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Free trade zone with EU fraught with mass unemployment in Ukraine - experts

November 29, 2013, 0:33 UTC+3 KIEV
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KIEV, November 28, 21:14 /ITAR-TASS/. Ukraine is running the risk of mass unemployment and the loss of domestic market for its manufacturers when it creates a free trade zone with the European Union, participants in a roundtable meeting dedicated to the possibilities and risks of Ukraine’s European integration noted on Thursday.

Such grave forecasts are a logical outcome after a merger of two economically unequal partners, of which Ukrainians were not duly informed when the Association Agreement between that country and the European Union was drafted and negotiated, participants in the roundtable meeting arrived at a conclusion.

“Next to nothing was said about the advantages the European Union had expected from the signing of this agreement,” Viktor Suslov, Ukraine’s permanent representative at the Eurasian Economic Commission, said at the roundtable meeting. “A more thorough analysis shows that the European Union’s benefits might outweigh Ukraine’s.” In his words, a free trade zone and mutual cancellation of import taxes are much more beneficial for a more competitive economy.

“So, it creates a real risk that the majority of Ukrainian manufacturers would not stand open competition with European producers in a zone of free trade,” he noted. “It is fraught with a halt of thousands of enterprises and mass unemployment in Ukraine, while the European Union will be able to considerably expand a market for its goods. Ukrainian manufacturers run the risk of losing the domestic market.”

Free trade zones, he stressed, are usually created between equal partners and the “year’s experience of Ukrainian businessmen working in the zone of free trade with the Commonwealth of Independent States has proved this fact.”

“Such a regime demonstrated its efficiency for Ukraine, while its restrictions in these of those forms this year have incurred considerable losses on the Ukrainian economy,” Suslov said.

Participants in the roundtable meeting cited expert estimates of Ukraine’s possible losses if Russia and the Customs Union [of Russia, Belarus and Kazakhstan] impose protective measures in 2014. Thus, according to specialists from the Institute of Economics and Forecasting of Ukraine’s National Academy of Sciences, in case Russia imposes protective tariff and non-tariff measures, Ukraine’s exports to Russia in 2014 might shrink to eight billion U.S. dollars. In this case, Ukrainian exports of farming products might reduce by half, exports of foods - by 40 percent, exports of chemicals, non-mineral products and machine-building products - by 20 percent.

“Thus, decreasing exports to Russia will nullify positive effects of the association and free trade zone with the European Union and will cause a 05.-1 percent GDP drop. Moreover, Ukraine’s exclusion from the free trade zone with the Commonwealth of Independent States (CIS) will further worsen the situation,” experts from the institute said.

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