More and more experts agree that during the autumn summit in Vilnius the Association agreement between Ukraine and the EU, as a well free trade agreement, will be finally signed. In general, the population welcomes the progress of European integration. However, it would not hurt to analyze what this integration brings in economic sense.

Duties off!

The EU is a market with 500 million potential consumers and $16-trillion goods turnover annually, a market which takes already 30% of domestic goods export. And for this market Kyiv will have extended free trade area, including liberalization of trade and free movement of capitals and current payments, head of the trade and economic department of the EU Representative Office in Ukraine Nicolas Berge says. According to him, it will be a FTA of new generation, providing for cancellation or reduction of customs duties, free trade in services, development of investments, state purchase markets, competition and market regulations. The FTA agreement also concerns nontariff restrictions, including technical barriers, standards, accreditation norms and conformity assessment, as well as sanitary and phytosanitary measures.

Berge also specifies that the important diversity of FTA with Ukraine from other similar regimes is Ukraine's obligations on gradual adaptation of legislation to European norms, including implementation of about 150 regulations and directives. Such progress will enables domestic producers to access not only Europe, but also markets of other counties, executive director of the International Blazer Fund Oleh Ustenko notes. Switching to European standards of internationals rules, Ukrainian enterprises will enter the regulatory space of EU relations with third countries. The matter concerns taxation, regulation of financial flows and accounting.

According to the analyst, simplification of the trade regime will enable Ukrainian exporters to save 487 million euro annually, and their colleagues from the EU will save 391 million euro. In particular, 82.6% of imported goods and 91.8% of exported goods fall under immediate cancellation of import duties. For other goods there will be certain transition periods, while cars and "second-hand" clothes will be protected by special mechanisms. In general, Kyiv will introduce 1-7 years transition periods for 52% of imported tariff lines, partial liberalization for 9.8% of goods and duty free quotes for 3% of goods. In total, the liquidation of required trade barriers will last at least 15 years.

We want to pay special attention to the changes for the agricultural sector. According to specialists, the sector will get maximum economic effect from the reduction of import duties - 330 million euro on agricultural goods and another 53 million euro on derivative products. In total, it will make 78.6% of all monetary savings of the country. From the European side, duties will be cancelled for 83.1% of tariff lines while from Ukrainian side - only for 35.3%. Moreover, Ukraine has received guaranteed amount of annual duty free supplies of crops, pork, beef, poultry and other.

Lightening of duties will be also applied to such industries as engineering and household appliances. Our country will reduce import duties for the total amount of 75.2 million euro, while the return move of Brussels on chemical goods will help Ukrainian suppliers to save up to 26.8 million euro per year. Finally,  pecuniary benefit of Ukrainian and European textile enterprises will make about 24.4 million euro and 8.7 million euro respectively.

What is in there for people?

Government's envoy on European integration Valery Pyatnitski adds that positive effect for national industry includes not only savings on duties. Market rapprochement with Europe will improve business-climate in Ukraine thanks to adaptation of legislation to the European and world norms and rules. Moreover, opening of markets will force domestic operators to improve and develop. According to Ustenko, it will result into redistribution of resources among producers, as well as economy sectors. "In a long-term perspective it will improve country's economy and raise its effectiveness and stability. For our plants, for example, it will be easier to introduce modern technologies, which in turn will also improve the economy."

Regular Ukrainians will also get their share, including wider range and better quality of goods. Moreover, the prices will fall due to high competition. Upgrading of production standards will improve working conditions, though employment terms will be strengthened as well. Active state policy will be very important for training labour forces in accordance with new trends. In general, FTA will increase progress-generating costs for provision of high-level welfare.

Technical issues

While the country is getting ready for signing of the agreement, there is still work to do, including adaptation of technical regulations. It is one of the key measures of non-tariff regulations, which becomes the man method of trade restrictions, replacing the traditional safeguard investigations and duties. The faster Kyiv unifies its technical regulations with Brussels, the easier it will enter European markets.

Former director of the Directorate General for Industry of the European Commission Evangelos Vardakas confirms that non-conformity with the system of technical regulations means denial of access to the EU for many products. However, it is comforting that the adaptation of Ukrainian system of technical regulations was launched 12 years ago and now is entering the final stage, not without the help of the EU, of course, which allocated 39 million euro for these purposes in 2009. The economist notes that adaptation of technical regulations to the European norms may give Ukraine annual income in the amount of 2-5% of GDP already in the first years of basic implementation.

In turn, head of the National Security and Defense Council Andriy Kluyev adds that the first full functioning year of the free trade area agreement with the EU may bring 2% of "bonus" GDP growth. At that, agricultural and mining sectors, which are already active exporters to Europe, will become absolute "winners". The list of winners will also include sectors already practicing national technical regulations -  electrical equipment, engineering, transport, partially food products. We want to remind that free trade with the EU may start working even before complete ratification of all provisions of the Association agreement, meaning we will be able to feel benefits of economic integration even still standing in lines for Schengen visas.

Andriy Boyarunets


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