We are thus far from a Russian economic boom, based on multi-sectoral productivity increases and strong investment activity. The overall investment rate relative to GDP has remained low at under 20% during the last five years. This is far from the rates that are needed for economic takeoff in emerging economies -between 25% and 35% in a medium-term perspective.Russia remains mainly a rent economy, with growth driven by primary goods production and export. This model cannot be maintained in the long term for the following reasons: • The model is incapable of providing sustainable growth, since growth in such a model depends on increasing world prices for energy or huge investments to increase output.
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