Strategic priorities of Russia-Belarus integration in terms of food security issue

Russian-Belarusian cooperation is in the process of active development. That requires a coordinated formation of science and technology, institutional and organizational policy, capable of creating conditions for modernization and increasing efficiency of the economies of the two countries.

Development prospects of the Single Economic Space will be determined, primarily, by the ability of parties to develop mutually beneficial mechanism of coordination of interests, the possibility of joint economic policy-making through special institutions of inter-state bodies.

Thus, at the first stage of integration in September, 2003 the Agreement on the formation of the Single Economic Space (SES) and the concept of its formation on the territory of Belarus, Kazakhstan, Russia and Ukraine was adopted.

The second stage of integration falls on November 2009 – January 2010 and is connected with the revitalization of the work on the creation of the Single Customs Union of Russia, Belarus, Kazakhstan. In this period a number of important international agreements on the Customs Union were ratified, and approximately 40 international treaties constituting the basis of the Customs Union were accepted.

The third stage of integration is associated with the creation of the Unified Customs Code of the Customs Union of Russia, Kazakhstan and Belarus within the framework of EurAsEC Summit on July 6, 2010.

The Unified methodology of customs statistics for the members of the Customs Union with third countries and the states mutual trade statistics were developed and adopted by the decision of the Customs Union Commission on January 28, 2011. This measure was aimed at the unification of approaches towards determination of mutual trade volumes.

Seven technical regulations in the field of food industry (‘On safety of food products’, ‘Food products labelling’, ‘Technical regulations on fruit or vegetable juices’, ‘Technical regulations for oil and fat products’, ‘On safety of certain types of specialized food products, including dietary therapeutic and dietary preventive nutrition’, ‘Requirements for safety of food additives, flavourings’ and ‘On safety of grain’) will come into force starting from July 1, 2013. This indicates that serious steps were taken with regard to regulation of the food market of supranational level to ensure a coherent policy in terms of standards, technical regulations, quality and safety of products.

At present, trade-economic connections between the two allied nations indicate a serious positive dynamics. Thus, the trade turnover between Russia and Belarus by the end of 2012 amounted to more than 40 billion dollars, thus exceeding the indicators of previous years [1].

Thus, the share of mutual trade between the countries in their total foreign trade turnover is the quantitative sign of integration, so the real integration between the countries will be achieved if the mutual exchange of Russia and Belarus prevails in the structure of foreign trade turnover.

Within the framework of the further development of Russian-Belarusian cooperation the systematic work on determining the priorities of the integration development is required, science-based approaches to the assessment and forecasting of integration development, including the development of the modern tools of quantitative assessment of macroeconomic decisions for socio-economic development of the two countries are needed.

Agro-food sector as a priority of crosscountry interactions.

Among the problems studied by the specialists with high scientific qualification, it is possible to single out the task of predicting the development of the Single Economic Space of Russia, Belarus, Kazakhstan and Ukraine with the use of cross-country models of structural interaction [2], which were conducted by scientists of RAS Institute of Economic Forecasting headed by F.N. Klotsvog.

The given cross-country model has the form of a large-scale linear programming problem and is an integrated complex of functionally interrelated country models. The model of each country contains the settings for the production and distribution of the products of the most important branches of national economy and industry, and of basic industrial and agricultural products in natural units in aggravate nomenclature. The model also includes the expanded block of foreign economic relations of

Russia, Belarus, Kazakhstan and Ukraine with foreign countries, countries of CIS, including the relations among the countries themselves. The model includes the equations of the foreign trade balance of each of the four countries in dollar terms, that allows monitoring the level of equivalence of each country’s foreign trade exchange.

The results of the research team scenario calculations show that the intensification of the integration process requires the reorientation of Russian energy and primary resources from the market of Western countries to the market of the SES countries. Integration effect is achieved due to the expansion of the market of mutual turnover of products of the processing industries and agricultural products, which by its competitive abilities, can be sold on the market of other countries. This applies primarily to the production of mechanical engineering, agriculture and food industry.

Along with the econometric models of emerging technologies for the development of a coherent strategy of Russia-Belarus macroeconomic integration, the authors consider the development of a forecast model of socio-economic processes within the Single Economic Space on the basis of computable general equilibrium models (CGE models), which include both the benefits of information technology, and the possibility of simulating complex systems, as well as allow reflecting the multiplicative effect of the influence of the estimated factors to the fuller degree. These models can use the new tools to work out the forecast scenarios of the countries interaction development in the context of ensuring the coordinated development of the Single Economic Space.

The author of the article Serdyukova Yu.S. had worked out the forecast model of socioeconomic processes within the Single Economic Space model, using CGE models within the framework of the project, executed under the RFBR grant [3]. The objective of the model was to obtain the quantitative assessment of macroeconomic management decisions in foreign trade exchange within Russia-Belarus space in order to ensure the physical and economic accessibility of production for the population, on the one hand, and to ensure economic performance of the market players, functioning in the conditions of the market economy, on the other hand.

The CGE model, developed by RAS Central Economic Mathematical Institute (Makarov V.L., Bakhtizin A.R.), and combining the Arrow–Debreu model (Walras-type model) and game-theoretical approach to the modelling of the economy, were used as the basis for the purposes of the project.

Preliminary results of the calculations have shown that the intensification of the integration process on the creation of Russia-Belarus Single Economic Space is of high economic efficiency for both integrate countries in general and for each of them individually. The analysis of the results of preliminary calculations showed that the basic effect of integration interaction on Russia-Belarus space will be accomplished by expanding the market of mutual turnover of agro-food and machinebuilding products (including agriculture).

Thus, the results of these studies indicate the necessity of the focused work in the selected priority areas on the formation of a single supranational food policy in terms of integration interaction on Russia-Belarus space, as the integration fact will most reveal itself in the given sphere, therefore, the implemented development efforts will bring the most significant results.

Food security: definition, measurement, regulation

International economic integration is an important factor of the world economic development. The European Union (EU) that underwent classic stages of economic integration from a free trade zone to the monetary union is an example of active integration group.

The EU experience with regard to the formation of institutions regulating and coordinating the interests of integrating countries shows the complexity and diversity considering the peculiarities of the countries’ economic development and cooperation, including the food market functioning sphere. The food market is characterized and fundamentally differs from other markets by the set of sold products that converge in a group of interchangeable food products, i.e. it represents a set of various commodity markets.

The functioning of the market, its expansion or contraction, changing price level of goods, supply and demand depend on the current situation, revealing itself in the dynamics of agricultural and industrial production, investments, price changes, the dynamics and structure of internal and external trade volumes, etc. Food market in terms of the system perspective acts as both an organizational structure, and a regulatory market mechanism. Specific management tools are determined by the peculiarities of the individual segments and sectors of the food market areas and rely on the structures, formed for ensuring the functioning of these instruments.

Special attention within the EU is given to the issues regulating relations concerning the quality and safety of food products, which are important indicators of food security. Since the 1970s food security has been regarded by the world community as an integral part of sustainable development. The UN system, international institutions and nongovernmental sector initiated the process of developing global strategies and policies on food security.

The approaches, approved for assessing the present state of the food market in terms of food security are based on four basic principles: availability, accessibility (physical and economic), stability, security.

Physical accessibility of food assumes food provision by production, supply or import at least at the level sufficient to satisfy physiological needs of the population. Economic accessibility of food comprises providing such living standards in the country, which would enable the population to acquire food products at reasonable prices without compromising health. The stability of the food market means sustainable access to food. Food products, consumed by the population must be of acceptable quality and safe-health level.

The concept of food security has several definitions and paradigms. At present, this concept is interpreted not only as total food supply (or deficit) at the regional, national or global level. Since recently, this term is more often used at the level of cities, settlements, households and individuals [4].

Food market is distinguished by the fact that its goods are extremely vital. That is why the food market falls within not only economic and social interests, but political ones, as well. In the conditions of an open economy it is impossible to rely on the food supply from other countries. In this case, a country may be vulnerable in the conditions of an unfavourable situation at the world markets. The consequences can appear in the country’s dependence in the economic and political sphere, and in the lack of food and poor life quality. The internal problems of the food market development also affect the resolution of food security issues [5].

A lot of publications, both in Russia and in Belarus, were devoted to the issues on scientific and methodological consideration of food security problems. It should be noted that the overwhelming majority of authors examines food security at the national or regional level. The approaches towards the assessment of the economic security level in the food sphere and towards determination of the security system, presented in the work [6] and set forth by the specialists of the Institute of Economics of the National Academy of Sciences of Belarus, can serve as an example.

As for the peculiarities of the systems assessing and ensuring food safety within the

Single Economic Space, there are much fewer publications devoted to this question. In this regard, the approaches towards the formation of the integration field of food competitiveness in the conditions of the SES customs union member states functioning, set forth in the work of Belarusian scientists of the Institute of System Research in Agroindustrial Complex and the Presidium of the NAS of Belarus, are of particular interest [7]. Industry questions of the agricultural market development and the peculiarities of grain markets organization within the Single Economic Space are covered in the Report on SES grain policies that was prepared with the participation of the specialists of the Russian Grain Union, the Union of grain processors and bakers of Kazakhstan; Institute of Economics and Forecasting of the NAS of Ukraine, Centre for Integration Research of the Eurasian Development Bank [8]. The paper, published by the Fund of the First President of the Republic of Kazakhstan, analyses the problems and risks for Kazakhstan with regard to the promotion of integration in the SES, analyses agreements in the framework of the SES creation in terms of positive effects and threats for Russia, Belarus and Kazakhstan, comprising the agro-food sector [9].

The main factors ensuring food security are examined in the article ‘Food security in Russia: current status and trends in provision’ [10]. Of special attention is the author’s suggestion on the transition to civilized constructive forms of international control and regulation of transnational companies’ activities in food markets in the conditions of the global food market monopolization.

At present, a considerable share of Russia’s modern food industry is concentrated in the hands of transnational companies (TNCs), most of which are multifunctional corporations. During the past two decades a significant segment of food products with high content of chemical additives and ingredients, identical to natural products, which have strong and ambiguous effect on cells, tissues and systems of the organism, i.e. on the biosafety of an individual has been practically implanted in the structure of the Russian food market. At the same time, the problem of food quality and safety has been growing, especially in the conditions of modern technical regulations, when only the manufacturer is responsible for the quality of products. It is obvious that the quality issue of food products with consumer attributes not meeting the requirements and principles of healthy eating currently comes to the fore in the context of providing the population with safe products [11].

How to explain the paradox that the output of many leading enterprises operating in the food industry, where the most advanced quality control systems have been introduced, adversely affect consumers’ health? Or do manufacturers interpret product quality in their own way?

During the transition to the new conditions of the market economy, the quality of products was assumed to be the basis of business competitiveness, therefore the following statement was considered valid: a company is competitive and successful, if it produces high quality products. Is the converse true in the market of manufactured food products? Do successful enterprises always produce products of the highest quality?

Today almost all world leading companies, producing food, beverages and tobacco products, run the manufacturing in Russia. It is possible to distinguish both positive and negative impact of TNCs on the economic processes occurring in the country (tab. 1) .

The share of foreign capital in the Russian food industry accounts for about 60% and has been steadily growing, largely due to consolidations and takeovers. Among foreign companies with Russian divisions are the following: Unilever, Nestle, Unimilk-Danone, Coca-Cola company, PepsiCo, Bonduelle, Hortex, le Groupe Cecab, Orkla Brands Russia, Mars company, Kraft foods, Ahmad tea, SUN InBev, SAB Miller RUS, etc.

Table 1. Pros and cons of TNCs

Positive effect	Negative effect
Saturate the market of the host country with goods and services	oust from the market or absorb national producers, due to economies of scale, high productivity and large financial resources
Import capital, equipment, technology for the industrial development and modernization	Occupy a dominant position in the market through consolidation and takeover policy
Provide additional revenues to the budget of the host country	Strain after market monopolization and price policy dictate, while achieving the goal
Introduce advanced management, increase the culture of production, create new jobs	Have many more opportunities, including financial and political ones for lobbying their interests in the host country

Table 2. Factors affecting the production of food with low nutritional value

Factors contributing to the production growth	Factors constraining the production growth
Low level of income and living standards of the population	Normative and regulatory acts, tightening the introduction of chemical additives and the ‘replacement’ of natural primary materials
Efficiency strategy implemented by food manufacturers	Implementation of technical regulations for products, enabling the consumer to determine the group affiliation of the product by the on-pack information
High level of monopoly, accompanied by price dumping	Support for the manufacturing of products with natural ingredients
The growth of the industry producing chemical ingredients for the food industry	Formation of trade motivation to increase sales of healthy food
Low culture of consumption	Awareness-raising work on rational eating behaviour and various hazardous additives

Product policy on major food enterprises stipulates the development and production of products with specified organoleptic properties at minimal cost as a priority. The peculiarities of the products manufactured by these companies include attractive look due to colourful packing, pronounced flavour, and maximally extended storage period.

Innovation development is held in the form of product formulas, ensuring the achievement of the maximum functionality, the company’s profit, to be exact. Manufacturers regularly carry out experiments, aimed at the integration of cheaper formulation that ‘replace’ natural primary materials, but at the same time guarantee the same (or even better) flavour characteristics of the finished product by the introduction of chemical additives and ingredients, identical to natural.

Table 2 shows the factors influencing the structure formation of the product offering; the so-called ‘active’ factors are presented in the left half of the table. A whole system of measures and legislative initiatives is needed, so that the factors of the right half of the table have a real impact on the structure of food products.

In the current situation it is a dangerous policy to use the definition of food quality at the legislative level without assessing its impact on human biosafety, thus enabling companies to implement their commercial interests that will damage the consumers. Obviously, it is a positive sign that the Customs Union has made serious steps with regard to the regulation of the food market of supra-national level, in order to ensure a coherent policy in terms of the standards, technical regulations, quality and safety of products (tab. 3) . However, it should be noted that unfortunately, the technical regulations (on labelling) entering into force on July 1, 2013, only partially solves the defined problems. Artificial colours, flavours and preservatives are an integral feature and ‘the curse’ of modern food products. However, their use is not neutral to the human body. Thus, a group of specialists from the University of Southampton examined the most popular food additives used in the food industry and submitted the obtained results to the UK Food Standards Agency (FSA). According to the results a number of food additives (dyes – E102, E104, E110, E122, E129) cause hyperactive behaviour in children [11].

Table 3. Application specifics of harmful food additives

Food additives	Application specifics
Ponceau 4R (brilliant scarlet 4R, cochineal red A; new coccine (eng., ger.), ponceau 4R (fr.) is a food additive, a dye. It is registered as a food additive Е-124.	In Russia the additive Е124 is prohibited for dying medicines but is allowed as a food dye. In the USA, Finland, Norway and several other countries the dye E124 (Ponceau 4R) is listed as a banned substance, as it is considered a carcinogenic that may instigate cancer. Moreover, the additive Е124 is a fierce allergen and may cause an anaphylactic shock or asthma attack in people with intolerance to aspirin.
Allura Red AC is a food additive with the number – E-129. the dye E129 is now mostly produced from petroleum products.	Dye E129 sometimes can cause the attention deficit hyperactivity disorder in children. Food additive E129 is forbidden for use in the food industry in nine European countries and some other countries, but is permitted for use in Russia’s food industry.
Indigo carmine (food additive E-132 ) is watersoluble blue salt, exhibiting properties of acidbase indicator. Depending on the acidity level it changes colour from bright blue to yellow.	Indigo carmine is considered a carcinogenic and is not recommended for use in preparing food for children. Moreover, it may cause hyperactivity, heart problems, nausea. Triggers asthma attacks in people with asthma and cause serious allergic reactions. In the food industry it is used as a dye in the production of soft drinks in glass bottles, ice cream. It is added in the manufacture of biscuits, pastry, confectionery.
Green S (a green synthetic substance) It is registered as a food additive E-142.	In the food industry it is used as a dye in the production of mint sauce and canned peas, vegetables. It is also added in ice-cream (for example, fruit ice), desserts. It is used in the production of dry soups, fish forcemeat, dry appetizers on the basis of potatoes, spices, crustaceans semi-finished products. It is added in mustard, fish ROE, spicy snacks. Green S is banned as a food additive in Canada, USA, Japan and Norway, as its consumption can cause allergic reactions. In Russia, this additive is permitted. This is one of the additives that is recommended to be excluded from children’s food ration, in order to prevent hyperactivity.

Let us quote short lines of the new technical regulations: ‘Food products containing the dyes (Azorubine E122, Quinoline Yellow E104, Sunset Yellow FCF E110, Allura Red AC E129, Ponceau 4R E124 and Tartrazine E102) must have a warning labelling: Contains a dye (dyes) that may have an adverse effect on activity and attention of children’. In what kind of products are these dyes mostly used, and who such products are targeted at? As the table shows, a significant part of colourful and attractive products (confectionery, sparkling water, ice cream) is designed for children. So, wouldn’t it be better to solve this issue more radically and listen not only to manufacturers, but to the medical community, which is increasingly concerned with the hyperactivity of modern children, their inability to concentrate that interferes with the process of learning and leads to difficulties in their social adaptation.

In this context, the Belarusian food market differs significantly from the Russian one, as the presence of foreign players in the food market and foreign investments in the food industry are substantially limited by the state. Without going into the analysis and assessment of macro-economic decisions of the Belarus government, it should be noted that foreign capital plays a significant role in the functioning of the Belarusian economy and is mainly concentrated in the banking sector.

In Belarus TNCs are presented in the food market mainly in the segment of soft drinks and beer production: Heineken N.V. (the owner of the brewing companies Retchitsabeer and Syabar), Carlsberg Group (owner of the brewery Olivaria), Coca-Cola beverages Belarus, KK beverages holdings Ltd.

However, it should be noted that Belarusian food products will not only go to the Russian market, but in the nearest future Belarusian producers will have to face competition in the market from Russian units of global Western companies.

A particular difficulty in ensuring food security on Russia-Belarus space is mainly connected with serious differentiation, peculiarities of formation and functioning of the agricultural market of the two countries. Traditionally the coefficient of food dependence is calculated by the following formula:

C = I/N, where I is import volume of the given product, and N is requirement quantity of the country in the product.

However, the authors suggest that when calculating the food security of Russia and Belarus, the assessment of food self-sufficiency is to be complemented by the coefficient of food dependence, which is calculated for each country considering integration interaction within the Single Economic Space. Provided that the governments of the two countries adopt single food policy in the conditions of integration interaction, it is necessary to introduce a special adjustment indicator adjusting food import of the food products supplied from Belarus. Thus, the indicator can be calculated by the following formula:

Fdj = (Ivol – Ii)/N ,         (1)

where Ivol – total volume of imported products, j – index denoting the country, for which the coefficient of food dependence is calculated, i – index denoting a member state of the Customs union,

Ii – Volume of import from the country- j to the country- i ,

Fdj – food dependence of the country- j .

Thus, the authors distinguish the following three levels of food dependency:

• 1.    The level of food dependence is considered safe, if the coefficient of food dependence is in the 0.1-0.2 range;

• 2.    The level of food dependence is threshold, if the coefficient of food dependence is in the 0.25-0.3 range;

• 3.    The level of food dependence is dangerous, if the coefficient of food dependence is higher than 0.5.

According to the authors, the indicator (Fdj) should be calculated by the goods of the priority list, which are the most effective in terms of trade exchange and co-production.

Ensuring the openness and transparency of information on the activities of the state apparatus, the extension of public control over the decision-making process, in particular through the involvement of competent experts, is one of the current directions of efficient public administration. In this regard, it is necessary to enhance the role of the expertise during the development and review of regulatory documents and drafts concerning state decisions on the development of the national food market. It is necessary to develop information databases in the sphere of food products regulation, which can and must be used when elaborating draft technical regulations as the evidence-base of the principles, provisions and requirements underlying the regulations.

According to the authors, in order to provide the population with quality and safe food, it is necessary to move from declarations, proclaimed by the Food Security Doctrine of the Russian Federation [12], to the balanced and scientifically-grounded programme of activities at the national and supranational levels, to make greater use of the possibilities of such state regulation instruments as reserve and distribution funds.

The authors believe that the scientists of the Russian Academy of Sciences, Russian Academy of Agricultural Sciences, Russian Academy of Medical Sciences, higher education institutions of the Ministry of Agriculture, agrarian educational institutions, technological institutes of the food industry, the scientific interests of which affect the solution of food security issues, can and should participate more actively in the implementation of the scientific expertise, as the absence of visa and customs borders of the Union State of Russia and Belarus create favourable conditions for joint scientific and innovation activity of Belarusian and Russian partners.

It should be noted that discussion platforms for the debates over a broad range of issues (for example, sittings of the standing seminar under the Parliamentary Assembly of the Union of Belarus and Russia on the building of the Union State) have been established and have been successfully functioning. However the authors consider it necessary to stimulate the young scientists of the two countries to more active participation in expert councils and to the work on projects and programmes at the supranational level. At present, within the framework of new breakthrough technologies young researchers of the two countries have expertise in the field of biosafety, breeding, production technologies, green economy and energy. Given the fact that food issues affect everyone, this topic could be the catalyst for developing new integration studies on Russia-Belarus space.

In order to realize the effects of the integration interaction of the two countries to the fuller degree, a new level of macroeconomic decision-making in the conditions of divergent interests is required, so it is important that the choice of priorities of the agreed food policy would be understood and accepted by the population, including young people. In this case the understanding and the image of the joint future of Russia and Belarus may coincide.