This year will decide the fate of the association agreement between Ukraine and the European Union. Both supporters and opponents of European integration await this decision. This moment of truth will determine the vector of Ukraine’s development for the next decade.
Not surprisingly, this issue has been debated in kitchens and in the highest political offices. There are many different opinions. Overall, this is a good thing — a sign that foreign policy in Ukraine is as active as domestic political life.
However, an active discussion does not necessarily lead to an informed decision. We need to distinguish emotion and from information, myths from facts. And we should ignore these seven myths:
There is nothing special in the Ukraine-EU agreement, since the EU has concluded similar agreements, for example, with Chile, Morocco and Mexico.
The agreement with Ukraine would be unprecedented in terms of ambition and depth. It will lay the foundation for political association and economic integration and will make Ukraine’s legal obligation to follow modernization of the state based on the European model.
A classic free trade agreement between the EU and others covers only trade in goods. Instead, the free trade agreement with Ukraine will be deep and comprehensive, that is, it will include liberalization of trade not only in goods but also services, liberalization of capital movement and to a certain extent, movement of labor force.
Unlike a conventional free trade agreement, it will also require a comprehensive adaptation of European regulatory legislation in the areas of transport, energy, services, agriculture and so on. It will unify a significant share of legal frameworks of the two parties, eliminate non-tariff (technical) barriers in trade and provide enhanced access to the EU single market for Ukrainian exporters and vice versa.
The agreement will be based on recognition of Ukraine’s European identity, a spirit of kinship and geographical proximity.
The association agreement does not have a clear European perspective, and therefore does not move Ukraine closer to EU membership.
Despite the fact that there is no clear reference to the prospect of membership in the agreement, the scope and obligations of the parties exceed European association agreements of the 1990s. Successful implementation will mean compliance with membership criteria, improving the quality of life, modernization of all spheres of state and society, improving competitiveness of Ukrainian producers and more. The agreement will allow Ukraine to reach a level of development where further progress towards EU membership becomes a matter of political expediency.
Failure to sign the association agreement indicates a crisis in relations between the EU and Ukraine.
This myth constantly changes. However, the rate and volume of technical work on preparation of the agreement, including the translation of multi-pages text into 23 official languages of the EU, show that the signing of the document could not be even considered before 2013. The prospects of signing will be discussed at the next EU-Ukraine summit in Brussels on Feb. 25.
The association agreement and free trade agreement will destroy sectors of the Ukrainian economy.
The EU continues to be one of the most successful economic and political projects. We talk about business conditions, significant investment potential, high technology and competitive products from the European manufacturers. Europe was advancing to reach its current position for decades.
Thanks to a free trade agreement, Ukrainian manufacturers will be able to win a place in the “wealthy” European market, find its niche and promote high-quality Ukrainian products at the European market – at a good price. Domestic consumers, in turn, will have access to high-quality European goods in Ukraine at lower prices.
Of course, it will be a struggle for economic survival, perhaps even natural selection for particular segments of the economy, but this is a struggle where Ukraine will be the ultimate winner. The most sensitive sectors will have certain transitional periods and favorable adaptation conditions that will prevent shocking dislocations.
The early years of adaptation will be difficult. This is not surprising, because the systemic transformation always leads to short-term losses. However, signing will significantly increase the investment attractiveness and foreign direct investment inflows, which will help to offset the current trade deficit with the EU.
The association agreement with the EU will hurt Ukraine’s relations with Russia
The association agreement with the EU is in the best interests of all parties, including Russia. It is about growing confidence in Ukraine as an international partner and strengthening the rule of law and predictability as the basis for the confidence of all, including Russian investors.
A free trade agreement with the EU will prevent the existence of one with the former Soviet republics in the Commonwealth of Independent States
A free trade agreement with the CIS, as opposed to joining the Customs Union of Russia, Belarus and Kazakhstan, is not inconsistent with the deep and comprehensive free trade area between Ukraine and the EU. CIS countries are important trading partners of Ukraine. Unfortunately, a large proportion of Ukrainian goods does not comply with EU requirements, and therefore can be competitive only in the traditional markets available to Ukraine. However, a free trade area with the EU will gradually improve the quality and efficiency of Ukrainian production, increasing the share of products with high added value in Ukrainian export.
Accession to the Russia-led Customs Union is more profitable for Ukraine than economic integration into the EU
The EU provides access to a larger (500 million consumers vs. 170 million in the Customs Union) and more predictable market with a much higher consumer purchasing power. Economic integration with the EU is the path to modernization. Look at the progress the European countries of the former socialist camp made in the last 20 years. The vast majority of them are already members of the EU, while Russia’s economy continues to be based on commodity-driven exports. Russia itself is in need of radical modernization.
Accession to the Customs Union may grant Ukraine only short-term dividends: a few billion dollars, about which Moscow says, are just a payment in exchange for the loss of sovereignty of Ukraine in the context of its own trade policy and rejection of integration into the EU.
However, the association agreement with the EU provides explicit legal and political guarantees of sovereignty, independence and territorial integrity of the Ukrainian state.
A joint study of the German Advisory Group and the Ukrainian Institute for Economic Research and Policy Consulting found that accession to the Customs Union will reduce the welfare of Ukraine by 0.5 percent in the medium term and by 3.7 percent in the long term, while the free trade agreement with the EU will increase this indicator by 4.3 percent in the medium term and by 11.8 percent in the long term.
The EU is a community with more than 50-year history, which proved its viability and effectiveness. EU states traditionally score high in quality of life, life expectancy, pensions and welfare. The EU has a rich heritage of common standards in many areas such as food quality, health care, social protection, environment, road safety, business climate, opportunities for young people and so on. These standards are actually implemented, not just declared.
Today, a choice of where to go – to the EU or the Customs Union – is trying to be imposed on Ukraine. Paradoxically, the most categorical statements come from the Customs Union.
All pros and cons of the European choice are clear. Achievements of the EU are obvious, as well as the challenges that it faces now. Instead, the pros and cons of the Customs Union are hypothetical. It is obvious that Ukraine should seek a compromise between pro-European and pro-Russian foreign policy. But it is equally obvious that the price of this compromise should not be rejection of European integration.
We should stop thinking as if we were an object of the struggle for spheres of influence and make our conscious choice in favor of the European model of development.
Kostiantyn Yelisieiev is Ukraine’s representative to the European Union
