Brussels, 04/01/2016 (Agence Europe) - The trade section of the association agreement between the EU and Ukraine became operational on Friday 1 January with the entry into force of the deep and comprehensive free trade area (DCFTA). The association agreement was signed in June 2014, and its political and cooperation arrangements have been in force since November 2014. The free trade agreement will enter into full force once ratification procedures in the 28 EU member states have been finalised.
As of 1 January, the EU and Ukraine have privileged access to their respective markets. Their free trade area is based on three pillars - it opens up markets through the gradual removal of customs duties and restrictions on public procurement and services; it ensures fair competition between EU and Ukrainian businesses by safeguarding the respect of intellectual property rights, basic workers' protection or environmental standards, and disciplines on use of subsidies and anti-competitive behaviour; it prepares the ground for the gradual alignment of norms and standards, including on food safety and technical regulations.
As of 1 January, the EU and Ukraine no longer apply import duties on most of their respective goods (on 98.1% of tariff lines for the European side, and on 99.1% of tariff lines for the Ukrainian side). The EU opened its market to Ukrainian goods unilaterally, and early, in spring 2014 (for up to 82.3% of agricultural products, 83.4% of processed agricultural products, and 94.7% of industrial products).
Through its ambitious objectives of moving closer to EU legislation in areas such as competition, public procurement and the protection of intellectual property rights, this agreement will contribute to the modernisation and diversification of the Ukrainian economy, and will create additional incentives for reforms - especially in the fight against corruption. It will give Ukraine the opportunity to improve its business climate and to attract foreign investment, and will help it integrate more with the global economy, the European Commission states in a press release.
“The entry into force of this trade area on 1 January 2016 creates unique opportunities for Ukraine to stabilise, diversify and develop its economy to the benefit of all its citizens. Assistance from the EU will be made available to help Ukrainian SMEs seize these new opportunities, to grow, and thereby create jobs. EU businesses will benefit as well by gaining improved access to a market of 45 million people”, said European Commissioner for Trade Cecilia Malmström.
“The change will not occur over night, it will require work and investment. Gradually, the DCFTA will contribute to a prosperous Ukraine and to stronger economic integration with the EU”, Malmström added.
In 2014, EU exports to Ukraine amounted to €17 billion and EU imports from Ukraine stood at €14 billion. The EU's main exports to Ukraine consist of machinery and appliances (€5.7 billion in 2013), transport equipment (€2.6 billion), chemicals (€3.7 billion), and manufactured goods. Ukraine's main exports to the EU consist especially of base metals (€3.5 billion in 2013), vegetable products (€2.8 billion), mineral products (€2.7 billion) and machinery and appliances (€1.2 billion).
Independent studies suggest that just the implementation of the free trade agreement would bring Ukraine benefits of 6% in GDP over the medium term and of 12% in terms of increased welfare for Ukraine's population, the Commission states. The expected benefits will be maximised if Ukraine implements the reforms provided for by the agreement to improve the business climate and attract foreign investment and technology transfers, the Commission adds.
As part of the free trade area, the EU is paying special attention to support of the private sector and SMEs through a special fund set up jointly by the EIB and EBRD. This will be given €100 million and is expected to release, by leveraging, at least €1 billion in new Ukrainian investments by SMEs. (Original version in French by Emmanuel Hagry)