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Free Trade Area: We start with CIS, Europe will come later

Posted by the Editor on October 19, 2011

Analytics / 19 October 2011 | 17:43

Free Trade Area: We start with CIS, Europe will come later

Free Trade Area: We start with CIS, Europe will come later

So, it has happened. Ukraine has taken the first step on the way to free trade area on foreign markets.

On Tuesday, during a meeting of the Heads of Governments of the CIS countries in St.-Petersburg, Prime Ministers of the CIS countries signed the Agreement on free trade areaž

The work over the agreement lasted 3 years, and 14 rounds of negotiations took place.

The Prime Minister of Ukraine Mykola Azarov underlined that signing of the Agreement on free trade area within the frameworks of the Commonwealth of Independent States and signing of the agreement on EU free trade area are the points of one plan on opening foreign markets for Ukraine for steady economic development.

Mykola Azarov named the signing of the free trade area Agreement as a historical moment, saying it will extend Ukraine’s capabilities on foreign markets.

ForUm addressed experts with a request to reveal merits and flaws of the signed document, as well as to explain the difference between FTA with CIS and FTA with the EU.

Volodymyr Lapa, dorector general of the Ukrainian club of agricultural business:

– The free trade area agreement with CIS is not something unexpected. Ukraine already has bilateral agreements of free trade with a number of CIS countries. Now these agreements have been converted into the united free trade area. We expect that the so-called exemptions will be cancelled eventually. In particular, the sugar issue is rather urgent. For example, Belarus can supply sugar in Ukraine, but Ukraine cannot supply it to Russia.

Speaking about the forthcoming FTA agreement with the EU and its relations with CIS FTA, I believe these two agreements can easily coexist.

Maria Kolesnik, expert on agricultural business:

– It is important to know the conditions of the agreement, because with Russia, for example, we already have a free trade agreement, but there are too many exemptions, and as a result we cannot export some goods.

However, FTA with Europe would be bigger breakthrough. Such cooperation will stimulate production of poultry and its goods. The same thing concerns confectionery.

Agricultural complex and food production in general will reach totally new level of quality. European investors will be interested in placing their production on our territory, as the prime costs are lower here, while the level technology and personnel is quite high.

As for cooperation with CIS, well, Russia is inclined to pressing its partners. For example, 40% of grain harvest in Kazakhstan remained on the fields just because Russia did not provide transportation.

Natalia Vitrenko, leader of progressive Socialist party, doctor of economics:

– FTA with CIS countries is a saving chance for Ukraine to keep up production. Unlike Europe, CIS agreement does not require thousands of conditions. I remember EU set 80000 conditions for all kinds of production in order to make our goods correspond with their standards.

It is obvious Ukraine will never meet these conditions, not now not in three years. But for CIS countries our standards are just fine, and as a result out production will find sale on CIS markets.

However, we should fall under illusion, because FTA with CIS does not simplify customs regime, attraction of investments or free transfer of means, as it could be in case of Ukraine’s membership in the Common Economic Space. It also does not mean gas price reduction, as it could be in case of Ukraine’s membership in the Customs Union. But still, FTA is chance to distribute Ukrainian production on new opening market.

Volodymyr Lanovoi, director of marker reforms Center, former Economy Minsiter:

– Right now it is difficult to give evaluation of the signed agreement, because there are no specific details of it. There are only odd bits of information, which do not depict the whole picture.

But I can say some words about what is know for sure regarding the agreement signed in St.Petersburg. First of all oil, gas and sugar remain out of the duty-free trade, which means import procedure of energy resources remain unchanged.

As for sugar, Ukraine would like to export sugar in Russia, but Russia set very high import duties for this Ukrainian product and prefers to buy cane sugar from all over the world. As a result, limitations for sugar exports lead to high prices on the domestic market and running at a loss of out sugar-processing plants.

That’s why the signing of the agreement of free trade area with CIS is a bitter blow. In fact, it is suppression of Ukraine under Russian interests.

Volodymyr Fesenko, head of ‘Penta’ political research center:

– First of all, I want to remind that this agreement is not something new. The agreement on FTA within CIS was signed back in 1990ies, but it was not fully effective, as Russia made many exemptions. Ukraine initiated the renewal of the agreement back in May, but a number of CIS counties refused to sign it, mostly on mercantile reasons, like Tajikistan and Uzbekistan. And there was a suspicion that Russia used the process of ‘unsigning’ as leverage – enter the Customs Union and you’ll get the rest. 

I believe that Russia suddenly agreed to sign the agreement only to reveal the contrast – you see that you have problems with Europe, but CIS is open and waiting, which means we are your real partners and you should prefer us.

However, the FTA agreement with CIS is beneficial for Ukraine, as we have a lot of economic interests in CIS countries. It is more civilized form of trade operations.

As for the differences between FTA with CIS and FTA with EU, the fact is that the agreement with the EU is a form of partial integration with the European Union, not a simple free trade area, which Ukraine has with many countries. It is more advanced format of economic relations, and it is very important step of integration into economic structure of Europe.


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