The Free Trade Agreement between the EU and Ukraine: Conceptual Background, Economic Context and Potential Impact

35 Pages Posted: 25 Apr 2012 Last revised: 25 May 2012

See all articles by Marek Dabrowski

Marek Dabrowski

CASE - Center for Social and Economic Research; Bruegel; National Research University Higher School of Economics

Svitlana Taran

CASE - Center for Social and Economic Research - CASE Ukraine

Date Written: April 1, 2012

Abstract

The idea of a Deep and Comprehensive Free Trade Agreement goes beyond the traditional concept of trade liberalization and, apart from the elimination of tariffs in trade of goods, it also includes the reduction/removal of non-tariff barriers, the liberalization of the investment regime, the liberalization of trade in services, and the far-reaching harmonization/mutual recognition of various trade and investment-related regulations and institutions. The economic literature, CGE modeling exercises and the practical experience of 'deep' trade integration suggest a substantial potential for the future EU-Ukraine DCFTA in promoting trade and investments, creating additional welfare and employment, regulatory and institutional harmonization with EU’s acquis, and modernizing Ukraine’s economy. While beneficial for both sides, the potential gains (but also potential adjustment costs) are greater for Ukraine as it is the smaller partner with higher initial trade barriers. However, the DCFTA does not include an automatic guarantee of success. Very much depends on the political will and administrative capacity to implement all of its provisions in a timely and accurate manner. This is a serious challenge for Ukraine, which has a mixed record in reforming its economy and state and which is still struggling to fulfill all of its commitments undertaken during the WTO accession process.

Keywords: trade, investment, deep and comprehensive free trade agreement, European Union, Ukraine, business climate

JEL Classification: F13, F14, F15

Suggested Citation

Dabrowski, Marek and Taran, Svitlana, The Free Trade Agreement between the EU and Ukraine: Conceptual Background, Economic Context and Potential Impact (April 1, 2012). CASE Network Studies and Analyses N. 437, Available at SSRN: https://ssrn.com/abstract=2045436 or http://dx.doi.org/10.2139/ssrn.2045436

Marek Dabrowski (Contact Author)

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National Research University Higher School of Economics ( email )

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Svitlana Taran

CASE - Center for Social and Economic Research - CASE Ukraine ( email )

Ukraine

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