ukrain eu association now starting

A woman sells Christmas decorations on St. Sophia Square in Kyiv on Dec. 30. (Anastasia Vlasova)

Ukraine has rung in the new year with a move that has at once deepened ties with the European Union and cut strings to Russia, as Ukraine's free trade agreement with the EU took effect on Jan. 1.

The trade deal, which is expected to give ordinary Ukrainians more buying power, was signed in June 2014 as part of the EU association agreement with Ukraine, but it was delayed for a year as Russia pushed for negotiations.The agreement should stimulate Ukraine’s economic growth, creating a more sustainable and diversified market and attracting foreign investment.

“The application of the (free trade agreement) constitutes a milestone in the bilateral relationship, as it will offer new economic benefits to both sides,” the European Commission wrote in a press release on Dec. 31, 2015. “Ukrainian businesses receive stable and predictable preferential access to the largest market in the world with 500 million customers, while EU businesses will be able to benefit from easier access to the Ukrainian market and build new relationships with Ukrainian suppliers and cooperation partners.”

Commissioner Cecilia Malmström said “the change will not occur over night” and that continuous work and investment are required. The process will be gradual yet will eventually lead to stronger integration with the EU.

Ukraine’s President Petro Poroshenko described the free trade agreement as one of the greatest achievements of 2015 during his New Year address to the Ukrainian people.

“In a couple of years we will compensate those colossal losses that Russia caused Ukraine,” Poroshenko said.

The free trade agreement eliminates tariffs on 97 percent of Ukrainian goods, Ukraine’s Economy Ministry said. Zero rates will be introduced for agricultural and industrial products, processed and food products.

Duties for some products – such as textiles, chemicals, confectionary goods, seeds, some grains, fruit and spices – will be canceled from both sides of the EU-Ukraine agreement.

Deputy Economy Minister Nataliya Mikolska says there won’t be any abrupt major inflow of European products into Ukraine as a result of the free trade agreement but it will contribute to cheaper prices of European products for Ukrainians.

“Because of such tariff liberalization there will be cheap European products in our market… In addition, this will stimulate domestic producers to improve their products – increase the quality and give more attention to marketing,” Mikolska said during an interview on the 112 Ukraine channel.

The process of tariff liberalization will be gradual. For some products it might take up to a decade. For example, for Ukrainian fish products and shoes it will take three years to lower the tariffs, whereas for fertilizers it will take seven years. The reduction of Ukraine’s tariffs on cars exported from the EU may take up to 10 years.

Throughout 2015, Russia, Ukraine and the EU held trilateral negotiations to settle disputed issues on the matter, but these talks were mostly unsuccessful. In October, German Chancellor Angela Merkel confirmed that the free trade agreement would take place and said it was not intended to isolate Russia.

Nonetheless, Russia retaliated by canceling its free trade regime with Ukraine on Jan. 1, and Ukraine, in turn, prepared sanctions against Russia.

Russia is still Ukraine’s largest trade partner, making up around one-sixth of Ukraine’s trade, or $10.4 billion, during the January-October 2015 period. However, as a 28-member bloc, the EU made up 33 percent during the same period, according to Ukraine’s State Statistics service.