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Wednesday, 05 October 2022


Must-see in Ukraine > Ukraine free-trade deal - a test of the EU’s credibility

While events in the Middle East and the Greek financial meltdown continue to monopolise the EU’s agenda, important developments are also taking place in the EU’s Eastern neighborhood as the EU enters the latter stages of negotiating a Deep and Comprehensive Free Trade Agreement (DCFTA) with Ukraine

Conclusion and implementation of the DCFTA will not only offer Ukraine a stake in the EU’s single market and significantly strengthen Kyiv’s ties with the bloc, it will also send a clear-cut message that Ukraine’s course towards European integration is irreversible as it will clearly signal the geostrategic choice of the country.  Historically, the road to EU membership goes via trade and economic approximation with a free-trade area being the first and core element of integration into the EU for the nations of central and eastern Europe.   Furthermore, the related reforms will help reduce corruption and improve the rule of law thereby creating a more attractive investment climate.  Being the first of its kind to be negotiated between the EU and a country covered by the Eastern Partnership, it is also groundbreaking.  It would set a positive precedent, becoming a benchmark for similar agreements with countries such as Moldova.
The DCFTA covers a wide range of issues in trade in goods and services, as well as tackling obstacles to trade through regulatory approximation.  Due to the importance of ties with the EU, both in terms of trade and investment and the extent of regulatory reforms associated with the DCFTA, the agreement is likely to have a significant impact on the Ukrainian economy. Over time, the DCFTA will lead to a substantial inflow of capital and expansion of domestic investment in Ukraine.  Furthermore, the reduction of tariff and nontariff barriers is likely to lead to substantial expansion of trade in goods and services as well as increase trade turnover, employment and strengthen European competitiveness. 
The agreement would also represent the biggest step yet to eradicating the wall that was created after the fall of the Soviet Union.  While countries such as Poland and Hungary were quickly offered a path to the EU, Ukraine was left out in the cold, which gave the impression that a new Iron Curtain had been constructed just a few hundred kilometres to the east from the old one. Therefore the political, as well as economic, consequences of the DCFTA cannot be overestimated.
After four years of tough talks, the two parties have managed to make many compromises. However, as the negotiations enter the crucial final stages the EU (or rather, some of its member states), is starting to move the goalposts by increasing efforts to protect certain sectors in their own markets.  Knowing the sensitivity and importance of this agreement for Ukraine, which is already coming under increased pressure, the EU’s negotiators are showing little mercy towards Kyiv and continue to push for greater concessions.  While the DCFTA has had until now broad support in Ukraine, including from opposition political parties and big business, cracks are now beginning to appear.

 For example, Ukrainian sunflower oil producers are up in arms, protesting that free trade conditions will kill the industry and make thousands people unemployed. The same dissatisfaction is expressed by agriculture producers or local car makers. The confectionary industry is also saying that the DCFTA is a one-way road that is not really opening up the EU market for competitively priced  Ukrainian sweets.
Nevertheless, Ukraine has now fulfilled almost all of the EU demands and Ukrainian President Viktor Yanukovych has set a deadline for his country’s delegation to finish the talks this year, meaning the agreement could be initialled during the EU-Ukraine summit in December in Kyiv.  Ukraine has taken on obligations similar to those requested of EU candidates, without demanding the same assistance or favourable conditions.  However, it is becoming increasingly clear that unless the EU shows greater flexibility in talks the agreement may be jeopardised as it will become increasingly difficult to have it ratified and implemented in Ukraine. Moreover, if the Association Agreement, which the DCFTA is an integral part, does not include a reference to an accession perspective - even a very distant one - in the preamble, the credibility of the Agreement and its attractiveness to Ukraine will be weakened. With elections in both Russia and Ukraine in 2012 there in an urgent need to maintain momentum in the talks.

 While the Polish EU Presidency has underlined its commitment to completing the talks with Ukraine, the EU as a whole needs to demonstrate far greater political wisdom and vision and not allow the negotiations to crash in tariff quotas.  Therefore 2011, the 20th anniversary of Ukraine’s independence, will either mark the beginning of real integration between the two partners, or will be remembered as the year the EU failed to fulfill its mission to unite Europe on the East of the continent.

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