“Flexing muscles”

Europe has noted the progress in the negotiations on creating the free trade area (FTA) with Ukraine and presumes that before the next summer holidays the negotiations can be over. As The Day already wrote, the European commissioner for trade Karel De Gucht announced this during his visit to Kyiv.

According to him, both the EU and Ukrainian parties want to accelerate the negotion process. “I see that the Ukrainian government is interested in signing the agreement on the FTA as soon as possible,” stressed De Gucht after the meeting with the Prime Minister of Ukraine Mykola Azarov. Nevertheless, the negotiating process is a difficult and lasting thing, since it implies looking for a consensus and some concessions on behalf of the partners. “So far we are training our muscles during these negotiations,” the European commissioner commented on the dynamics of the 14 rounds of the negotiations. “One can be in a hurry while electing the Pope, but it is impossible in trade. We still have a lot of work ahead.”

As of today, a common vision on several positions of the future trade agreement has been reached. So, it is expected that the EU will open its market for Ukrainian goods right away. Ukraine can use the required transition period to establish free access to its market. In addition, according to De Gucht, the EU is ready to offer Ukrainian providers of financial services a possibility to set up their own business in the European Union, at this keeping only to the corresponding terms of the European legislation. It should be noted that the European Union for the first time in its history offers such a possibility for countries-partners, the European commissioner stressed.

The most innovative feature of the future trade agreement, in the opinion of De Gucht, is the coordination of the Ukrainian legislation with the rules and norms of the EU. “Such a conformation is really unique and unprecedented,” stressed De Gucht. “This means that all Ukrainian manufacturers will meet the EU standards by simply observing the internal rules. If you add the canceling of import duties to this, then such preferences will imply removing obstacles and, consequently, decreasing expenses for entering to the biggest and wealthiest market in the world, with 500 million prosperous consumers.” Besides, this modernization process, stressed the European commissioner, will also increase Ukraine’s ability to compete on the international market.

However, despite the readiness of the European Union to cancel almost all customs duties in trade with Ukraine, from what Ukrainian importers in metallurgical and textile fields and producers of clothes and fertilizers can benefit, the position regarding the assignment of quotas for the so-called sensitive goods remains crucial. The EU, according to De Gucht, will keep in the text of the future trade agreement with Ukraine the requirement to open European borders for agricultural products of Ukraine with the ratio of 80 percent to 20 percent. “The overwhelming majority, that is 80 percent of agricultural goods, will be imported to the European market without any problems,” explained the European commissioner. “Quotas will be assigned for the remaining 20 percent. The import of products defined by the EU as ‘sensitive’ beyond the established norm will be subject to the import duty.”

De Gucht didn’t answer the questions of journalists about which Ukrainian agricultural goods the EU considers “sensitive,” what will the amount of the quotas be, and whether they will not limit the volume of the Ukrainian-European trade established before the agreement, referring to his lack of information on these specific provisions of the agreement (!). However, he stated that quotas would definitely be introduced for the import of cereals. Regarding the size of the import duty that Europe is going to levy on the “excessive” Ukrainian goods, the European commissioner stated this was the question for another round of the negotiations.

Generally speaking, De Gucht stressed, Ukraine’s integration with the external EU market will bring a number of benefits for Ukraine. In particular, domestic investors and entrepreneurs will feel the growth of the level of legal stability, an improvement of business environment, and a decrease in the level of corruption. Ideas of inventors and artists will get better rewards owing to the European standards for the protection of intellectual property rights. And Ukrainian consumer will get access to goods of higher quality for lower prices. The European commissioner is confident the FTA will also have a positive impact on the work of the state government bodies. “They will spend the money of taxpayers more efficiently, processing state orders of necessary goods and services through the mechanism of competitive and transparent purchases,” emphasized the expert. “As a result of creating the FTA with the EU, the general level of social welfare in Ukraine will increase by over five percent, and the level of salaries in the long-run — by more than four percent,” stated Gucht, referring to the conclusions of one of European studies.

So if Ukraine manages to take advantage of all rules and preferences suggested by the EU correctly, it has the chance to become a leader and bring changes for the entire region of the Eastern Partnership, supposes the European commissioner. This is because the EU, in the opinion of De Gucht, today proposed to Ukraine the highest level of trade liberalization ever offered to countries that do not belong to the European area.

The Ukrainian party continues to look for compromises. During the meeting with De Gucht, Azarov defined for the European Commission a number of important questions, which should be solved before establishing the FTA between Ukraine and the European Union. First of all, the premier pointed out, this is the issue of renouncing export subsidies in bilateral trade. The second issue is rejecting the mechanism of establishing import prices for agricultural products. Azarov also pointed out that Ukraine finds it necessary to reject instruments of trade protection. In particular, the sphere of automobile transportation and energy services worries Ukraine.

In his turn, President of Ukraine Viktor Yanukovych, after the meeting with De Gucht, stated that the Ukrainian party is satisfied by the intensity of Ukraine-EU contacts on the highest political level. So the government expects that soon it will be possible to find the common denominator in solving agreements on all key questions. Indeed, according to the head of the state, the Ukrainian party already offered a corresponding mechanism to the EU.

Analyzing the results of the working visit of the European commissioner to Ukraine, the head of the board of the Institute for Economic Studies and Political Consultations Ihor Burakovsky in his conversation with The Day highlighted the progress of the negotiations as well. For example, the expert calls the norm “80 to 20” an obvious concession for Ukraine, as it should be noted that at the beginning of the negotiations the EU was not interested in opening its own agricultural market for Ukraine at all. “The point is not in their bad attitude to us, but in the economic policy of the EU regarding third countries,” highlighted Burakovsky. However, the expert stresses, Ukraine should not forget that the declaration of opening the European market for Ukrainian agricultural production does not guarantee trade. The issue of conformity of Ukrainian goods to the quality standards of the European Union remains unsolved.

Nevertheless, though there are still many questions that need to be answered, and despite the evident progress in the negotiating process, fulfilling obligations remains the key problem of the “Ukraine-EU-FTA,” points out Burakovsky. “The point is not in what we promise, but how we will fulfill our obligations,” stressed the expert. “Therefore we should undertake realistic commitments. Ones we can carry out. And while fulfilling those promises, we would simultaneously move forward with our economic changes and reforms.”