Author: Bunyod Tillakhujaev – 29/01/2024
Political, Trade and Economic Aspects of Relations Between Uzbekistan and the European Union
Bunyod Tillakhujaev
Chief specialist, Development Strategy Center, Uzbekistan
The European Union (EU), with its advanced economy and single market area, attracts the interest of many countries seeking to deepen comprehensive relations. Uzbekistan also prioritizes strengthening relations with the EU and its member states as part of country’s national development strategies.
Uzbekistan, within the framework of the National Development Strategies, expanding mutually beneficial ties with traditional partners and the geography of international cooperation, attaches special attention to strengthening relations with the EU.
The basis of multidimensional cooperation between Uzbekistan and the European Union is the Partnership and Cooperation Agreement (PCA), signed at the level of heads of state in 1996 in Florence.
The PCA contains provisions on political dialogue, cooperation in the fields of democracy, human rights, the promotion of cultural ties, financial and technical cooperation, investment, trade in goods and services, as well as the protection of intellectual property.
Thanks to the open policy and reforms pursued in the country, as well as the tasks outlined in the framework of the Development Strategy of New Uzbekistan for 2022-2026, relations with all foreign partners, including the European Union, have reached a qualitatively new level. In particular, in July 2022, a new Enhanced Partnership and Cooperation Agreement (EPCA) was initialed in Brussels, supplementing the PCA.
The EPCA includes provisions related to customs administration and technical regulation, sanitary and phytosanitary measures, combating illegal migration, organized crime and corruption. Significantly expands the range of interaction in the fields of investment cooperation, trade in goods, services and intellectual property by including the fundamental rules of the World Trade Organization. Thus, this Agreement, taking into account the intensification of bilateral relations, as well as the measures outlined in the framework of the “Uzbekistan-2030” Strategy, will presumably enter into force this year and will not be considered a framework, but will create a full-fledged mechanism for comprehensive cooperation between Uzbekistan and the EU.
Meanwhile, in expanding and deepening cooperation between Uzbekistan and the EU, the key role is played by the constant contacts of the President of Uzbekistan with the EU leadership, heads of state and government of Europe.
So, over the past 3 years, fruitful official visits of the President of the Republic of Uzbekistan to France, Italy, Germany and Hungary have taken place, as a result of which agreements have been reached in investment, political, trade, economic, cultural, humanitarian and other spheres. The return visit of German President Frank-Walter Steinmeier to Uzbekistan was successfully held.
In addition, it should be noted that the dialogue between Uzbekistan and the European Union is also conducted in the format of interregional cooperation “Central Asia Plus.” For many years, Uzbekistan has been cooperating with the European Union in the EU-Central Asia format, which makes it possible to effectively resolve regional issues together.
The EU and Central Asian countries participate in annual ministerial meetings. In October 2023, at the 19th EU-Central Asia ministerial meeting, a roadmap was approved to deepen ties in areas such as interregional political dialogue, trade, energy and security. At the same time, within the framework of this meeting, it was noted that in the second quarter of 2024, the EU-Central Asia summit is also planned in Uzbekistan, in which the heads of state of Central Asia and the President of the European Commission will take part.
At the same time, the “Uzbekistan-2030” Strategy emphasizes a measure to develop trade, economic, financial, investment and technological cooperation with European countries, as well as further strengthen the legal foundations of multifaceted partnership and practical interaction.
Currently, Uzbekistan actively interacts with the European Union in all of the above areas. In particular, particular progress is being observed in the field of trade and investment. Thus, in recent years, there has been a noticeable increase in the trade and economic sphere. In January-November 2023, the EU accounted for almost a tenth (9.3%) of Uzbekistan’s total trade turnover, which is equivalent to $5.3 billion. At the same time, Germany (EU member) is one of the ten trading partners of Uzbekistan in terms of commodity turnover.
This indicator is very convincing when compared with indicators, for example, 2020, when the volume of trade between the parties was $3.9 billion. The structure of Uzbekistan’s exports to the EU is dominated by textiles, food products, agricultural raw materials, and the structure of imports from the EU is dominated by machinery and equipment, vehicles, and chemical goods.
Moreover, thanks to the measures taken under the Strategy, Uzbekistan has been extended until 2027 to use the advantages of the EU’s Generalised Scheme of Preferences (GSP+), which is an instrument of EU trade policy and exempts more than 6,000 types of goods supplied to European markets from export taxes.
Thus, Uzbekistan has access to preferential conditions for the export of its goods to the European Union for the next 3 years, which undoubtedly contributes to the increase in export potential, and as a result, an increase in the country’s total trade turnover.
It is worth noting that the extension of the GSP+ preferences to Uzbekistan indicates the recognition of the reforms carried out in Uzbekistan, in particular, to create a favorable business climate, develop the socio-economic sphere, improve working conditions, judicial and law enforcement systems. The European Commission noted that great efforts had been made in Uzbekistan to eliminate the use of child and forced labor in production processes in Uzbekistan. Thus, these results demonstrate the development of relations between Uzbekistan and the European Union not only in the economic, but also in the legal sphere, positioning Uzbekistan as a democratic and social state.
In general, relations between Uzbekistan and the EU in recent years, having reached a qualitatively new level, have become comprehensive and have huge potential for further development. Both sides are interested in expanding cooperation in many areas, in particular in trade, economic, investment, political, cultural and humanitarian, as well as in the field of human rights and democracy.
However, it is still worth making more efforts to extract greater benefits in relations with the EU. For example, speaking of GSP+ preferences, we can conclude that Uzbekistan has received huge opportunities for developing the market, in this case the European one, and the correct approach to using these opportunities will push the boundaries of Uzbekistan’s foreign economic activity. However, the fact that the country has not yet fully realized its export potential is now accepted. This follows from the fact that Uzbekistan has a negative balance in trade with the EU.
Also, in order to develop trade and economic relations, it is worth paying attention to the state of transport and logistics interconnectedness. Export and delivery of goods between Uzbekistan and the European Union is carried out through various types of transport, including railway, road and aviation. However, rail and road transports are the most in demand. In 2023, 36% of goods to Uzbekistan were imported by road and 46%, respectively, by rail.
In this regard, it is necessary to modernize infrastructures at border points, simplify customs control procedures, improve the relationship between various government agencies, as well as increase investment in the development of the transport network. Thus, current measures will facilitate trade-and logistical activities between Uzbekistan and EU that will serve for prosperity and of economy in perspective.