The School of Business at the National University of Mongolia has released the results of a comprehensive study analyzing the potential impact of the Eurasian Economic Union (EAEU) Interim Free Trade Agreement on Mongolia’s economy. The findings were presented by Director of the School of Business N.Batnasan and Professor of the Department of Marketing and Trade N.Otgonsaikhan.
The study comes at a time when public concern is growing around the possible implications of the agreement. While many domestic manufacturers have voiced criticism of the EAEU and the interim agreement, the government has stated that the agreement will move forward, citing that amendments have been made to the draft. However, the researchers noted that no official information has been provided about the nature of those changes, particularly regarding which goods would benefit from reduced customs tariffs. As a result, the analysis was based on the original version of the agreement and should be viewed as a preliminary but well-grounded assessment.
The study focused on how the agreement would affect Mongolia’s businesses, its competitive environment, and the structure of domestic production. It utilized extensive data dating back to 2019, incorporated 110 macroeconomic variables, and examined nine major economic sectors.
According to the research, the country’s gross domestic product would decline by 6.1 percent, falling from 8.4 million to 7.8 million USD. At the same time, the agricultural sector is expected to expand modestly by 4.2 percent, and exports are projected to grow by 3.7 percent, opening up an estimated 4 million USD in new markets. However, imports, especially industrial goods, would increase significantly, by 117 percent, contributing to a sharp rise in the trade deficit. Researchers warned that production would decline across the board, with agricultural output decreasing by 4.3 percent and industrial output plummeting by 18 percent.
The study also indicated that the net income of Mongolian enterprises would fall by 5.6 percent, and that state budget revenues would decline by 3.2 percent. The country’s foreign trade deficit would widen by an estimated 120 million USD. According to the researchers, the industrial sector would suffer the most under this agreement. While consumers may initially benefit from falling prices, the decline would not be uniform across sectors, and the long-term consequences would likely include a reduction in domestic jobs and industrial capacity.
The study also delved into the current trade relationship with Russia, which, despite the broader framework of the Eurasian Economic Union, remains Mongolia’s primary trading partner among the five member states. Mongolia exports approximately 100 million USD in goods to Russia each year, while importing over 2 billion USD’s worth of goods and services, resulting in a significant trade imbalance.
Although the authorities claim that the agreement would allow for the exemption of customs tariffs on 375 types of goods, the researchers found that in practice, Mongolia would only be capable of exporting 38 of those. Meanwhile, the EAEU, with its vast financial, production and human resources, could export up to 277 goods to Mongolia. For example, the customs tariff on alcohol, currently at forty percent, would be reduced to 25 percent under the agreement. This would likely lead to a 95 percent increase in the import of white alcohol into Mongolia. Similarly, imports of food products like yogurt are expected to rise substantially.
Despite the potential for export growth, the study emphasized that Mongolia lacks the production capacity to compete effectively in key markets. Russia, for instance, imports over 1 billion USD’s worth of meat annually from Brazil, Uruguay and Argentina, focusing mainly on beef, cereals and fish. Since Russian consumers have limited demand for goat and sheep meat, which are more common in Mongolia, and since the country is not even able to meet its own domestic beef demand, the opportunities for expanding meat exports are minimal. Even if the country developed the capacity to do so, it would face stiff competition from well-established Latin American suppliers, the experts noted. 
Furthermore, the agreement does not address non-tariff barriers, which continue to be a significant obstacle to exports. While the reduction of customs tariffs may seem beneficial on the surface, it does not eliminate other barriers such as complex import regulations, certification requirements, or high domestic taxes in importing countries. For instance, Russia maintains a value-added tax rate of 20 percent, which remains unaffected by the agreement.
N.Batnasan underscored that customs tariffs are not the only challenge Mongolian exporters face. Non-tariff barriers, which include bureaucratic processes and technical standards, often prove more difficult to overcome and are not mentioned in the current draft of the interim agreement. Therefore, even products that meet international standards may still struggle to gain access to Eurasian markets under the proposed framework. The study concluded that the agreement does not offer a balanced opportunity for mutual trade and warned that it could potentially reverse some of the progress Mongolia has made in strengthening its domestic industries. Researchers urged policymakers to consider the broader implications of the agreement and to ensure that future trade negotiations prioritize the long-term interests of Mongolian businesses and workers. Meanwhile, the Ministry of Economy and Development is continuing to draft the final version of the agreement. President U.Khurelsukh is expected to attend Victory Day celebrations in Moscow on May 9, during which the agreement may be officially ratified.

Published Date:2025-04-09