Ukrainian officials won't come back empty handed from their trip to North America.
On July 14, Ukrainian Prime Minister Arseniy Yatsenyuk signed a free
trade agreement with his Canadian counterpart Stephen Harper in Ottawa, which should add
$19 million to the nation’s gross domestic product yearly.
The same day Infrastructure Minister Andriy
Pyvovarsky and U.S. Secretary for Economic Growth, Energy and the Environment
Catherine Novelli signed an Open Skies agreement in Washington, D.C.
The free trade deal
will eliminate most import-export tariffs between the two countries mainly
benefiting the agricultural and industrial sectors of Ukraine, whereas the
aviation deal is expected to nurture the Ukrainian airline business.
“This agreement strengthens bilateral economic ties and facilitates the
growth of civil aviation between the U.S. and Ukraine. It is an example of the
strong bonds of friendship and cooperation between our two countries,” the U.S.
Embassy to Ukraine wrote on its website.
“This (open skies) deal will be significant,” Oleh Marchenko, a partner at law firm Marchenko Danevych, says. In some cases when the
U.S. signed an Open Skies agreement with other countries there was a 35 percent
flight increase between the two countries, in other cases more than 100
percent.
But Serhiy Vovk, director of Center for Transport Strategies, a think tank,
says that the deal will only bring a small increase in flights in the short
term.
“A flight from Ukraine to the U.S. is a pretty expensive pleasure. If
you look at the prices of around $400-$500 per ticket, unfortunately not many
Ukrainians can allow themselves to do this,” Vovk says.
Furthermore, visa restrictions add to preferences for cheaper holiday
alternatives.
“A hopping tourist flow will only be possible with the normalization of
the economic situation in Ukraine, the increase in the salaries of the
population,” Vovk says.
U.S. carriers may start entering Ukraine’s market in 3-4 years, Vovk adds.
But Marchenko thinks that current prices aren’t an issue. The presence
of more U.S. airlines companies because of free access to Ukraine’s aviation
market means that Ukrainian customers will get more choices for direct travel
between the two countries, Marchenko says. “It’s a free market – when there is
less regulation there will be more travel.”
So far, America’s Delta is the only airline company operating in
Ukraine.
But even if Ukraine’s economy does recover, the nation still faces stiff
competition when drawing investors in the region. While there is potential for Ukraine
to become a hub between Asia and the U.S., there is a lot of strong competition
coming from the European Union and Turkey.
“Let’s not forget that the Boeing (flight MH17) tragedy unfortunately has
its own (negative) effect on the psychology of the consumer,” Vovk says.
Both Marchenko and Vovk agree that one of the main achievements of the
Open Skies comes from its symbolic gesture.
For Ukraine it is more important that it signs the Open Skies agreement
with the EU.
Before it was expected that Ukraine would sign the agreement with the EU
first, says Marchenko. The U.S. even delayed signing the deal for more than a
year so that the EU could take the initiative. But the outcome happened to be
the opposite.
“It’s essentially a political signal to the EU that it should ratify the
open skies agreement with Ukraine,” Marchenko says.
The other achievement – the Canada-Ukraine free trade deal – is also
expected to boost trade in Ukraine.
In 2011-2013, total bilateral trade of goods averaged only CA$347
million whereas in 2014 it plunged to CA$264 million. After the deal, bilateral
trade is expected to expand by 19 percent.
The agreement will not only
strengthen trade but will also help in such areas as economic reform,
development of peace and prosperity, long-term security and stability,
according to Canada’s Foreign Affairs, Trade Department.
Kyiv Post staff writer Ilya
Timtchenko can be reached at [email protected].
