The European Parliament was called into session, as leaders of the 28 member states immediately searched for ways to contain one of the greatest threats to the existence of the union since its founding in 1959.
One of those leaders was Ukrainian President Petro Poroshenko, who attended several high-level meetings with European officials to discuss the implications of Brexit on Ukraine’s standing with the EU.
The referendum outcome on June 23 has already had a major geopolitical impact worldwide, and will likely affect Ukraine’s geopolitical situation in several ways.
The most profound impact Brexit is likely to have on Ukraine is the fact that it will most likely delay the country’s bid to join the EU.
European leaders will now devote their attention to Britain’s withdrawal from the union, and the Ukraine issue will most likely slide down their list of priorities.
The EU itself is also likely to focus on Brexit negotiations with Britain, which will take years and will involve many of the 33,000 people employed by the European Commission, leaving even fewer officials to conduct talks with Ukraine.
The EU’s desire for further integration with Ukraine may also be diminishing- Jean-Claude Juncker, president of the European Commission, and Martin Shultz, president of the European Parliament, and other senior figures within the union will seek to steady the ship and ensure that there are no further departures, particularly given the current calls for referenda in France and Holland, before they look to expand.
However, even if the focus remains on Ukraine, Brexit will most likely have made negotiations more difficult, as the British were traditionally seen as one of the more pro-Ukrainian nations in the EU.
The UK often acted as a counterbalance to the more pro-Russian attitude of the Germans and Italians.
British influence would have been particularly helpful to Ukraine at this point given that Slovakia, one of the more pro-Russian countries in the EU, will take over the rotating presidency in July.
However, it is also possible that advocates of further European integration will want to bring Ukraine into the EU in order to dispel the view that the union is beginning to crumble. The hope would be that induction of Ukraine will show to the world that the European Union is growing and expanding, rather than declining and collapsing.
The Brexit decision will no doubt also have an impact on the movement of people and goods between the two countries.
The free trade agreement signed by Ukraine and the EU will open up new opportunities for Ukrainian businesses, but a British exit from the single market will shut the door for Ukrainian enterprise to the second largest economy in Europe, with a gross domestic product of just under $3 trillion.
Britain leaving the European Economic Area would also mean that British companies would be less likely to invest in Ukraine if it ever joined the EU as they would no longer be avoiding the union’s tariffs.
Up until this point, European companies who wanted to make goods cheaply while avoiding tariffs would outsource manufacturing to the less wealthy Eastern European members of the EEA, where they would have access to a large pool of relatively cheap skilled labor. However, if the UK leaves the EEA, companies will no longer need to avoid EU trade barriers, and therefore will not need to manufacture their goods in Europe, thus reducing Ukraine’s potential in the eyes of British companies as a manufacturing base.
Another issue with British withdrawal from the EEA could be free movement of people- even if Ukraine joins the EU, Ukrainian citizens would still have to get visas to travel to England.
However, it is important to note that both of these scenarios are reliant on Ukraine becoming a member of the EU and the UK leaving the European Economic Area.
It is also important to note that there is a reasonable likelihood that at least one of these things won’t happen.
As we have seen, Ukraine’s future with the EU is far from certain, and Britain could decide to stay in the EEA under a Norwegian-style agreement, at which point it would have to accept free movement of people.
If Britain stays in the EEA and Ukraine joins the EU, it would likely see an influx of British companies seeking to outsource their manufacturing, as the UK would still be in the single market and would therefore still have to comply with EU tariffs.
However a scenario in which Ukraine does not join the EU and Britain leaves the EEA would also potentially boost Anglo-Ukrainian trade.
If Britain, no longer constrained by EU tariffs, signed a free trade agreement with Ukraine, the country could well become an attractive proposition for British companies looking to outsource- it has a large pool of skilled workers in sectors such as manufacturing and IT, and is much closer geographically to the UK than other potential manufacturing hubs such as India or Brazil, thus making transportation of goods easier.
However, the biggest winner in Ukraine from free trade with Britain would be the agricultural sector.
Ukraine has vast export potential in agriculture, but it has not been fully reached, largely due to the European Union’s tariffs and Common Agricultural Policy. When the Treaty of Rome was signed in 1959, the French realized that their manufacturing sector would be crushed if exposed to more efficient German competitors. They therefore decided to protect their agriculture instead, and have subsequently pushed for agrarian protectionism within Europe ever since.
In this way the Common Agricultural Policy was formed.
It was, along with punitively high tariffs on food from non-EU states, designed to keep food prices artificially high for farmers through minimum pricing. This meant that countries that were able to produce food at lower prices, such as Ukraine, were cut out of the market. If the UK leaves the EEA and therefore the CAP, it will be able to buy food from non-EU countries without having high tariffs imposed upon it, thus opening up a vast new market for Ukrainian farmers.
Britain’s decision to leave the EU has already sent tremors through the very core of European politics, and it is therefore inevitable that Brexit will have an impact on Ukraine.
Although it is still uncertain exactly what the effect will be, it seems clear that much will depend on whether Ukraine is successful in its bid to join the EU (which in itself may be delayed due to the chaos in Europe caused by Brexit), and whether Britain remains in the European Economic Area.
If Ukraine becomes an EU member and Britain leaves the EEA, Ukrainian businesses will have missed out on a market with a GDP of $3 trillion a year. However, it is worth remembering that the EEA will still have a GDP of $15 trillion — a vast amount which still provides plenty of opportunity to Ukrainian enterprise. It is also worth remembering that if Ukraine does not join the EU, it will still be able to trade with an economically independent UK despite being locked out of the EEA.
