Ukraine Takes Step Toward EU Free Trade

The European Commission’s decision to grant market economy status to Ukraine could put it on a par with Norway and Switzerland by 2009 in terms of EU market access, a leading think-tank says.

“Tomorrow I look forward to informing president Yushchenko of our intention to grant market economy status to Ukraine”, commission president Jose Manuel Barroso stated on Wednesday (30 November), before flying out to an EU summit in Kiev on Thursday.

The move paves the way for Ukrainian World Trade Organisation (WTO) membership this year and bodes well for the creation of a free trade agreement (FTA) with Ukraine in the next few years.

The commission is already working on a free trade feasibility study with Kiev-based think-tank International Centre for Policy Studies (ICPS) and Brussels’ Centre for European Policy Studies.

“This is a deeper kind of FTA agreement. It looks like preparation for accession”, ICPS expert Olga Shumylo told EUobserver.

“This is the step toward integration with the EU. Once our [economic] structures compare with the EU, we will get full access to the single market like Switzerland and Norway”, she added.

Free trade path not easy

ICPS expects the commission to launch FTA talks with Kiev in mid-2006 following Ukrainian parliamentary elections, with negotiations, ratification and implementation taking a further three to four years.

But with Russia trying to pull the country into a competing “single economic space” together with Kazakhstan, while supplying most of Ukraine’s gas and €17 billion a year in trade, the way ahead is far from secure.

“Russia jumps out of the box every time”, Ms Shumylo indicated. “Every time we try to move westward, Russia appears.”

Russia might also impact EU plans to relax visa requirements for Ukrainian students and professional travellers.

EU-Ukraine visa talks are set to start on Thursday.

But given Russia’s reluctance to sign a repatriation agreement with the EU and the open nature of the Russian-Ukraine border, Brussels is unlikely to open the Ukrainian door in case it becomes a portal for migrants from the whole ex-Soviet bloc.

EU door open or closed?

It is unclear whether closer economic integration could lead to EU accession for Kiev down the line.

Mr Barroso said again that “the future of Ukraine is in Europe” last week, while his officials indicated shortly before that the EU is at the very edge of its capacity to absorb new members after Turkey and the western Balkan states.

Brussels’ current row over the 2007-2013 EU budget could also endanger EU aid to Ukraine next year under the so-called European Neighbourhood Policy.

But the launch of a new 70-strong Odessa-based EU police mission on Wednesday shows Europe is working with Kiev in the political and security arena as well as the economic one.

The two-year mission is designed to cut arms, drugs and people smuggling between Ukraine and Moldova.

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