In October of 2011 the government’s heads of the CIS countries signed the treaty on the free-trade area within the Commonwealth. Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Moldavia, Tajikistan, and Ukraine signed the treaty. However, establishing of the free-trade area undergoes slower than its initiators want.
Andrey Klepach, Deputy Minister of Economic Development of Russia
I must say that our free-trade area is quite old; 20 years have passed since 1992. At the same time, a certain breakthrough, a new step was made, because a new complex treaty was signed. It is not bilateral any more, as was typical for our countries, it is a multilateral treaty on a free-trade zone which corresponds to all WTO requirements. In fact, it provides for a new format of cooperation between the countries, first of all, from the point of view of lifting of restrictions on mutual trade, and what is most important, new approaches to disputes and conflicts which might occur. We have an opportunity to settle disputed questions not only within bilateral consultations, but through an Arbitration Court which will enable us to establish a new, more civilized and faster format of settlement of disputes. It is an institutional step, but it provides a new quality of relations, a new quality of mutual trade and economic relations in general between our countries, i.e. it is a step toward integration. At the same time, the free-trade area is a problem of our format of relations which would enable the CIS countries, the CIS countries which belong to the Customs Union, to be one of the most active areas in the world economy. Against the background of serious crisis in the European Union where the growth will be negative this year – -0.3% or more. Nevertheless, the CIS countries show a stable growth of 4% annually. We think that steps such as a free-trade zone and other international processes will allow us to be one of the most active areas in the world economy in the future.
Valery Muntiyan, Government Envoy on Cooperation with CIS Countries
The systemic financial economic crisis has been continuimg in the world for 5 years. To treat this problem we have to define at what point of the international economic system we are situated, what our real socio-economic situation is. This is the first thing. Secondly, we should look at development tendencies: what economy will be demanded tomorrow and what are we doing in this direction? We know that transformational changes are taking place; the world is changing quickly. It appears we didn’t get into geostrategic and geoeconomic global processes, because we have no such players or suitable economic level, as it should have at least 5% of the world GDP. On the other hand, regional processes are passing us by. Even though Ukraine has unique resources, scientific potential and geostrategic location, it cannot use these resources. That is why the right decision was made, and Ukraine was an initiator of this idea – to sign a new treaty on a free-trade area as the first instrument, the first mechanism of integration. Why did we choose the CIS countries? Because they are economically beneficial. For the integration mechanism to work and achieve results, a proportion of 28% vs 72% is needed. We have 42% vs 54% with the CIS countries. It meant $71 billion in 2011. The second indicator. What result can we get from this treaty? We have conducted mathematical research, which shows that if the treaty starts operating – and it has already come into force – the growth of trade turnover will be 30-35% in an optimistic scenario. Therefore, trade turnover will be $92-96 billion annually. There are no such volumes. But the structure is more important than volumes. What is the level of recycling? What is the level of surplus value? I mean in these spheres there is no such partner as the CIS. The biggest rate of recycling, for example, of machinery: 64% of Ukrainian exports go to the CIS countries.
Oleg Ustenko, Executive Director of Blazer International Fund
Ukraine is an open economy. We are trading actively with various regions, including the CIS and the EU. About 40% of Ukrainian exports go to the CIS, and about 25% go to the European Union, while Russia gets about 35% of our exports. If we take 100 hryvnas of GDP which are gained in Ukraine, 50 hryvnas are GDP which was realized abroad, it was produced here, but realized abroad. 20 of these 50 hryvnas are money which was gained in the CIS, and about 25 out of these 50 hryvnas were gained in the EU. I mean Ukraine is an open economy, and we cannot ignore any of these directions. The discussion which is taking place in the Ukrainian expert sphere is about whether we have to make a choice and whom we should integrate with. I think Ukraine doesn’t face a choice “whether…or”: whether the Russian Federation and the CIS or the European Union. Both of these directions are very important for Ukraine, and there are prospects for their development.
Ruslan Grinberg, Head of the Institute of Economy under the RAS
A free-trade area is a good thing. Of course, it would be better if we had deeper forms of integration. At least 20 years ago we thought that by this time we would have arrived at more developed forms of integration. However, it didn’t happen. Thank God we are pragmatists now and have no illusions. National interests have been defined. Today we all realize that to revive our economy – not revive, but reduce the risks of its functioning – Russia and Ukraine need a free-trade area. We are concerned about the developments taking place in post-Soviet space. We thought that we would be in a common economic space, but it didn’t happen. If I were a diplomat, I would beat about the bush. I try to state my clear position now. Ukraine is in a desperate situation. I wouldn’t make a choice if I were the authorities of Ukraine. Being between two giants, they have to settle their national tasks. They have to measure thrice and never cut. And Ukraine is doing it. I think this is right.
Viktor Suslov, Economic Scientist
Ratification of the treaty on the free-trade area encountered no problems in Ukraine. Almost all political forces supported this treaty, as the economic effect is obvious. However, criticism was connected with the fact that Russia and other countries of the Customs Union use export taxes for more than 90 items, and some of the goods are essential for Ukraine – energy, raw materials, and so on. As you know, these taxes are not used toward the members of the Customs Union. In this context a question on additional economic effects from Ukrainian participation in the Customs Union was posed once again. We have attentively studied the report by the Institute of Household Predictions of the RAS and the Institute of Economy and Predictions of the National Academy of Sciences. The report is published at the web-site of the Eurasian Development Bank. The report presents the forecast till 2013, according to which Ukraine might get $212 billion of additional benefits in case of participating in the Customs Union. Nobody doubts in the effect from participation in the Customs Union because calculations presented in this report have never been argued. But the question about such a choice is political. According to current international treaties a state cannot be a member of the Customs Union and a member of the European Union simultaneously. Regarding membership in the European Union, this norm is provided by Ukrainian legislation. The Ukrainian government strives in this direction. That is why Ukraine, unfortunately, has no intention of joining the Customs Union, despite huge economic benefits. Further development of the economy will tell. A decision will probably have to be made. At least, the internal discussion of joining the Customs Union continues in Ukraine.
Aleksander Shirov, Head of Laboratory of the Institute of Domestic Forecasts of the RAS
As we analyze the prospects of development of the Russian and Ukrainian economies, I'd like to proceed from the potential. We should understand what potentials for growth the Russian and Ukrainian economies have. If we understand this, we can build some adequate economic policy and consider effects which might appear in case of closer integration between our countries. The problem is tha,t after the crisis of 2008-2009, the Russian and Ukrainian economies failed to reach the dynamic level which characterized them before the crisis. There are many factors, including the situation in the world economy. However, we have to be honest – those drivers that previously developed our economies have run out. We should find new directions for economic growth, i.e. new factors which would enable us to achieve an adequate pace of economic growth suitable for the implementation of our tasks. When we look at the integration potential, it is obvious that there are certain operational, technical, trading, economic ties which remained after the Soviet period. At the same time, we understand that these ties are become fewer and fewer year after year. The potential for growth diminishes as well. Therefore, the faster we move toward integration, the bigger the effects that will be achieved.
