UKRAINE-EU FREE TRADE: ACHIEVEMENTS AND PROSPECTS

On September 16, 2014, the Verkhovna Rada of Ukraine and the European Parliament simultaneously ratified the Association Agreement between Ukraine and the EU. Analyzing such steps is always challenging, as there is a temptation either to be overly critical or to turn the discussion into ideological theses ripe for political speculation.

Despite the wide range of opinions, the key takeaway is clear: the Deep and Comprehensive Free Trade Area (DCFTA) established under the Association Agreement has, in recent years, become a stabilizing factor for Ukraine’s economy, a driver of strategic geo-economic reorientation, and an incentive for production modernization. There were, of course, challenges—trade quotas, labor migration, roundwood exports, disputes with the Netherlands and Hungary, among others. At one point, Ukraine’s economy suffered a major blow when a quarter of its exports were oriented toward Russia. However, these tactical difficulties have been largely overcome or relegated to the background.

Without resorting to complex rhetoric or excessive sentimentality, a sober assessment reveals that six years ago, Ukraine made the right civilizational choice—one that was both mentally determined and economically sound.

Recently, Belarusian President Alexander Lukashenko provocatively claimed that Ukraine is “on its knees, praying to an unknown force,” likely hinting at external influences—a favorite narrative of various pro-Russian groups in Ukrainian politics. This assertion, however, is both easily debunked and detached from reality. Any informed citizen understands that in the 21st century, economies do not exist in isolation, confined to domestic markets. Instead, national economies intertwine like threads in a complex web of interdependencies, where each country is, in one way or another, reliant on others. To dictate terms, a country must have a strong economy and robust institutions.

With the launch of the free trade zone, Ukraine gained access to the world’s second-largest consumer market, surpassed only by the United States. According to the World Bank, in 2018, China had a consumer market size of $5.35 trillion, while the EU’s market reached $8.52 trillion. Meanwhile, trade with Russia—once Ukraine’s leading trade partner—became increasingly risky and toxic. It is no surprise, then, that trade between Ukraine and the EU has grown at an unprecedented pace.

The EU’s internal market is characterized by high purchasing power. In 2019, the average GDP per capita in the EU, measured by purchasing power parity, was $46,500, compared to the global average of $17,700.

By 2017, more than 14,000 Ukrainian enterprises were exporting goods to the EU. Ukrainian oil, machinery, wheat, blueberries, toys, and meat products have rapidly gained ground in EU markets and beyond. Notably, raw materials now account for only about a quarter of Ukraine’s exports—a direct rebuttal to analysts who claim that Ukraine has become an agricultural raw-materials colony for Europe.

Trade dynamics with the EU contribute to the stability of the hryvnia, job creation, and tax revenues. Ukrainian manufacturers are increasingly adopting effective business strategies, investing in marketing, building reputations, and ensuring high product quality.

Commercial relations between Ukraine and the EU continue to evolve. For example, in 2019, amendments were made to an annex of the Association Agreement to increase the EU’s tariff quotas on poultry meat—an adjustment that helps safeguard the interests of Ukrainian poultry producers.

The next step is the so-called “industrial visa-free regime”—the Agreement on Conformity Assessment and Acceptance of Industrial Products (ACAA), which aims to eliminate lengthy, costly, and complex certification requirements for Ukrainian industrial exports to the EU. A key prerequisite for this agreement was already met with the adoption of the Law “On Amendments to Certain Legislative Acts of Ukraine to Reduce Pressure on Business from Market Surveillance Authorities.” This law strengthens consumer protection by preventing unsafe non-food products from entering the market.

Signing the ACAA will be a significant challenge for Ukraine. Unlike agricultural products, which have already secured a strong foothold in the EU market, industrial goods will need to carve out their place under the sun.