Opinion / Op-Ed Contributors

Ukraine has to wait for EU membership

By Zhu Honggen (China Daily) Updated: 2014-09-29 07:53

The Association Agreement between the European Union and Ukraine was ratified by Verkhovna Rada, the Ukrainian parliament in mid-September, with the European Parliament ratifying it simultaneously. Although the economic component of the agreement - the free trade deal - will not be implemented until Dec 31, 2015, the ratification of the agreement by Rada indicates Ukraine has paved its path toward European integration.

The agreement was negotiated between the EU and Ukraine under the Eastern Partnership Project, and included subjects such as political and economic reform, free trade zone, border control and visa procedure. Until sometime before a scheduled meeting in Vilnius, Lithuania, in November last year, when former Ukrainian president Viktor Yanukovych suspended the proposed EU pact, integration with Europe seemed to be the priority of Ukraine's foreign policy. Yanukovych's decision provoked protests in many parts of Ukraine throwing the country into a political crisis. The result: a radical change in the domestic political scene.

Yet despite the referendum in the Crimea, armed conflict in the eastern regions of Donetsk and Lugansk, and a sharp economic downturn and fiscal crisis, the new Ukranian government went ahead and signed the agreement with the EU on June 27.

The agreement has far-reaching consequences both for Ukraine and the EU. Once it is implemented, Ukraine has to deepen its political reform to cleanse the country's business environment. Ukraine's economy is characterized by an unfavorable business climate, imperfect law enforcement, rampant corruption and shadow economy. Also, its per capita GDP is just about $4,000 - far less than that of neighbors.

The political reform, the EU believes, will unlock Ukraine's economic potential given its strong chemical industry, achievements in science and technology, educated and skilled workforce, huge market and advantages in agriculture.

As a comprehensive pact, the free trade deal will require Ukraine and the EU to open their commodity markets to and cut customs duty for each other's products. It is also intended to remove tariff barriers and facilitate free migration of labor and free flow of capital between the two sides. Apart from expediting bilateral trade, the implementation of the deal is also expected to help Ukraine attract EU capital, which can breathe life into the country's economy that is suffering from overly high rate of consumption, low rate of fixed asset investment and savings, persistent current account deficit, and constant pressure of the falling currency, hryvnia.

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