Dubious Economic Partnership: Why a China-Russia Free Trade Agreement Is Hard to Reach

Abstract

Since the successful conclusion of the Uruguay Round of trade negotiations in the early 1990s, regional trade agreements of various types, including bilateral free trade agreements (FTAs), have replaced internationally comprehensive agreements as the main driver for development of official trade relations. There is also a tendency for such agreements to extend beyond trade and cover security and other issues. Russia is a “resource-cursed” country like Australia, and there seems to be a prima facie case for China and Russia to conclude an FTA similar to the China-Australia Free Trade Agreement (ChAFTA). However, Russia intends to promote free trade with China via the Russian-led Eurasian Economic Union (EAEU) because it views any FTA in quite narrow political and security terms, and its economic agenda is orientated toward new industrial development rather than trade development. In comparison, China prefers an FTA within the framework of the Shanghai Cooperation Organization (SCO) because it is, at the current stage, most interested in enhancing economic development and trade across the Central Asian and wider Eurasian regions. Russian resistance to the idea of an SCO-based FTA was one of the reasons for China’s initial development of the land part of the “One Belt, One Road (OBOR)” initiative. While China and Russia have recently agreed to work toward an FTA between China and the EAEU, it is not quite hopeful in the near future, and a ChAFTA-type FTA between China and Russia will be even more difficult to achieve mainly due to Russia’s lingering strategic considerations.