Ukraine doesn’t have to choose between integration with Europe or with Russia

Daniel Gros, Director of CEPS

Many commentators have criticised the EU for putting such a stark choice before a deeply divided Ukraine –   In reality, however, it was Russia that presented Ukraine with these alternatives: the Association Agreement the EU proposed did not limit in any way Ukraine’s freedom to remain open to trade with Russia, whereas the Customs Union offered by Russia would have limited Ukraine’s freedom to remain open to trade with the EU.

The differences between the Russian and the EU approach were both technical and in political attitude: A customs union has a common external tariff. If Ukraine had joined the Eurasian Union proposed by Russia, it would have to accept the common external tariff chosen by Russia and thus would have not been able to reduce trade barriers towards the EU, which remains the biggest market at its doorstep. Moreover, when the then President of Ukraine, Yanukovic, declined to sign the Association Agreement late last year, the EU just said, “too bad”, but did nothing.  By contrast, when earlier Ukraine had appeared to lean towards signing the Association Agreement Russia imposed arbitrary obstacles to imports from Ukraine. The non-exclusive nature of the EU’s offer remains true even now: the free trade provisions of the EU Association Agreement will now be put speedily in force.  But this does not represent any obstacle to Ukrainian trade with Russia (unless Russia imposes again arbitrary obstacles to Ukrainian imports, as it has done in the past). It is Russia that is putting the East-West choice before Ukraine, and its offer would have prevented Ukraine from expanding trade with its biggest market. The EU’s GDP remains almost 10 times larger than that of Russia. In a world without trade barriers, most of Ukraine’s exports should naturally go to the EU and most of its direct foreign investment and technology should come from the EU.

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