Eurasian sticks and carrots
Ukraine will join the Eurasian customs union only if the economy will further deteriorate over the next two years and the government desperately needs at least a short-term positive effect, However, joining the Customs Union would mean technology lag for decades, an article in Kyiv Weekly warns.
The agreement on the CIS free trade zone signed October 18, 2011 in St. Petersburg by Ukraine, Russia and Belarus came into force on September 20. After the parliamentary elections, official Kyiv is hoping to sign the association agreement between the EU and Ukraine with the free trade agreement between the two sides being its integral part. The text of the association agreement was initiated March 30 and the text regarding the free trade zone (FTZ) between Ukraine and the EU was inked on July 19.
Ukraine’s First Vice Premier Valeriy Khoroshkovskiy had earlier expressed hopes that the association agreement would be signed by the end of 2012. However, after the agreement is signed, it must be ratified by Ukraine and all EU countries, which could take several years.
Ukraine to join the EurAsEc customs union now due to the obligations it had undertaken when it joined the World Trade Organization. In the analytical report “Prospects of Relations between Ukraine and the Customs Union of the Republic of Belarus, the Republic of Kazakhstan and the Russian Federation” compiled last year by the National Strategic Studies Institute, the researchers note that the average customs tariff of Ukraine is nearly twice lower than the average tariff of the customs union.
“According to our calculations, the amount that could be subject to sanctions will be at least US $5 bn,” reads the NSSI report. “In particular, the import of cars from WTO member countries is one of the major categories of import into Ukraine. A six-fold hike in tariffs compared with Ukraine’s obligations to WTO increases the probability that WTO members will appeal to the WTO Dispute Settlement Body, which will impose considerable sanctions on Ukraine. There is a 30% tariff for all cars under the Customs Union, whereas according to Ukraine’s obligations to WTO the tariff for this group of commodities will be 5% starting from 2013. At the same time, import tariffs for agricultural products in Ukraine are higher than in the Customs Union (twice higher for wheat, for example, four times higher for rye, twice for pork fat, twice for olive oil and 25% higher for sunseed oil).”