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ABOUT THE CRITERIA FOR EVALUATING THE INTEGRATION EFFECT IN THE EURASIAN ECONOMIC UNION
1Arupov A. A., Doctor of Economic Science, 1Abaidullaeva M. M., Ph. D. in Economy, 2Kalieva S. A., Doctor of economic science,
2Arupova N. R., Moscow state institute of international relations (U), Ph.D.
1The Institute of world economy and international relations, 2The Institute of Economics of the CS MES RK
ABSTRACT
Development of the integration process was a logical result of the growth of the international movement of goods and factors of production, which required a more reliable production and marketing links between the countries and the elimination of many obstacles to international trade and the movement of factors of production. It was possible to do only within the framework of interstate integration associations on the basis of a lot of political party agreements. Within the framework of the international economy in general, integration must be assessed in terms of whether it is a step towards greater freedom of trade or, conversely, is a restriction on the way trade flows. In order to assess whether the creation of this or that integration group in the interests of the international economy as a whole, a number of independent researchers and experts have formulated a number of criteria.
Armenia, Kyrgyzstan.
© 2015 The Authors.
A study of cross-border integration and integration within the individual states based on the analysis and evaluation of the integration of markets, which is understood as the establishment of linkages between spatially distinct markets and specific trading platforms.
There are four main methods of measuring the integration of markets, which are developed by the Asian Development Bank, in particular:
1. Definition of cross-border flows of goods, services and capital.
The classic way to assess the volume of trade between the countries is the indicator of the share of intra-regional trade in the total foreign trade turnover [1] using a group of alternative indexes. Among them should be highlighted:
- Indicators of regional trade concentration (Herfindahl-Hirschman Index, the index of the concentration, the Gini coefficient and others);
- the intensity indices of intra-regional trade: the share of intra-regional trade, indicators of the dynamics of mutual trade, analysis of trade flows (used in East and Southeast Asia) [2] ;
- indicators of absorption capacity to export and the ability of the saturation of import to assess the complementarity of trade and combinations thereof, which are the modification indices of revealed comparative advantage, actively used for the characterization of foreign trade as a whole [3];
- the definition of the volume of mutual trade between the countries on the basis of the gravity model, in which the mutual trade is directly proportional to the size of GDP and inversely proportional to the distance between the countries [4];
- the number of telephone calls (integration in the field of communication), trade in food products (integration in agriculture and others) - are the measure used by the UN Commission.
ARTICLE INFO
Received 11 November 2015 Accepted 20 November 2015 Published 30 December 2015
KEYWORDS
globalization, economic integration, international trade, the Eurasian Economic Union (EAEU), Kazakhstan, Russia,
2. The indicators of price structure using the aggregate macroeconomic indicators of price (the market for goods and raw materials, the financial market), the law of one price are applied to the study of internal integration [5, 6, 7, 8].
3. The integration of capital markets.
4. The scale of regional specialization: the more the markets are integrated, the greater the incentives for specialization of individual regions.
The index of revealed comparative advantages offered by Balassa in 1965 [9], used for the analysis of trade specialization of the country and calculated as:
RCAi = (Xy / Xit) / (Xq / Xnt) = (Xy / Xq ) / (Xit / Xnt), (1)
where X - export, i - the country studied, j - product (or industry), t - group of products (or industries) and n- group of countries.
If the RCA1 > 1, the country has a comparative advantage, if the RCA1 <1, then the country has no benefits to a certain group of products or industries.
We note that the easiest way to calculate the index of comparative advantage was offered by Lisner (Liesner H.) in 1958 during empirical studies of comparative advantage in the UK trade with the countries of the Common Market. This index is calculated as the ratio of the export of a single product of the country to the total exports of the product by the group of countries [10].
RCA2= Xij / Xnj (2), (2)
where X - export, i - the country studied, j - product (or industry) and n - number of countries.
On the basis of the calculation of this index the study of comparative advantages by Vollrath T. were conducted at the global level [11], by Balassa - at the sub-global and regional levels, by Dimelis S. and Gatsios K. were conducted in the conditions of bilateral trade between the countries [12].
Alternative calculation of the index of «revealed comparative advantage» allows to define the comparative advantage based on intra-industry trade [13].
RCA3 = (Xij - Mij) / (Xij + Mij), (3)
where X - export, i - the country studied, j - product (or industry).
The range of RCA3 index is from -1 to +1, but can be set to 0.
Greenway D. and C. Milner proposed a formula, based on the equality of the Balassa:
RCA4 = (Xij / Xit) / (Mij / Mit) = (Xij / Mij) / (Xit / Mit), (4)
where X and M - exports and imports, respectively, i - the country, j - product (or industry), t -group of products (or industries).
The advantage of calculating the natural logarithm of indicators that correspond to the index RCA4, is the comparability of the difference values of the index, regardless of the initial values. Thus, an increase of RCA5 by 100 always means growth of RCA4 in 2,72 times.
European centre for development policy management has developed a methodology to assess the partnership agreements between the two countries based on factors such as:
- qualitative indicators: determination of ordinal scales across multiple dimensions (interviews), determination of the number of agreements and regulations. Final integration of the index combines information on the areas of cooperation. For example, the index of institutional integration of the European Central Bank, calculated for the EU and Mercosur is from 0 to 100, and is composed of four indices ranging from 0 to 25 and describe the degree of integration within the framework of a free trade area, customs union, common market, economic union and the «complete economic integration»;
- quantitative measures (tariff barriers) - a measure of inter-country cooperation.
Such an approach takes into account the various objectives of partnership agreements and includes a scorecard of four blocks:
Block 1 - bilateral trade.
Block 2 - the intensification of cooperation with the partner country.
Block 3 - the quality of the economic reforms.
Block 4 - the liberalization of markets.
Six indicators characterize «achieve integration» and are measured on a five-point scale [14]:
1. The trade in goods and services;
2. The mobility of capital;
3. Labor mobility;
4. The importance of supranational institutions;
5. The coordination of monetary policies;
6. Coordination of fiscal policy in the directions:
- international trade in goods, services, technologies and intellectual property;
- international movement of factors of production: capital (foreign direct investment); labor (in the form of natural migration of unskilled and semi-skilled workers and a «brain drain»);
- international financial transactions: loans (private, public, international organizations); basic securities (stocks, bonds and other debt instruments); derivative financial instruments (futures and options etc.), currency operations.
Trade integration as a process of reducing trade barriers and increase participation in the international economy, is the basis of not only global, but also regional economic integration. By basic indicators of trade integration include internal and external regional trade.
According to the system of indicators of the OECD [15], the intra-regional trade - is the inner region's exports, as measured by the sum of the export countries in trade within the region:
n n-1
XU =£ZXj , (5)
1=1 j=1
where Xn Intra - domestic exports of the region;
XJi - the country's exports, i- within the region, i.e. in other countries, j- this region (ij
External regional trade is an external region's exports, which is calculated as the difference between total exports of exporting members and the internal region's exports as follows:
Xn _ X ' V World -w-n
Extra = ^ Xi "X Intra > (6)
i=1
where Xn Extra - external exports of the region;
XjWorldi - total exports of each country in the region, including trade within the region and
beyond.
Relative indicators - the share of regional trade in world trade and export market share in the region. The share of regional trade in world trade is defined as the ratio of domestic exports to the region's exports to the world:
XTn
AY
kWoild
(7)
The share of regional trade increases during the formation of the integration block and stabilized if the export unit grows at the same rate as world exports.
When calculating the export market share the integration block is regarded as a single economic entity of the global economy. Its market share is the ratio of regional exports to the external world exports:
^^ n*x na /
/y
^ World
feto/ (8) Av
Frequently used indicators and evaluation of the integration processes are organized into 3 blocks in Figure 1.
In assessing the effects of trade it is important to determine a trading partner of the country or region in terms of imports.
Combining reproductive processes in two or more countries in a single a macroeconomic integration and includes:
- approval of the ultimate goals of socio-economic development in the medium and long term between interested countries;
- the definition of coordinated structural trends, innovation, investment, foreign trade and social policy to ensure the fullest use of the total resource potential of integrable countries to achieve social and economic goals.
Modelling the interactions between countries is a tool for determining the degree of functional relationships between key macroeconomic and sectoral indicators.
In the future, this model allows to determine the optimal structure of production and distribution, and foreign investment flows, which maximizes the potential of economic growth for each country, taking into account the objective of the existing resource constraints.
Additional GDP growth, the country received through integration with the other is not nothing but a macroeconomic integration effect, the value of which is determined by scenario modeling of the economy. At that, two scenario options of macro structural models with different level of integration interaction are developed. All other model parameters in both scenario variants must be identical. In this case, the increase of GDP in the variant with a higher level of integration is a macro-economic assessment of the effect of integration.
Block 1 - the degree of integration of the national economy in international trade:
Indicators of the intensity of foreign trade:
1. The indicator of foreign trade turnover -
FTT=EX+IM, (9) where EX - export. IM - import of goods.
2. The trade balance -TB=EX-IM (10)
Positive balance - when exports more than imports, the negative -when imports more than exports.
Performance evaluation of the degree of openness and the country's participation in world trade:
1. The export quota = value of exports / value of GDP * 100% (11)
The World Bank on the degree of openness of the economy highlights a number of countries:
a) a country with a closed economy - less than 10%;
b) countries with relatively closed economies - 11-24%;
c) the relatively open economy - 25-34%;
d) the country with an open economy - more than 35%.
2. An import quota = import cost / value of GDP * 100% (12)
3. Structure of imports - is the ratio of the volume of imported raw materials and finished products. This figure shows the dependence of the economy on foreign markets and the level of development of its industries.
"Ö
&
"Ö =
Block 2 - The degree of participation of the country's economy in the international movement of factors of production:
1. The net inflow of foreign investments - the difference between the inflow of investments into the country and the outflow of investments abroad.
NIFI = IFI - OFI (13)
2. The share of foreign investments received in the national economy in the global investment volume is the ratio of the volume of imported and accumulated direct foreign investment in the country's economy to total global investments (to evaluate the extent to which the foreign investor participates in the economy).
3. The net inflow of labor.
NIL = Entrance of the labor force - Departure of the labor force (14)
Block 3 - The level of economic development of the country:
I
1. GDP per capita - an indicator of evaluation of the economic development of the country. The GDP growth rate = GDP2 - GDP1 / GDP1 (15)
2. Credit position of the country - characteristics of the country in terms of its formal (public) external debt, to evaluate how and how much the country is responsible for its obligations.
CP = country's amount of liabilities - the amount of loans to other countries (16)
Fig. 1 - Indicators of the degree of integration
The main objective of evaluating the effects of the integration is to reduce the constraints of long-term development of integration processes, including:
- the improvement of trade relations;
- closer levels of technological development and the restoration of cooperation relations;
- the development of integration at the level of separate sectors of the economy.
At that base effect of integration is determined, and then the calculation of the additional integration effects (technological convergence, innovation, monetary integration, expanding the number of countries - participants of integration processes) and integration scenarios for new entrants are implemented.
Today index of institutional integration, including the various indicators are developed. The complexity of the assessment of institutional integration consists in the following:
- the lack of criteria for institutional structures;
- the need to quantify the qualitative characteristics of integration interaction [16].
One approach to the assessment of institutional integration is to determine the quantitative indicators, such as:
- the budget of the regional organizations (including as a percentage of GDP);
- the number of regulations of various types (agreements, acts of supranational bodies) within the project;
- the number of diplomatic visits of a particular region. [17]
Four groups of characteristics (economy, politics, society and technology) often describe the overall development of the region in the relevant field - regardless of the real cooperation are used in the model of the global dimension of integration.
Thus, we can say that a significant contribution to the development of modern economic science for the development of criteria and indicators for assessing international economic integration, making international organization of global and regional level, monitoring and assessment of international integration, which are presented in Table 1.
Table 1 - Organization of monitoring integration
Organizations Goals
UN Regional Commissions (the European Commission, United Nations Economic and Social Commission for Asia and the Pacific, the Economic Commission for Latin America and the Caribbean Economic Commission for Africa, the Economic Commission for Western Asia) Monitoring of regional integration processes in the ACP countries (Africa, Caribbean and Pacific) under the Cotonou agreement
The European Central Bank (ECB) Evaluation of the institutional and economic integration
Directorate for development of the European Commission Development of a system of indicators to measure the impact of regional integration and cooperation
Inter-American Development Bank (IDB) The collection, analysis and processing of data on the countries of the region to assess the progress of regional integration
Latin American Integration Association (ALADI) Reporting on the status of integration in Latin America
The project of UN Economic Commission for Africa Development of a multi-level system of indicators of regional integration (SIRI) to estimate indexes on four levels (country, region, sector, continent)
Regional Organization «Common Market of Eastern and Southern Africa» (COMESA - Common Market for Eastern and Southern Africa) Development of proposals on the composition of a set of indicators of regional integration
The World Bank Development of a system of indicators of fiscal decentralization at the national level to assess the ability of the public administration of a country to regional integration
Note - developed on the basis of [18]
Thus, the criteria for evaluating the integration potential are:
1. The potential of producing a multiplier effect through the integration. Thus, the interaction of the countries in the framework of the EAEU in the field of energy, financial, information, telecommunications, transport services, etc.., can provide not only the development of these areas, but also lead to a multiplier effect of development of other sectors of the economy.
2. The potential for import substitution manifests itself in increasing competition in sectors with a high proportion of imports of products from third countries.
3. The potential of increasing and diversifying exports to third countries may occur in cooperation of countries to create favorable conditions for the development of sales and marketing, and ultimately to the production and introduction of high technologies.
4. Development of specialization and an increase in the supply of goods and services to the domestic market.
5. The development of international production chains, creation of conditions for doing business in the framework of the EAEU and the increased participation of member states in the creation of global value added.
6. The development of «industry of the future» and an increase in the number of companies and joint ventures of the member states, the expansion of product markets, the creation of unique products, human development, reduction of dependence on imports of high technology products, the development of nanotechnology, information and communication technologies, 3D-Printing, technology, photonics, robotics, automation and robotics industries, biotechnology, processing of rare earth elements, materials and manufacture of composite materials, the new urban development, engineering and product design, technology, energy efficiency and conservation, and more.
7. Integration potential expansion of business activity in those sectors that are directly regulated by the state. At that, the creation of conditions for their liberalization and provide cost savings for the manufacturer of the EAEU, increase the competitiveness of products, the free market will form a production and lead to significant economic benefits.
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