Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
Black Sea Economic Forum

Impact of EU-Ukraine
free-trade agreement

Venezuela: 5 Year USD Credit Default Swap Par Bid Rat...
1. Main measures of the DCFTA
• Most trade tariffs & quotas on imports/ exports removed.
• Gradual elimination in some "se...
2. Impact of the DCFTA: different views
Different takes reflect political agendas.
For the EU: a bright future
• Modernisa...
3. Ukraine’s economy now
yryr%<N926NGPC>
yryr%<N926IMD>
yryr%<N926IXD>
15.0

80

7.5
40
0.0
0
- 7.5
- 40
- 15.0

- 22.5

E...
4. The long and the short of it
EU and Russian versions emphasise different time frames.
EU version: Over the longer term
...
5. What’s missing?
Important considerations that temper both scenarios.
Against Russia's catastrophism:
Ukraine's external...
Upcoming SlideShare
Loading in …5
×

BSEF 2013 macroeconomy David Dalton

406 views

Published on

Published in: Business, News & Politics
  • Be the first to comment

  • Be the first to like this

BSEF 2013 macroeconomy David Dalton

  1. 1. Black Sea Economic Forum Impact of EU-Ukraine free-trade agreement Venezuela: 5 Year USD Credit Default Swap Par Bid Rate (bps) Egypt: 5 Year USD Credit Default Swap Par Bid Rate (bps) Ukraine: 5 Year USD Credit Default Swap Par Bid Rate (bps) 1200 1000 800 600 David Dalton © Economist Intelligence Unit 1000 800 October 24th-25th 2013 1200 600 400 400 200 200 JUL AUG SEP OCT NOV DEC JAN FEBMAR APR MAY JUN JUL AUG SEP OCT 13 Sources: CMA Datavision /Haver Analytics 1
  2. 2. 1. Main measures of the DCFTA • Most trade tariffs & quotas on imports/ exports removed. • Gradual elimination in some "sensitive" segments. Also:  Cut non-tariff barriers.  Improve food safety, animal welfare.  Simplify trade administration.  Develop mechanisms for solving trade disputes. Why deep and comprehensive? • • • Harmonisation of commercial rules. Liberal trade regime will apply to new kinds of business. Gradual incorporation of public procurement. 2
  3. 3. 2. Impact of the DCFTA: different views Different takes reflect political agendas. For the EU: a bright future • Modernisation of trade & economy. • Boost real GDP. • Raise buying power. • Net gain of €100m/ year from elimination of trade duties. For Russia: dire warnings • Poor-quality products > exports fall > external deficit expands • Currency crisis, macroeconomic destabilisation. • Russia might disrupt trade as in August. • Russia might reconsider border treaties. • Political/ social costs: separatism? Collapse of Ukrainian state? • Sergei Glazyev calls step "suicidal"—more like assisted suicide? 3
  4. 4. 3. Ukraine’s economy now yryr%<N926NGPC> yryr%<N926IMD> yryr%<N926IXD> 15.0 80 7.5 40 0.0 0 - 7.5 - 40 - 15.0 - 22.5 Economy ailing, vulnerable to shocks. • GDP: fell for 4th qtr in Apr-Jun 2013. • Industry & exports: still falling JulAug. • Current-account gap widened in JulAug. - 80 03 04 05 06 07 08 09 10 Sources: Haver Analytics, The State Committee of Statistics 11 12 13 Ukraine: Foreign Reserves: Foreign Exchange EOP, Mil.USD Some signs • Borrowing costs rise sharply from May • Reserves used to meet debt repayments • Devaluation expectations rise • NBU returns to intervention in currency markets in Sep. 40000 40000 36000 36000 32000 32000 28000 28000 24000 24000 20000 20000 16000 16000 11 12 Source: National Bank of Ukraine /Haver Analytics 4 13
  5. 5. 4. The long and the short of it EU and Russian versions emphasise different time frames. EU version: Over the longer term • Specialisation brings trade gains. • Trade gains maximised as EU is large market. • Wider range, better-quality products. • Lower prices and higher living standards. • Ukrainian products more competitive outside EU. • Harmonisation of business rules attracts investment. Russian version: In the short run • More economic adjustment as competition diverts resources to stronger sectors: business closures, job losses in weaker sectors. • Poland & Croatia: shipyards; Latvia: engineering. • Those who lose out may not be ones to benefit. • Costs: EU trade admin, food and labour safety. 5
  6. 6. 5. What’s missing? Important considerations that temper both scenarios. Against Russia's catastrophism: Ukraine's external gap is large, BUT In large part because of high gas prices. Devaluation should narrow trade gap. Financing could come from IMF, EU. Against EU's idealised trade liberalisation: Ukraine's political economy • Weak state overcome by business-political groups • Profits sustained by blocking market entry • DCFTA provisions of competition, procurement, working conditions may face resistance 6

×