Free Trade with Ukraine: Facts, Traps and the Consequences

Berlin, 16.9.2015
Nachricht18.09.2015
Free Trade with Ukraine: Facts, Traps and the Consequences
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Discussion event on the economic and political consequences of a Free Trade Agreement between Ukraine and the European Union, moderated by the project director of FNF for Ukraine and Belarus Miriam Kosmehl.

On September 16th Friedrich-Naumann-Foundation for Freedom together with the German Society for Eastern European Studies “dgo” invited the public in Berlin to discuss the Deep and Comprehensive Free-Trade Area (DCFTA) that will come into force as of the 1st of January 2016 as an integral part of the Association Agreement between Ukraine and the EU.

About 100 citizens followed suit and spend their evening to hear from the panelists why a trade agreement had the effect of bringing Ukrainians to the streets in masses in the autumn of 2013 in protest against then-president Yanukovych, who bowed to the Kremlin’s pressure and refused his signature.

After Ukraine finally did sign it’s Association Agreement with the EU in the summer of 2014, almost a year later and under completely different circumstances with Yanukovych meanwhile having fled to Russia, the issue is no less controversial with, again, Russia at the centre of events. Moscow claims economic disadvantages as a result of EU-products finding their way over its borders via Ukraine and threatens to retaliate by enacting a trade embargo. 

All experts on the panel – Veronika Movchan of the Kyiv Institute for Economic Research and Policy Consulting; Miriam Frey of Regensburg University’s Institute for research on East and South-Eastern Europe; and Thomas Otten, head of an audit and consulting firm in Kyiv – agreed that these were figments of imagination. As Miriam Kosmehl, the director of Friedrich-Naumann-Foundation’s Kyiv office and moderator of the panel pointed out in an interview with mdr-radio, Russia does not have similar claims regarding Serbia and this was not an argument against free trade. Accordingly, all experts stated that it would of course be advantageous for Ukraine to trade freely with Russia and the EU, but that, unfortunately, Russia itself had insisted on Ukraine’s membership in the Eurasian Custom’s Union specifically to restrict Ukraine’s sovereignty in trade.

Altogether, the advantages of the DCFTA far outweigh the risks, i.e. for uncompetitive Ukrainian industrial sectors. It is no surprise that Ukraine has already made adjustments. For example, while exports to Russia fell, Ukraine achieved increases in exports to the EU, but also to Asia and Africa. Further, while there is a decline in industrial export, exports have risen in the agri-cultural sector. 

All experts gave examples on how the DCFTA was a good framework outlining benchmarks for reforms that Ukraine desperately needs to sustain progress. They emphasized as well that Ukraine must reduce excessive bureaucracy and effectively fight corruption, in particular in the judiciary, in order to improve the investment climate.

Thomas Otten called to mind the impact, if the resources being zapped by corruption were freed up and reinvested in Ukraine’s economy. Veronika Movchan stated that the Deep and Comprehensive Free Trade area with the EU would help leverage these natural resources and build economic success. While reforms are not easier in the face of armed aggression and economic hardship, today’s Ukrainian decision-makers are spurred on by active and engaged citizens who wish to hold those standing in the way of reform and progress accountable. All panelists agreed that the close cooperation of Ukraine with the European Union under the terms of the Association Agreement would be a welcome foundation for the harmonization of more Ukrainian standards and rules with European regulations and thus a solid fundament for more connections between Ukraine and modern, democratic counterparts.

Miriam Kosmehl, Project Director, FNF Ukraine & Belarus

Photos: Manuel Rommel

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