Mongolia is on the cusp of enhancing its trade landscape as it works toward finalizing a Free Trade Agreement (FTA) with the Eurasian Economic Union (EAEU), which includes Russia, Kazakhstan, Belarus, Kyrgyzstan, and Armenia. This agreement, set to take effect from January 1, 2025, promises to open new economic avenues for Mongolia by reducing trade barriers and fostering stronger regional ties.
Key Benefits of the Agreement
Under this agreement, Mongolia will be able to export 375 categories of goods, including meat, leather, wool, cashmere, and related products, to EAEU countries duty-free and without quotas. This move is expected to breathe new life into Mongolia’s export-driven industries, especially agriculture and textiles, while offering increased opportunities for local producers to access a market of over 300 million consumers.
Deputy Prime Minister S. Amarsaikhan highlighted the transformative potential of the agreement, stating it will “open a new page in economic relations between Mongolia and Russia” and strengthen Mongolia’s ability to compete in international markets. The FTA also includes provisions for reducing bureaucratic hurdles at customs, simplifying certification processes, and introducing e-commerce frameworks.
Challenges and Controversy
However, not all stakeholders view the agreement favorably. Critics, including MPs Ch. Lodoisambuu and D. Uuriintuya, expressed concerns over its potential impact on Mongolia’s domestic industries. They argue the FTA might harm local producers by exposing them to increased competition from larger economies. Lodoisambuu emphasized the difficulties already faced by cement factories and flour producers, warning that the agreement could exacerbate these issues.
Minister of Economic Development L. Gantumur countered these concerns, stating that the agreement is the result of two years of negotiations and careful planning. He highlighted that Mongolian exports currently face steep tariffs of 15-50% in neighboring countries, compared to the 5% tariff Mongolia imposes on imports. The FTA aims to address this imbalance by eliminating or reducing these tariffs.
Boost for Agricultural and Processing Sectors
State Secretary of the Ministry of Foreign Affairs, Sh. Batkhuu noted that the agreement would positively impact Mongolia’s agricultural sector by removing significant trade barriers. He added that the inclusion of e-commerce provisions would modernize trade practices, further simplifying cross-border transactions.
Minister of Agriculture, Food, and Rural Affairs J. Enkhbayar echoed this optimism, stating the FTA aligns with Mongolia’s “Food Revolution” program aimed at achieving 100% domestic food supply. However, he acknowledged that some sectors might experience losses and emphasized the importance of supporting affected industries through tax exemptions for agricultural equipment and other incentives.
Future Prospects
The agreement, valid for an initial period of three years, will undergo a review at the end of its term to assess its impact and decide on possible expansions. Meanwhile, plans to establish additional FTAs with the Republic of Korea and other partners are underway, underscoring Mongolia’s commitment to diversifying its trade relationships.
This pivotal agreement symbolizes Mongolia’s strategy to balance its economic reliance on neighboring powers while creating new opportunities for growth and integration into the global economy.
For expats in Mongolia, these developments highlight the country’s evolving economic landscape and its ambition to become a more significant player in regional and global trade.
