January 18, 2013

Where to Now: the Area of Free Trade with the EU or the Customs Union?

The Independent Analytical Center for Geopolitical Studies “Borysfen Intel” affords ground to the young analysts generation for expressing their point of view regarding the political, economic, security, information situation in Ukraine and in the world in general, according to their personal geopolitical studies and analyses.

 

Note that an authors’ point of view
can disagree with the editor’s one

KHOMEI Oksana,
1990 year of birth.

A graduate of Ivan Franko State University of Lviv (international relations faculty), Near East University (Turkey) and the University of Tartu. Has a good command of Ukrainian, Russian and English.

 Where to Now: the Area of Free Trade with the EU or the Customs Union?

The question of Ukraine’s membership in the Customs Union is becoming especially urgent. It looks like Ukraine has faced the choice: the EU or rapprochement with the countries of the ex- Soviet Union, and in the first rate-with Russia. Some experts, politicians and other subjects of the civil society – non-governmental organizations, scientific institutions, etc. are advancing the idea of signing an agreement on the Customs Union. Who stands behind it, and who will benefit from it, we shall tell below.

There is no doubt about the Ukrainian people’s wish to move westwards, not eastwards. According to the result of the Ukraine-wide poll, carried out by I.Kucheriv “Democratic Initiatives” Fund together with the sociological service of Razumkov’s Centre in December 2012, 48% of Ukrainian citizens think that Ukraine should join the European Union, while 40% of them support the idea of Ukraine’s joining the Customs Union with Russia, Belarus and Kazakhstan. We may speak about a split of the Ukrainian society, as traditionally the West and Center of Ukraine have been supporting joining the EU, while the South and East – the Customs Union. At the same time, majority in our society is sure that Ukraine should move towards Europe.

Despite the fact that mass media, and especially television, estimate positively Ukraine’s possible joining the Customs Union, there are some doubts. Most of high rank officials from Yanukovych’s government and Party of Regions’ members cannot be called open supporters of joining the Customs Union. Leading analytical centers and non-governmental public organizations stand out for Ukraine’s European integration.

But there are politicians who don’t even try to hide their anticipation of the Customs Union with Russia, Belarus and Kazakhstan. In particular, in support of the idea of joining the Customs Union, many times have spoken Valeriy Montiyan – the government’s representative on the questions of cooperation with the Russian Federation, CIS and Eurasian Union, and a member of the Party of Regions Alexandr Yefremov. President Yanukovych also declared a possibility of adaptation to the norms of this union[1].

Among the analytical centers which partially or completely support the idea of joining the CU, should be mentioned Viktor Medvedchuk’s “Lawful State” Centre, Mykhailo Pohrebinskyi’s Kiev Center of Political Researches and Conflictology, Anatoliy Orel’s Center of International and Comparative Researches, Institute of Forecasting of the National Science Academy of Ukraine headed by Valeriy Geyets. The reason for such active pushing forward the idea of joining the Customs Union by the mentioned above institutions is either their being financed from Moscow or their ideological closeness to the Russian leading ideas. The most widely spread arguments of the supporters of the idea of joining the CU and the counter-arguments are as follows:

Argument One. Ukraine and CIS countries have much in common - averagely the same level of economic development, technologies, common past, that is why it will be easier to find mutual understanding on key questions and to take our own social-economic advantages.

To begin with, economies of Russia, Belarus and Kazakhstan are not competitive at the world market. Their production is not tested properly, businesses don’t have a proper material-technological base for producing high quality goods, and the investment climate, to put it mildly, is not attractive. That is why it is a closed circle. Ukraine’s economy is nearly in the same situation. But, thanks to joining the free-trade area with the European Union, Ukraine would get a number of advantages: investments from the West would arrive, the system of quality control of Ukrainian production would start working, nearly 500 million consumers would be added to the selling market, and in future Ukrainian economy would become competitive.

To choose the Customs Union is easier for Yanukovych’s government, as Russia does not demand to reform the legislation system, nor to control the production quality, etc. More so, there is no need to make up excuses for removing the main political opponents by imprisoning them.

But for the leading oligarchy elite joining the Customs Union contains a danger of their businesses being gradually swallowed by Russian oligarchs. This holds the current political leaders from rushing into the embracement of a big brother. There is a risk to lose everything.

Argument Two. Ukraine is situated at the crossroads of the West and East and has to take advantage of it to the full.

Attempts of Ukraine’s balancing between Europe and Russia had been noticed since the time of declaration of Independence, and they have failed. Ukraine has lost from both, political and economic points of view, having been unable to use to the best advantage its favorable geographical situation. The only way to rescue its future is a gradual and proper integration into European structures.

Implementation by Ukraine of the already initialed agreement on the FTA between Ukraine and the EU, which is a part of the Association Agreement, will mean that European ambitions of Ukrainians are not multi-word rhetoric, but a strategic vision of its state in the cradle of European peoples. Ukraine’s place is in Europe. And not just on the world’s geophysical, but also on the political map. Our history, culture and geographical situation have already determined our belonging to Europe.

V.Yanukovych’s government should confirm its consistency in Ukraine’s integration into European structures. If the government chooses to sign the agreement on free trade area with the European Union, this will positively influence Ukraine’s image. Staying in the gray zone of uncertainty between Europe and Russia can’t last forever! Thanks to the FTA agreement Ukraine will proudly declare of having chosen the western way of development. The postulates of the European vector will be realized in life and will stop being just a written article of the Constitution.

Apart from economic advantages, FTA between Ukraine and the EU, as a part of the Association with the EU Agreement, in the future can become a driver for inner political changes. There are grounds for a hope for the improvement of the situation with human rights, freeing political prisoners and perfection of the work of courts. As we know, the EU presents high demands to its closest partners. If Ukrainian political standards are not up to the European ones, economic and trade sanctions may be introduced.

Argument Three. Ukraine will not give up its national interests and will be able to lead its own trade –economic policy.

According to V.Montiyan, a representative of the Government on the questions of cooperation with the Russian Federation, CIS and Eurasian Union, who had many times expresses his support to the idea of joining the CU, “Russia is interested in us as in an equal partner”[2]. Did Russia ever look at Ukraine from the principles of equality? It has always seen Ukraine as its own part of the empire, an outskirt of the “Russian world”. It successfully lobbies Ukraine’s joining the CU, being sure it has its weighty reasons for this. This joining will strengthen its positions in the relations both, with the EU and on the international arena, in the first rate - at the Eurasian territories. In the course of such strengthening, Russia will get additional tools for influencing the situation in the region and will have all the aces in talks with the EU on political and economic questions.

Ukraine will incur losses. To tell the truth, Russians never keep their promises. Promises including cheaper gas, economic support and even paying Ukraine’s fines after having raised the tariffs on export, as a part of their obligations taken up in case of Ukraine’s joining the CU, will most possibly remain just promises. In other words, Russia will get what it is aiming at (controlling Ukraine’s economy and trade operations), and will forget about its own promises.

 Argument Four. Ukraine may start a member of the Customs Union first, and then sign the agreement on the Free Trade Area with the EU.

This thesis had been formulated by a people’s deputy from the fraction of the Party of Regions Mikhaylo Chechetov, who declares that “the world is going in the direction of globalization. So, perhaps, we will unite the Customs Union and the European Union? Then Ukraine will have the honor to unite the two most powerful megapolises”[3].

Official representatives of the EU correctly pointed out that Ukraine cannot integrate into both structures at the same time. The EU and CU differ greatly not only in carrying out financial accounts, tariff rates and the value of the trade turnover. In the first rate their fundamental values on which they are built, are absolutely different.

The interests of the European Union in regard to signing the Free Trade Area Agreement with Ukraine.

The European Union is also interested in Ukraine’s joining the FTA. If from the financial point of view it would be somewhat doubtful for the EU, from the political point of view it would be very important for it. If Ukraine chooses the Customs Union that will mean the EU is so weak due to the crisis, that it can’t keep its nearly most important neighbor in Eastern partnership in the zone of its political influence. This will naturally weaken the position of the EU on the international arena as that of a regional important player and will strengthen the position of its rival - Russia. This will also mean that in the eyes of its neighboring countries, the EU will miss its economic and political attractiveness.

The aim of the Customs Union in the final version, as it is seen by the Russian president V.Putin, who very actively has been propagandizing this union, is to restore CIS with Russia’s full dominating. This union can’t be as geo-politically weighty as the Soviet Union used to be, but it will make the world talk about Russia’s getting stronger. Of course, Europe will not like such a development of events against the background of the long term crisis.

The gray zone: how long can it last?

Most favorable for oligarchs and supporters of V.Yanukovych is to hold Ukraine in the gray zone with familiar to them rules of the game at the market and in politics. Any movements in the direction towards Europe or towards Russia are painful to Ukrainian magnates.

But it cannot remain like this any longer. Both, Russia and EU press on Ukrainian governors demanding some definite decision.

Conclusions

For Ukraine the dilemma “EU-Russia” is most possibly a civilization choice. This choice will determine Ukraine’s place in the world in a long term period of time: European equality or Central-Asian third ratedness.

Joining the FTA with the EU will mean a more decent salary and higher standards of life, education, medical care; increase of the competitiveness of Ukrainian industries and gradual production of its own high quality products instead of selling raw materials and resources like now; democratization in the political life and gradual realization of the principles of supremacy of Law.

Joining the Customs Union will mean giving up all the national interests of the country’ low salaries and a lagging behind, based on using natural resources, economy; growing corruption in education, health care; return of slightly refreshed Soviet ideology, way of thinking, dogmas about brothers-peoples; degradation of what remains from democratic processes and worsening of the sad situation with justice, opposition, observing human rights.



[1] Україна може адаптувати свої закони до норм МС, заявив Янукович. — 4 січня 2013 р. — http://tsn.ua/groshi

[2] Валерий Мунтиян.Зона свободной торговли с СНГ дает нам спасительные возможности. — http://m.kp.ua/kiev/pda/articles/310812/354225/

[3] Чечетов замахнувся об'єднати Європейський союз із Митним. — 8 січня 2013 р. — http://tsn.ua/politika/