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Economic association with EU having more cons than pros for Ukraine

June 09, 2014, 21:05 UTC+3 Zamyatina Tamara
© EPA/ROMAN PILIPEY

MOSCOW, June 09. /ITAR-TASS/. Intention of the newly elected Ukrainian President Petro Poroshenko to sign the economic section of the Association Agreement with the EU before June 27 causes much skepticism among Russian experts and European politicians likewise.

French Foreign Minister Laurent Fabius confessed to i-Tele channel Sunday after attending Poroshenko’s inauguration in Kiev he could only state in the wake of his conversations with European counterparts that most of them did not encourage the idea of Ukraine’s joining the EU.

His compatriot, Marine Le Pin, who leads the National Front, sounded more emphatically when she said Ukraine would not get membership of the EU and there was not telling tales about it because the country’s economy was standing at a far lower level that required in EU.

The problem is further aggravated by a possibility of enactment of a range of protective measures by Russia if Kiev signs the economic section of the AA. President Vladimir Putin informed Petro Poroshenko about the prospect during their meeting in Normandy last week.

Earlier, he meted out the same warning to the former Ukrainian President, Viktor Yanukovych, who put off the signing of the AA subsequently.

Putin recalled in this connection that Ukraine might a lifting of the zero customs duty and a revision of an agreement permitting Ukrainian citizens to stay and work in Russia for up to 90 days without obtaining visas if it Kiev signed the AA in full.

Along with it, Putin said that five to six million able-bodied Ukrainians are working in Russia.

“The then Prime Minister, Nikolai Azarov, said last fall the assimilation of various European technological regulations alone would require spending in the amount of 100 billion to 160 billion euro over a period of ten years,” Dr. Mikhail Remizov, the director of the Institute for National Strategies told Itar-Tass. “It is the introduction of EU technological regulations and standards that poses the biggest problem for Ukraine today in terms of coping with terms of the economic association with the EU.”

“The need to fulfill these requirements will have destructive aftermaths for the Ukrainian economy,” Dr. Remizov said.

“Transition to European standard makes Ukrainian industries uncompetitive and this primarily concerns the processing industries,” he said. “Many high-tech enterprises in Ukraine, especially in mechanical engineering and aircraft manufacturing, are tied very closely to Russia. Take for instance the Antonov (jets and turboprops. – ITAR-TASS) that require cooperative efforts on both sides.”

“If there’s no cooperation, Russia will find an opportunity to substitute for imports but many Ukrainian factories will get extinct because neither Ukrainian domestic consumers nor the EU need jet engines, as the competition (between manufacturers) is very intense there,” Dr. Remizov said.

“Ukraine hopes to get an inflow of foreign investors if it signs the AA but their interest towards the Ukrainian economy cooled off sharply in November 2013 when the agreement was still in the offing because the investors were attracted by the prospects of reaching out to CIS markets,” he said.

“However, they turned away from Ukraine when they realized Kiev would lose this privileged in the light of the AA,” Dr. Remizov indicated.

“Rank-and-file Ukrainians hope for a lifting of visas for trips to the EU after the signing of association and for a further opportunity to get jobs in highly developed nations,” he went on. “But this is happening on the background of a sharply growing resistance to the inflow of guest-workers from abroad in Europe and the fact adds to the overall scope of disadvantages, which clearly outweigh the advantages offered by the economic part of the AA.”

Dr. Sergei Markov, a member of Russia’s Public Chamber and director of the Institute for Political Research, also said the AA was generally unprofitable for Ukraine.

“The pattern of access for Ukrainian commodities to the EU markets offered now presupposes that Ukraine will deliver the products with low degrees of processing, while the finishing will be done in the EU, which will be getting obvious profits from commerce of this kind,” he told ITAR-TASS.

“In the meantime, if Ukraine opens its market for an influx of EU goods, the prices for these imports will fall and Ukrainian manufacturers will be knocked out of business,” Dr. Markov warned.

“The text of the AA says the EU will issue rather small quotas for the bulk of Ukrainian commodities - for poultry meat, grain, and a number of other items — that don’t exceed 5% of entire output of each product,” he said. “In essence, this is a discriminatory agreement.”

“It was exactly the market of the CIS that European exporters were seeking to get outreach to because it is ten times bigger than the Ukrainian market,” Dr. Markov said when he was asked to explain for why Russia would have to defend its customs territory from the impact of the AA.

“If the Ukraine-EU association takes place, indeed, European goods will then stream into CIS markets without any impediments and will get to the Russian market in bypass of all the tariff regulations applied to commerce between Russia and the EU,” he said/

To date, Russia is the main foreign trade partner for Ukraine. In 2013, 23.8% of all Ukrainian exports ($15.1 billion) had Russian destinations.

The CIS Customs Union embracing Belarus, Kazakhstan and Russia accounted for 30.3% of Ukrainian exports ($19.2 billion). The entire EU stood at 26.5% (equivalent of $16.8 billion).

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