Showing posts with label integration. Show all posts
Showing posts with label integration. Show all posts

Wednesday, February 17, 2010

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.

Friday, November 27, 2009

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: