Written by Bartu Geyik
Uzbekistan has recently hosted the Economic Cooperation Organization (ECO) Summit of 2023, uniting many countries from West to South Asia. This economic cooperation has been ongoing for the past four decades, reaching 10 members during 1992 after the ex-soviet Central Asian countries joined the cooperation. The world is becoming multipolar, evidenced by the emergence of regional multicultural organizations including the ones established by developing countries to increase their growth and development, such as ECO. The objective of such countries is to accelerate their growth in regional economic unions, creating benefits for each member’s economy through tariff agreements and customs unions with the potential of launching a common market. The areas ECO member nations cooperate in are trade, transport, connectivity, energy, tourism, productivity, and the environment, all with the hopes of economic growth and the welfare of their nation (ECO Vision, 2017, p.6). This article will focus on whether or not ECO is a successful economic cooperation, specifically analyzing if it is possible for them to reach the level of the EU, becoming a role model for other developing nations and regions.
ECO currently consists of Iran, Turkey, Pakistan, Azerbaijan, Afghanistan, Uzbekistan, Turkmenistan, Kazakhstan, Kyrgyzstan, and Tajikistan. Due to the connected borders these countries have, along with the similarity in languages among some of them, there has been an advantage in terms of trade relations (ECO Vision, 2017, p.1). The founding member nations, Iran, Turkey, and Pakistan, have opened the doors for ex-soviet states to form an economic alliance, providing a platform where they can express their economic independence. As international trade rises through the liberalization of trade, the expectation is that unions with free or low tariffs will help elevate the welfare level of each member country (IMF, 2001). To this end, there have been organizations, such as the EU, APEC, NAFTA, MERCOSUR etc. The intent behind all of these organizations is to form a successful economic and political union.
The common history with the ex-soviet states and Russia enables the latter to perform power over the former countries, naturally affecting ECO’s autonomy negatively. Most of the time, these countries cannot make their decision independently especially when it comes to the trade of natural gas and oil. It has to be taken into consideration that Russia is still their leading trade partner (Cooley, 2015, p.1). As long as member countries prioritize trading with strong economies, whether voluntarily or through obligations, their inner trade relations will remain insufficient. For example, the top ten countries Kazakhstan trades with only includes two ECO countries, Turkey and Uzbekistan, with Russia and China at the top (ITC, 2015). Intra-regional trade of ECO is 8.2% of the total trade the region has with the rest of the world (Trade Statistics, 2023). In comparison, the EU’s imports and exports within itself outnumber external trade for the EU member states, with the exception of Ireland and Greece (Eurostat, 2023). The ECO trade statistics show that the member states are not economically benefiting as much from this alliance as they should be.
If ECO members had more free reign on their economic and political decisions, willing to act as a whole, it would be the perfect opportunity for them to fill in the trade vacuum created in the region due to the Ukraine war. By forming a customs union and common market, the region will be able to better utilize its vast economic opportunities. For instance, the comparative advantage of each country as a result of the specialization forced upon them during the Soviet Union will contribute a lot to the region, if the countries are able to combine their resources under ECO. As international trade around the globe is becoming more competitive, each nation is trying to increase their share of the pie, adopting free trade by decreasing national regulations. To this end, regional cooperations are becoming more and more prevalent due to this new global world order. This way, ECO can not only increase trade within itself, but also begin attracting foreign investment to the region by demonstrating its power to the rest of the world. Although the involvement of Iran could concern many Western nations in terms of government intervention, with most of the members being secular, open trade seems to be prioritized.
The creation of customs unions would reduce the cost of trade and investment in ECO. This way, the production capacities and technologies will improve for each member state and the region, due to competition and rise in foreign investments, helping them increase their economic efficiency (Turk, 2020, p.8). Also, bordering the Mediterranean Sea, Black Sea, Caspian Sea, Persian Gulf and Indian Ocean, and having direct transportation among the nations emphasize the importance of ECO improving its transportation facilities (Eco Vision, 2017, p.8). The region is very important due to its oil and natural gas resources and the transportation of them has always been an economical and political issue. For instance, western countries prefer them to be transported on the energy route independent from the Russian Federation and Iran’s control, making sure that the transportation continues without interruptions. Due to these economic and political worries, we witness several alternatives of carrying energy resources in the region.
The EU Single Market is one of the most important successes that was accomplished by the EU, providing the free movement of goods, services, capital, and people in Europe. The Euro made everything easier in this market, creating a real bond among eurozone members. Since there are tariff negotiations among ECO members to this day, the possibility of reaching a common market seems unlikely. ECO members are reluctant to lower tariffs to protect their domestic productions. One of the goals of ECO was to protect each member from any negative impact of the financial and economic situation possibly taking place internally or externally. This protection can only be accommodated with common monetary regulations, which require active institutions and the willingness of the members. ECO Trade and Development Bank could be more active in supporting investors, promoting Direct Foreign Investment between the member countries as well as providing trade finance loans to give momentum to internal trade (ECO Trade and Development Bank, 2023). ECO lacks its own version of the Economic and Monetary Union, which controls the EU’s monetary policy, protecting members from economic crises. Unfortunately for ECO, the most obvious similarity between the EU and ECO is the fact that the member states have a common religion, whereas the former has similar political systems and interests under supranational institutions, unlike the latter.
ECO could benefit from forming a tariff union, followed by a single market, reaching a high global level as it was the case with the EU. Yet, it is not easy as ECO does not have members with strong economies like some in the EU. The EU stands out in comparison to other similar groups due to having member states with strong economies, even being considered as a single member entity at G7. Expecting the same result from other economic unions is not realistic, since most of their goal is to develop their country instead of being part of a greater whole. There is a clear lack of common identity, something ECO has not been able to create for them yet. Post-colonial Africa and Post-Soviet republics are struggling with the effects of their pasts, still attempting to reach the economic autonomy and power of western nations. Although ECO has a lot of potential, as long as the member states aren’t willing to consider themselves as a whole similar to EU members, it is very unlikely that ECO will reach the level of the EU.
References
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