Free trade zone
Should Ukraine sign the Association Agreement provided by the EU?
Ukraine is Europe’s second-largest country by landmass, with a population of 45 million and a $176 billion economy. This combined with its strategically important geographic location between Western Europe and Russia makes it highly important for both the EU as well as Russia’s newly announced Eurasian Economic Community (EEC). (N.A, 2013) In the EUs strive to engage Ukraine in the union; they have recently proposed an offer in form of an Association Agreement, providing the country economic stability and security. In the recent past, other former Soviet countries in Europe have signed similar agreements with the EU, historically functioning as a primary step towards EU membership. (Garanina, 2013) The objective of this essay is to examine the positive and negative effects of signing the Association Agreement and distinguish whether it would be beneficial for Ukraine to sign.
If Ukraine decides signing the agreement, it risks losing many of its current trading partners, which in the short run could be economically devastating. For example they might have to forfeit their entire Russian export sector, which accounts for $16 billion. Russia estimates that this will immediately cost Ukraine about €35 billion. (NA, 2013) At the same time, Ukraine faces dept. repayments of more than $60 billion, which amounts to a third of the country’s GDP ,according to July Central Bank Data. $20 billion of that amount is loans provided by Russian state-owned banks who threaten to demand instant payment if Ukraine signs the agreement. (NA, 2013) In addition to the lost trade and the immediate payments, large transition expenses together with costly improvements in infrastructure would have to be done. (N.A, November 29)
From a political perspective, the signing of the Association Agreement could be seen as an exclusion of Russia’s Custom Union, a statement that in the worst case could
Ukraine is Europe’s second-largest country by landmass, with a population of 45 million and a $176 billion economy. This combined with its strategically important geographic location between Western Europe and Russia makes it highly important for both the EU as well as Russia’s newly announced Eurasian Economic Community (EEC). (N.A, 2013) In the EUs strive to engage Ukraine in the union; they have recently proposed an offer in form of an Association Agreement, providing the country economic stability and security. In the recent past, other former Soviet countries in Europe have signed similar agreements with the EU, historically functioning as a primary step towards EU membership. (Garanina, 2013) The objective of this essay is to examine the positive and negative effects of signing the Association Agreement and distinguish whether it would be beneficial for Ukraine to sign.
If Ukraine decides signing the agreement, it risks losing many of its current trading partners, which in the short run could be economically devastating. For example they might have to forfeit their entire Russian export sector, which accounts for $16 billion. Russia estimates that this will immediately cost Ukraine about €35 billion. (NA, 2013) At the same time, Ukraine faces dept. repayments of more than $60 billion, which amounts to a third of the country’s GDP ,according to July Central Bank Data. $20 billion of that amount is loans provided by Russian state-owned banks who threaten to demand instant payment if Ukraine signs the agreement. (NA, 2013) In addition to the lost trade and the immediate payments, large transition expenses together with costly improvements in infrastructure would have to be done. (N.A, November 29)
From a political perspective, the signing of the Association Agreement could be seen as an exclusion of Russia’s Custom Union, a statement that in the worst case could
References: Garanina, E. (2013) The EU – Ukraine Association Agreement and Deep & Comprehensive Free Trade Agreement explained http://ukraine.nlembassy.org/binaries/content/assets/postenweb/o/oekraine/netherlands-embassy-in-kiev/import/association-agreement/the-eu-explained_eng.pdf NA. (2013) To deal or not to deal? Ukraine’s EU-Russia crossroads in facts and numbers http://rt.com/business/eu-trade-deal-vilnius-449/ Krol, M. (2013) What will now happen to the Ukraine-EU relationship? http://www.frivarld.se/magasin/vad-ska-nu-handa-med-relationen-mellan-eu-och-ukraina/ Surana, K. (2013) Why Ukraine debate has Cold War echoes http://globalpublicsquare.blogs.cnn.com/2013/12/12/why-ukraine-debate-has-cold-war-echoes// Zilic, A. (2013) Ukraine belongs in Europe. http://www.corren.se/asikter/debatt/ukraina-hor-hemma-i-europa-6643495-artikel.aspx