EU trade policy

Simon J Evenett has a nice piece on the EU trade policy. Here is the key paragraph for Ukrainian RTA:

EU RTA policy runs into two constraints. First, EU negotiating objectives are far too diffuse, ranging from traditional tariff considerations to new behind-the-border rules to "sustainable development" and a plethora of other non-economic goals. The latter are often wrapped up in patronising language about promoting European values. Second, some of the RTA partners are large enough that they too have demands, demands which the EU probably cannot deliver. (Indian demands for visas being a case in point.) Both factors have eroded, if not eliminated, the basis of the deal in many negotiations. In fact, the EU negotiating package seems best suited for other industrialised countries that have either defensive agricultural interests (Korea) or are willing to forgo their offensive agricultural interests (Canada). The problem is that there aren't many such countries left for the EU to negotiate RTAs with! As far as the large emerging markets are concerned, little should be expected.

Overall, unless there is a substantial streamlining of EU negotiating demands and occasionally a willingness to make serious concessions to negotiating partners, the EU's RTA and EPA negotiations will remain a sideshow. These negotiations may afford opportunities for experimentation but there aren't enough deals in the works to dramatically scale up any innovative provisions.

Ukraine is emerging country with an agenda to promote its agricultural products to EU. That is exactly a combination of factors, EU is not prepared to deal with.

Ukranian News - EU Foreign Relations Council Eyes Approval Of Plan For Introduction Of Visa-Free Regime With Ukraine

Ukranian News
- EU Foreign Relations Council Eyes Approval Of Plan For Introduction Of Visa-Free Regime With Ukraine: "EU Foreign Relations Council Eyes Approval Of Plan For Introduction Of Visa-Free Regime With Ukraine"

I can't believe it is happening. Just a nice illustration that only the credible threat of joining Russian-centered economic union makes European bureaucrats act.

I do not want to live on the bridge

Yanukovych in WSJ:

Let me say here, a Yanukovych presidency is committed to the integration of European values in Ukraine. Ukraine should make use of its geopolitical advantages and become a bridge between Russia and the West. Developing a good relationship with the West and bridging the gap to Russia will help Ukraine. We should not be forced to make the false choice between the benefits of the East and those of the West. As president I will endeavor to build a bridge between both, not a one-way street in either direction. We are a nation with a European identity, but we have historic cultural and economic ties to Russia as well. The re-establishment of relations with the Russian Federation is consistent with our European ambitions. We will rebuild relations with Moscow as a strategic economic partner. There is no reason that good relations with all of our neighbors cannot be achieved.

He did not say anything new, the main message is Ukraine should be a bridge between EU and Russia, and his main agenda to restore economic growth by: 1) creating jobs, 2) stabilizing prices, and 3) increasing social transfers.
My argument against the main message is that nobody wants to live on the bridge, people like to build on a solid rock. There is a clear trade-off that can not be avoided: either integrate with EU or integrate with Russia, in both cases there is something to lose and something to gain. Staying in between is a shaky and non-stable equilibrium.

Ukraine is being lost in transition: should it stay, or should it go?

Ukraine is currently in a very awkward position of moving away from CIS (or rather Russia, Belarus, and Kazakhstan emerging trade bloc), but not getting closer to the EU. My new research paper shows that any integration strategy -- CIS oriented or EU oriented -- would be better than the current status of being lost in transition. Here is the graph that demonstrate actual vs predicted aggregate trade under the EU and CIS integration scenarios:

By distancing itself away from Moscow, Ukraine is losing its current trading partners in traditional goods that it exports. By not integrating with EU it is losing in two different ways: its old trading partners from new EU member-states (trade diversion effect) and is finding it more difficult to attract FDI, create competitive products in manufacturing sector, promote its production in the EU market (losing possibility for expansion of manufactured exports and probably agricultural products).
Here is the graph that shows the gains in exports of Ukraine in 4 large groups of products from chosing EU integration rather than CIS integration:

EU double standards

An issue of visas is very important in Ukrainian-EU relationships. As another evidence of double standards, Kyiv Posts reports:

The Parliament: EU castigated over Ukraine visa issue 

"...At present, Europeans wishing to visit Ukraine do not need a visa and Kiev eventually wants reciprocal visa-free facilities for its citizens travelling to the EU.

Speaking at a breakfast briefing in Brussels on Thursday, Kostiantyn Yelisyeiev stressed, "We are not asking for the immediate introduction of a visa-free regime because we realise we have to take certain measures.

"But what we are saying is that the EU should be doing much more to help facilitate this."

He singled out four member states – Germany, Belgium, Austria and the Netherlands – for particular criticism, saying they were obstructing the start of "serious" negotiations on the issue."

Europeans demand Ukraine to have a fair election

Europeans really think that Ukraine owes them something. In a new article Tony Barber portrays Ukraine as an unstable, corrupt country that constantly irritates its neighbors. He further says the following: "...the key moment in EU-Ukrainian relations would be its January 17 presidential election. Anything less than a free and fair election, and a mature acceptance of the result by winners and losers alike, would be catastrophic for Ukraine's image in EU eyes."
One might wonder, do Europeans have a moral superiority to say something like that? What has the EU done in the last 5 years to improve its relationships with and help to develop Ukraine? The answer is it has done nothing. There were some talks, conferences, empty promises: all kind of things that the EU bureaucrats are good at. But die the EU made any effort in make the EU open for the movements of people, goods, and capital between the EU and Ukraine. Did the visa issuance improved? No, it got worse. Can Ukrainian farmers access the EU market? No, they can not. Do we have a free trade agreement? No we do not.
Ukraine is in deep political and economic trouble and needs some help from the international community, but all we have got so far from EU are empty words from their side and ungrounded demands. Sorry guys, if you do nothing to help, you have no rights to teach us.