Nauki Społeczno-Humanistyczne Соціально-Гуманітарні Науки Social and Human Sciences

 

Kopiyka, Valeriy; Shnyrkov, Olexandr, 2014. EXTERNAL DETERMINANTS OF THE EU-UKRAINE DEEP AND COMPREHENSIVE FREE TRADE AREA. Social and Human Sciences. Polish-Ukrainian scientific journal, 01(01), pp. 45-49.

Nauki Społeczno-Humanistyczne. Polsko-ukraińska czasopismo naukowe / Соціально-Гуманітарні Науки. Польсько-український науковий журнал / Social and Human Sciences. Polish-Ukrainian scientific journal, 2014, Vol. 01(01)



 

Kopiyka, Valeriy; Shnyrkov, Olexandr, 2014. EXTERNAL DETERMINANTS OF THE EU-UKRAINE DEEP AND COMPREHENSIVE FREE TRADE AREA. Social and Human Sciences. Polish-Ukrainian scientific journal, 01(01), pp. 45-49. 

 

EXTERNAL DETERMINANTS OF THE EU-UKRAINE DEEP

AND COMPREHENSIVE FREE TRADE AREA

 

Kopiyka, Valeriy,

Doctor of Political Science, Professor,

Taras Shevchenko National University of Kyiv,

Institute of International Relations,

Director

kopvv@ukr.net

 

Shnyrkov, Olexandr,

Doctor of Economic Science, Professor,

Taras Shevchenko National University of Kyiv,

Institute of International Relations,

Head of the Department of World Economy and International Economic Relations

aisch@ukr.net

 

SUMMARY

The article deals with modern global trends of international division of labor and particularly the EU-Ukraine Association Agreement, possible external barriers to the EU-Ukraine deep and comprehensive free trade area, and its impact on development of similar regimes of Ukraine’s trade with other countries and customs unions. The article also defines possible advantages and losses which Ukraine may experience in case of implementation of the Association Agreement economic part and Russia’s trade retaliation.

Key words: EU-Ukraine Association Agreement, deep and comprehensive free trade area, Russia’s trade retaliation, external options of implementation of the Association Agreement.

 

 

ЗОВНІШНІ ФАКТОРИ РОЗВИТКУ ПОГЛИБЛЕНОЇ І

РОЗШИРЕНОЇ ЗОНИ ВІЛЬНОЇ ТОРГІВЛІ УКРАЇНИ З ЄС

 

УДК 327

Копійка, Валерій,

доктор політичних наук, професор,

Київський національний університет імені Тараса Шевченка,

Інститут міжнародних відносин  (Україна, Київ),

директор

kopvv@ukr.net

 

Шнирков, Олександр,

доктор економічних наук, професор,

Київський національний університет імені Тараса Шевченка,

Інститут міжнародних відносин (Україна, Київ),

завідувач кафедри світової економіки і міжнародних економічних відносин

aisch@ukr.net

 

АНОТАЦІЯ

У статті розглянуті сучасні глобальні тренди розвитку міжнародного поділу праці та, зокрема, Угоду про асоціацію України з ЄС, можливі зовнішні бар’єри створення поглибленої та розширеної зони вільної торгівлі, її вплив на режими торгівлі України з іншими країнами та митними союзами. Визначені переваги та втрати, які може отримати Україна в разі реалізації економічної складової Угоди про асоціацію з ЄС та торговельної реакції Росії.

Ключові слова: Угода про асоціацію України та ЄС, поглиблена та розширена зона вільної торгівлі, торговельна реакція Росії, зовнішні умови реалізації Угоди про асоціацію.

 

 

Deep and Comprehensive Free Trade Area is an important component of the EU-Ukraine Association Agreement. Signing of agreement on creation of free trade area is in line with the global trends of international division of labor: at the beginning of 2014 583 regional trade agreements have been notified to WTO, most of them (95%) dealt with free trade area [1]. At the same time 159 countries are the members of WTO, therefore each country participates in several agreements.

Modern world economy already lists certain “hubs” of free trade areas to which other countries tend: the USA, the EU, CAFTA and MERCOSUR. Thus, particularly, at the beginning of 2013 the EU had 29 agreements on free trade areas and continued or started negotiations on initiation of another 23 agreements including ones with the USA and Japan. The process of establishing of Eurasian center of trade gravity continued after signing the Agreement of EurAsEC in May 2014.

We can also observe the development of the new phenomenon of international competition – competition among countries for the access to captious internal markets of the above-mentioned economic centers [2]. The producers of those countries which have the access to these markets have obvious advantages comparing to the countries which are not members of free trade areas with these economic centers. On the other hand, liberalization of the access to markets of countries or their unions, which themselves have developed network of free trade areas with third countries, may multiply effect for national exporters that receive such “double” access. Therefore in case of implementation of the free trade area Ukraine will get the access to the largest regional market in the world economy with the demand that may appear to be the ground for structural reforms of national economy.

Within the system of the EU association agreements with other countries (there are 4 main types of association agreements) the agreement with Ukraine, providing international movement of production factors and depth of regulatory convergence, concedes only to agreements on association with countries of Eastern Europe that envisage joining the EU.

Free trade area with the EU shall not preclude the development of similar regimes of Ukraine’s trade with other countries or customs unions. In case of signing the Association Agreement with the EU Ukraine doesn’t have to contract out existing agreements on free trade areas or respective negotiations on creation of such areas (CIS countries, Customs union of Russia, Belorussia and Kazakhstan, EurAsEC, EFTA, Macedonia, Turkey, Canada, ect.) as far as common trade policy towards third countries is implemented starting from the level of customs union. Moreover existence of two main free trade areas of Ukraine (with the EU and with CIS countries) provides the unique competitive access architecture for Ukrainian producers to captious external markets which other countries do not have.

On the other hand, establishment of free trade area with the EU shall become a real barrier for Ukraine’s participation in other customs unions, common markets, economic unions, particularly in the Customs union of Russia, Belorussia and Kazakhstan, EurAsEC as far as within these RTAs supranational processes of creation of common and single policy in different branches and sectors of economies is in progress. In case of joining the developed forms of international integration, starting with the customs union, the problem of exit from free trade regimes with other countries and respective economic compensation for change of trade regime according to the WTO rules may arise.

The real external barrier for implementation of economic part of the Association Agreement is political and economic position of Russia which is trying to involve Ukraine into the Customs union of Russia, Belorussia and Kazakhstan and into the EurAsEC from 2015. Strategic aim of Russia is creation of regional economic union which shall be the factor of strengthening of Russia’s position in global world economy and policy. Involvement of Ukraine’s economic, scientific, technical and demographical potential to this union is crucial.

Russia’s turmoil on the possible negative consequences for Russian economy of the EU-Ukraine Association Agreement is based on the assumption about new level of competition for Russian companies in Ukrainian, Russian, and the EU markets, alteration of Ukrainian export flows, international regional capital movement, etc. However, existing researches show that in spite of the fact that the level of competition for Russian companies will grow in the internal, Ukrainian and the EU markets such growth will not be sufficient enough to have the negative consequences for the Russian economy. Moreover Russian companies which locate their production networks in Ukraine shall benefit from receiving the access to the EU markets. Russian claims about the possibility of increase of re-export operations from the EU to Russia as a premise for withdrawal from the regime of free trade with Ukraine can also be criticized as the existing mechanisms of the WTO rules allow to create effective barriers for re-export operations without general change of trade regime. That is why threats of Russia on withdrawal from free trade regime with Ukraine and the existing practice of trade restrictions of import from Ukraine mainly have the political nature.

In case of implementation of the EU-Ukraine Association Agreement economic part, Russia has the possibility for considerable trade (and not only trade) impact on economic development of Ukraine which may lead to the slowing down of national economy or even to the economic crisis. Thus, in 2012 Russia’s share of Ukraine’s foreign trade turnover was 29,4% while Ukraine’s share in Russia’s foreign trade turnover - only 5,4%. Thereby positive effects from free trade area with the EU will not fully compensate losses of Ukrainian economy from restrictive trade measures of Russia in the short run [3]. Balance of positive and negative effects from free trade area with the EU and Russian trade restrictions depends on depth of integration processes with the EU, forms of Russia’s reaction and effectiveness of adaptation of Ukraine’s economy to the new conditions of trade with main partners. Gas price plays the key role in the system of negative factors of Russia’s impact on economic development of Ukraine.

Deep and comprehensive character of free trade area with the EU provides essential costs for national economy in the process of adaptation to the technical and other requirements of the EU common market. Possibilities of the EU official economic assistance, national budget financing, expenditures of national consumers and producers for the adaptation process are essential but limited. Experience of the East European countries proved the considerable role of foreign investments in national economies modernization. Establishing attractive internal investment climate in Ukraine becomes an urgent driver of economic association with the EU. On the other hand, guarantees for foreign investors on economic unity and indivisibility of state boarders of investment field in Ukraine shall be considered as an important external factor of realization of the EU-Ukraine Association Agreement. Moreover absence of such guarantees shall essentially diminish attractiveness of Ukrainian economy for foreign investments, and therefore generally economic attractiveness of the Association Agreement for Ukraine itself. Therefore the implementation of the EU-Ukraine deep and comprehensive free trade area will to a great extent depend on guarantees of preservation of unity and homogeneity of investment environment in Ukraine.

Instability in eastern regions of Ukraine may require the European Union and Ukraine to find other options of implementation of the Association Agreement economic part. Depending on the character and depth of negative impact of the abovementioned factors transition to deep and comprehensive free trade area may be postponed, partly started, have temporary exceptions in terms and spheres of implementation, require increase of quotas, be accompanied by essential growth of technical and credit assistance from the EU. System of state guarantees of the EU and other countries investments into the national economy may also become an important driver of the EU-Ukraine free trade area. New external political and security guarantees of Ukrainian sovereignty may be also envisaged.

 

REFERENCES:

1.                      Regional Trade Agreements Information System (RTA-IS) of WTO. Available at: http://rtais.wto.org/UI/PublicMaintainRTAHome.aspx (accessed 1 June 2014);

2.                      Shnyrkov O. (2013) The Macroeconomic Impact of an FTA with the EU on the Ukrainian Economy/ O. Shnyrkov, L. Kharkova // Post-crisis Global Economy Restoration of Equilibrium : Monograph; Edited by O. Shnyrkov and A. Fillipenko ¬ K: Publishing center “Kyiv University” - pp. 236-245;

3.                       Oxford Economics (2012), The Impact of an FTA between Ukraine and the EU.

 



Обновлен 27 июл 2014. Создан 14 июл 2014