The Partnership and Co-operation Agreement (PCA) ,economic relations between the EU and Russia. It was signed in 1994 and entered into force on 1st December 1997. Under the terms of the PCA, Russia receives Most- Favored -Nation (MFN) status, whereby no quantitative limitations are applied except on exports of certain steel products (which represent only 4% of bilateral trade). On 27 April, Russia agreed to extend the PCA to the ten new EU Member States from 1 May 2004. The basis of the PCA is the shared principles and objectives of the two partners: “the promotion of international peace and security, support for democratic norms and
for political and economic freedoms.” It covers an extensive range of policy areas from trade and financial cooperation through science and technology and education to the cooperation on the prevention of illegal activities. While the PCA created a framework for political dialogue, the most important aspect for Russia was that it created a way to gain access to the EU market.
The Partnership and Co-operation Agreement established a complex institutional structure for regular consultations.
In the economic realm the significance of the PCA was that it declared Russia to be a “transit economy” which was a step beyond its earlier status of state trading economy. In this realm the long term aim is to eventually establish a free trade area between Russia and the EU.13 Pointing in this direction, it did away with most of the quantitative restrictions for Russian goods, with the exception of steel, textiles and nuclear material.
This is also part of the rationale behind the Common Economic Space, which should contribute to anchor Russia in the European and to fully benefit from the recent EU enlargement. At the EU-Russia Summit of May 2001, the EU and Russia launched discussions on the establishment of a Common Economic Space. The main objective of this initiative, which covers essentially all trade and economic issues, is the elimination of trade barriers between the EU and Russia mostly through regulatory convergence. Indeed, regulatory convergence would allow economic agents to operate subject to common rules in a number of fields throughout the enlarged EU and Russia which represent a market of around 600 Million consumers.
The EU-Russia Summit on 21 May 2004 has discussed the next steps to develop the four Spaces launched at the EU-Russia Summit in St. Petersburg in May 2003, and notably the need to agree on an action plan on the Common Economic Space in the coming months.
During our research we found that throughout the entire post-Soviet period, the European Union has been Russia’s main partner in trade and economy and will remain so at least until 2015-2020. The further expansion of trade with the EU is necessary for Russia in developing its entire complex of foreign-economic relations.
Apparently both Russia and the European Union do not have the issue of Russia's accession to the EU on their agendas because neither party is prepared to meet with such a contingency. This issue, however, is frequently debated theoretically, and it has its advocates and opponents both in Russia and in the EU countries, Russia's great dimensions being one of the principal arguments against Russia's membership in the European Union: it will «always be too large for Europe.»
The advocates of Russia's gradual integration into European structures contend, however, that based on its economic potential, its demographic trends and the evolution of its armed forces Russia may soon be rated as an average European country.
Negative perceptions of many processes and occurrences in Russian business are based upon antiquated stereotypes, the tendencies of mass media and unavoidable projections of the image of the country in the reputation of its corporate citizens. The fundamental factor currently determining the perceptions of Russian business abroad is Russia's image, which unfortunately still has a negative influence
At the moment one of the main issues on the EU-Russia agenda is the expiration of the Partnership and Co-operation Agreement in 2007 and thus the need and the opportunity to rethink the basis of EU-Russia relations. The two sides want the new agreement to reflect the changes that have taken place in both entities and the new goals that resulted from these changes. Currently the two sides are only in the stage of preparatory work, while the formal EU position is expected by the end of 2006 or the beginning of 2007. The basic principles will remain embedded in the new agreement as well.17 At the same time, the partners want to come up with a solution that would be “capable of promoting the future evolution of relations, including the perspective of enhanced trade and economic integration once Russia has joined the World
Trade Organization (WTO).” As it is possible that coming up with a new agreement may take longer than the old PCA is valid for, the two sides agreed to allow the document to stay in force until the new agreements comes into effect.