Экономические науки / 2. Внешнеэкономическая деятельность

Naboka S.O.

2-d year student faculty of international economic relations

Savytska L.V.

Associated Professor, Doctor of Philosophy

Kharkiv national university of economics

TWO WAYS OF UKRAINIAN DEVELOPMENT:
THE EUROPEAN UNION AND THE CUSTOMS UNION

Modern realities say to survive in this progressive world it is necessary to make alliances with different formation on favorable conditions as much as possible. It may help to remain further afloat to developing countries, for example, such as Ukraine.

Since ancient times Ukraine was the bridge from Asia to Europe thanks for its favorable geographical and geopolitical location and Soviet Union only strengthened this tendency. The powerful building of metallurgical, defense and agricultural enterprises, creation of gas transmission system, its volumes of transportation remains one of the most powerful in Europe, determined today’s situation.

Two self-sufficient organizations (The European Union and the Customs Union) continue fighting for our country offering different benefits and privileges, but avoiding their true motives and disadvantages.

Nowadays Ukraine is in its crucial point, which can change its future development. However, it’s important to represent and analyze accurately what the accession to these organizations will give not only for the state, but for its ordinary citizens.

The aim of this publication is to analyze from economic point of view what benefits and privileges we will get accessing to the Customs Union and signing Association between Ukraine and the EU.

Agreement on association with the European Union is the agreement between EU and the state which isn't the member of the European Union creates a framework for cooperation. Cooperation areas usually affect for development of political, commercial, social, cultural ties and safety strengthening. The legal base for such an agreement was created by the article N 217 in the contract about The European Union functioning [1].

The main aims of the association are:

1) to assist gradual rapprochement of Partners, based on general values and close privileged copulas, and participate in politicians, programs and agencies of the EU.

2) to provide conditions to increase economic and trade relations, which will conduce to gradual integration of Ukraine to the internal market of the EU due to creation of deep and all-embracing free trade zone [1].

The EU is one of strategic partners of Ukraine. In 2012 commodity turnover was near 43 billion dollars and the level of exchanging services estimated in 75 billion dollars. However, the trade balance was -9 bil. USD (goods), + 142 mil. USD (services) [2].

Diagram 1. Structure of import-export Ukrainian goods with the UE countries [2]

Diagram 2.Structure of import-export Ukrainian services with the EU countries [2]

Same time this association gives an opportunity to trade with the EU members on more favorable conditions. According to the fourth part of the agreement “Trade and questions related”, after its signing and ratifications Ukraine gets rights for cancellation of duties, tariffs and other payments. Major experts think that it will improve trade balance and even turn it to positive side.

In case of zero import duty rates between Ukraine and EU general welfare of Ukraine will increase by 1.3 % in medium-term prospect at other stable and equal conditions (ceteris paribus). In case of deep and comprehensive ZST with EU which is modeled as mutual refusal of import duties plus decrease in non-tariff barriers in connection with legislation harmonization, the gain of welfare makes 4,3% in medium-term prospect [3].

Let’s analyze negative aspects of signing this agreement. One of them is Ukrainian market will be rushed by the mass of goods made in the countries of the European Union creating the competition to the domestic. First of all, it effects to agricultural industry as European countries are much more developed and agricultural products will have smaller expensive part, respectively and smaller net cost.

No need to exclude, political and economic parts of the issue as powerful Ukrainian neighbor also has economic benefits and, in a case of signing of the agreement about the Association it can lose them. As, Ukraine is a strong base for soling Russian goods Russian Federation applies all leverage on the country which sometimes may turn into open opposition and threats, both economic, and political character. Main of them: denouncement of the agreement about Strategic partnership signed in 1997, and continued in 2012; increase the cost of gas, etc.

All these steps are taken to push Ukraine to east vector of development. This vector is called the Customs Union with Russian Federation at the top.

The Customs Union formation envisages creation of a common customs territory without customs duties or economic restrictions and with special protective, anti-dumping and compensatory measures. The Customs Union provides standard customs tariff and other measures regulating the commodity trade with third nations. This Union consists of three ex-Soviet republics – Russian Federation, Belarus and Kazakhstan [2].

Diagram 3.Structure of import-export by countries
(the Customs Union) [2]

Customs regulation in the Customs Union within the Eurasian Economic Community - the legal regulation of relations connected with the movement of goods across the customs border of the customs union, their carriage of a single customs territory of the customs union under customs control, temporary storage, customs declaration, release and use in accordance with the customs procedures, carrying out customs control, customs duties, as well as power relations between customs authorities and the persons implementing the right of possession, use and disposal of these goods [4].

Adherents of the Customs Union claim that in case if Ukraine enters the Customs Union it will get discount for energy carriers. Anyways getting stable long-term discounts in energy costs is very doubtful. Russia plans deregulation of domestic market, thus, the internal prices will go up. Moreover, increasing of power efficiency and diversification of deliveries is more reasonable economic strategy, than search of short-term discounts. Besides, the gas price isn't a subject of arrangements within the customs legislation of the Customs Union and the Contract on the Free trade zone of CIS countries. Therefore there is no hope to change the Russian approaches in gas price. Except for the scenario if Ukraine agrees on merger, NAK “Naftogaz Ukrainy” will be taken over by "Gazprom". It means that Ukrainian sovereignty in the energy sector will be lost.

One more negative aspect is also that the Customs Union is very young formation and there are no steady laws of development, management and control. The predominating role belongs to one state, and the others carry out functions of certain satellites.

Adherents of east development note that Russia and Belarus are our fraternal countries. We have common history and economic development. However they miss very powerful fact that the union constructed on the ultimatum without respect won't exist for a long time.

Ukraine chose European integration. It’s even fixed in law on bases to interior and foreign policy of Ukraine: “Basic principles of foreign policy providing integration of Ukraine to European political economic, legal space to get membership in the European Union”.

So, Ukraine waits for the summit of east partnership in hope to sign agreement with the European Union. Ukrainian citizens also wait for it, in hope to get better living conditions.

References translated and transliterated

1. Government of Ukraine will discuss the draft agreement on the association with the European Union. Daily news. Ros Business Consulting 18.09.2013 [Electronic resource]. – Access mode: http://www.rbc.ru/rbcfreenews/20130918095650.shtml.

2. Ukrainian Foreign trade [Electronic resource]. – Access mode: http://www.ukrstat.gov.ua/.

3. CEPS (2006) The Prospect of Deep Free Trade Between the European Union and Ukraine. Report prepared by Centre for European Policy Studies (CEPS), Brussels; Institut fur Weltwirtschaft (IFW), Kiel: International Centre for Policy Studies (ICPS), Kyiv.

4. Ukraine and the Customs Union [Electronic resource]. – Access mode: http://gazeta.zn.ua/internal/ukraina-i-tamozhennyy-soyuz-problemy-integracii-_.html