Since 2013, the CSLR have been documenting growing levels of state repression of peaceful protests by Ukrainians fighting for social, economic and civil rights. In our collective view, the Association Agreement’s core component, the Deep and Comprehensive Free Trade Area (DCFTA), is premature and problematic and will only benefit a number of Ukraine’s elite at a cost to the majority.
The DCFTA demands almost full abolition of tariffs for trade in goods, extensive liberalisation to allow for enhanced market access for European service providers, and enhanced protection for foreign investors and liberalisation of capital flows. What this means is a complete opening up of Ukraine’s economy to competition from powerful European multinationals, at a time when Ukraine’s domestic economy is in no condition to hold its own.
Many key sectors in Ukraine, notably industrial production, are traditionally oriented towards exporting to Russia and the other states of the Eurasian customs union, based on Russian standards of production. These sectors will struggle to reorient themselves towards exporting to the EU because standards differ widely. The economy as a whole suffers from a crisis in innovative development and requires urgent injections of capital to pay for new technologies and to modernise existing equipment. However, domestic prospects for innovative development remain limited because of cuts to research and development budgets.
While Ukraine’s exports used to mainly comprise of high-tech goods destined for the Russian market, the new orientation towards the EU is already leading to a rise in the export of raw materials and agrofood products. The exports to the EU only partially compensate the loss of exports to the former Soviet states, because of the larger share of lower value added unprocessed goods . Deindustrialisation of the economy looms. The balance of payments is set to worsen, as is Ukraine’s gross external debt, which rose from 88% in 2014 to 155% of GDP in 2016.