Last week’s European summit in Austria confirmed that the European Union has established a hierarchy of potential members, which may have inadvertently recreated a division of the European continent. Ukraine is most definitely on the wrong side of that dividing line – and it will remain there if the government continues its current policy.
Even though President Leonid Kuchma recognizes that isolation from Western Europe is not in Ukraine’s interests, his response has been wholly inadequate, if not directly harmful to Ukraine’s long-term prospects. The approach so far has been to attack the EU for alleged discrimination against Ukraine and to conduct near desperate levels of diplomacy to minimize the prospects of isolation.
When confronted by accusations of discrimination, the EU in its defense pointed out Ukraine’s poor record in the implementation of the Partnership and Cooperation Agreement, which came into force in March, and requires the elimination of barriers to trade.
According to German foreign-policy expert Alexander Rahr, the EU has given Ukraine enough chances to start its full integration into Europe. Yet, according to Rahr, nothing has been done by Ukraine for the last eight years.
Ukraine stands to lose a great deal through the present European expansion process if it is left behind. This is because new members will have to implement the full body of EU law (the acquis communautaire and the Schengen Agreement) – in effect, putting countries such as Poland and Hungary on the right side of the EU’s trade wall, while Ukraine remains on the wrong side.
Trade figures indicate that there is a significant risk of trade diversion, as Ukrainian goods imported into the EU would be more expensive when they are subjected to the EU’s Common External Tariff.
The current lack of border restrictions enables $1.7 billion worth of exports to be traded between Poland and Ukraine each year, while black-market trade from the western part of Ukraine is estimated to be as high as a further 50 percent on top of the official statistics.
More severe restrictions on traveling will put a stop to the thousands of Ukrainian construction and agricultural laborers who now cross to Hungary, Poland, and the Slovak Republic in search of employment, sending home much-needed income to their dependents.
Also at risk are the many well-publicized projects between Polish and Ukrainian regional projects, such as increasing tourist links, protecting shared water resources and other ecological projects, and the establishment of free economic zones.
Some economists argue that tougher competition will force local producers to become more efficient, but that overlooks the requirement for politico-economic solutions to the problems of transformation.
Moreover, competition is only likely to develop in a free-trade situation, between complementary economies, but the EU does not operate a system of free trade outside its borders, and it would be difficult to argue that the Ukrainian economy complements that of western Europe given its present circumstances.
On top of that, the countries that are left out of the enlargement process have faced additional problems in their transformation in that foreign-investment opportunities are increasingly directed at those countries that can provide potential access to the European market.
From the start of transformation to 1997, Ukraine has attracted a total of $1.3 billion, compared to more than 10 times that in Poland and in Hungary.
One final risk is that countries that cannot access EU markets and assistance will increasingly try to protect themselves – most likely by insulating themselves from the EU altogether.
Already in 1997, Ukraine levied higher import tariffs on certain high-tech imports, which in September 1998 resulted in Ukraine experiencing its first positive trade balance with the EU.
Today, the Lviv oblast in western Ukraine imports much of its dairy products and other food from Poland – inadequate distribution systems and the lack of restructuring of the old monopolies have rendered locally produced goods uncompetitive.
Public awareness of the tremendous trade deficit vis-a-vis Poland implies that if Poland joins the EU while Ukraine remains isolated, continued mass importation may become politically unacceptable. In those circumstances any Ukrainian government would find it politically advantageous to levy even higher import tariffs in order to protect local producers.
In response, Kuchma has embarked upon what can only be called desperate diplomacy.
Rather than implementing a package of reforms, he spent most of the summer and autumn of 1998 courting neighboring heads of state, repeatedly proclaiming that Ukraine’s future relationship with its neighbors was assured.
Both in Hungary and Poland, Kuchma extracted promises that those countries would operate as ‘Ukraine’s ambassadors’ within the EU.
Polish President Aleksander Kwasniewski has, in fact, stated his opposition to introducing visa requirements for Ukrainians, arguing that ‘if we seal the EU’s eastern border, we shall in fact have to deal with a new division of Europe.’
In reality, though, according to the Polish Ministry of Foreign Affairs, Poland will be compelled to implement visa requirements for Ukrainians in the future, despite its acknowledgment that Ukraine would be negatively affected by this step.
In reality, Kuchma’s efforts to guarantee Ukraine’s relationship with its western neighbors are mute, as any agreements made now have a very limited shelf life, in that they will be negated by those countries’ eventual inclusion in the EU.
President Kuchma is reveling in the proclamations by Poland, Russia, Hungary, NATO and EU of Ukraine’s status as a ‘strategic partner.’
Unfortunately, Ukraine’s strategic importance is undermined by the same president’s lack of efforts in establishing the basis for partnerships.
Instead of public-relations exercises, the Ukrainian president would be better advised to heed the EU’s suggestion that Kyiv initiate a genuine internal reform process and meet current obligations under the Partnership and Cooperation Agreement, and thereby establish a more permanent relationship with an enlarged EU.
Michael Andersen and Wendy Feuell are visiting lecturers with the Civic Education Project based at the Faculty of International Relations of Lviv State University.
