Share Tweet Pocket Add to Bookmarks
You're reading: On closer look, a Potyomkin village-style trade agreement

 Since Aug. 9, when Ukraine ratified a free trade agreement with Russia and Belarus, the nation's officials have not stopped praising it.  Iryna Akimova, deputy head of Presidential Administration, said the deal will create 60,000 jobs in the country and will boost tax revenues by Hr 9.4 billion per year, and so on.

economists say that the agreement will actually change little in reality. It’s
basically another stunt pulled out by Russia. A clever trick, no more.

“Little has
changed,” says head of the Institute for Economic Research Ihor Burakovsky.
“The deal supersedes more than a hundred bilateral free trade agreements that
regulated trade between different countries in CIS – Russia and Ukraine,
Ukraine and Belarus, and so on.”

The current
trade with Commonwealth of Independent States, or CIS, accounts for 42 percent
of Ukraine’s merchandise turnover. But most export duties that currently exist
will remain.

Duties on
export of machine building and pipes, which make up a large part of Ukraine’s
exports to Russia, will be lowered when then agreement comes into effect in

Pinchuk, one of the nation’s richest men and the biggest producer of pipes, is
one of the beneficiaries of this agreement.

But other
commodities, like energy and sugar, only get duties lifted if the exporting
country is a member of the Russia-led Customs Union.

“In the
FTA, Russia has canceled the duty on energy commodities and raw products only
for members of the Custom’s union, which Ukraine is not,” says Oleg Ustenko,
executive director of The Bleyzer Foundation.

This trick
looks like another ploy by Russia to push Ukraine into the Customs Union, which
it has so far resisted. Previously, Russia’s Vladimir Putin has pushed for it
by suggesting that Ukraine will get big discounts on gas if it decides to join
the Customs Union. Ukraine pays one of the highest prices in Europe, $450 per
1,000 cubic meters, for imported Russian gas.

however, has been pursuing a deep and comprehensive free trade agreement with
Europe. Although on hold at the moment for political reasons, the agreement
could potentially give an important boost to Ukraine’s economy by gradually
opening up a large and rich market next-door.

The free
trade agreement the European Union is offering Ukraine would not immediately
scrap all trade restrictions, either. But it includes a detailed transition
period and time frame during which trade restrictions will be phased out.

In contrast,
the CIS free trade agreement offers nothing of the sort. It offers no clear-cut
prospect for free trade at all. Rather, it offers free trade on paper
followed up by more years of negotiations for most of the commodities.

agreement does provide some benefits, though.

treaty’s key advantages are that it will complicate expanding the list of
exemptions, introduce a common disputes settlement mechanism based on WTO
[World Trade Organization] principles, and require that technical barriers, sanitary
and phytosanitary measures comply with WTO rules,” says Olena Bilan, chief
economist at Dragon Capital.

The free
trade agreement makes it harder to wage “trade wars,” like the cheese war
Russia started against Ukraine earlier this year. It banned some cheeses,
claiming they are not produced to the Russian health standards.

agree that the free trade deal does not prevent Ukraine from signing a similar
deal with the European Union, which the sides initialed on July 19.  

“The more
free trade agreements Ukraine gets with foreign countries, the better it is for
our trade and economy, since we are an export-oriented country,” Ustenko says.
Currently the government is negotiating similar documents with Canada, Israel
and Turkey.

Armenia, Uzbekistan, Azerbaijan and Turkmenistan are expected to join the FTA
between Ukraine, Russia and Belarus later in 2012.

Kyiv Post staff writer Svitlana Tuchynska can
be reached at


Found a spelling error? Let us know – highlight it and press Ctrl + Enter.


Add comment

Sorry, you must be logged in to post a comment.
More in this section

Add a picture
Choose file
Add a quote

Are you sure you want to delete your comment?


Are you sure you want to delete all user's comments?


Are you sure you want to unapprove user's comment?


Are you sure you want to move to spam user's comment?


Are you sure you want to move to trash user's comment?

Spelling error report

The following text will be sent to our editors: