Joining to Customs Union, participation in CES could benefit Ukraine to the tune of $6-10b, says study
Kyiv, April 11 (Interfax-Ukraine) – Ukraine's joining the Customs Union and participating in the Common Economic Space (CES) as a part of the Eurasian Economic Space could benefit the country to the tune of $6-10 billion.
This is according to experts from the Institute of National Economic Forecasting of Russian Academy of Science and the Institute for Economics and Forecasting of Ukrainian Academy of Science, who presented the results of a joint study at a press conference at Interfax-Ukraine on April 8, 2011.
"The improvement of the conditions for Ukraine's trade is estimated at $6-10 billion, which will allow the country to equalize its balance of trade and provide for macroeconomic stability. We should take into account other positives effects that could be obtained with the expansion of trade with goods and services, the boosting of scientific and technical cooperation, and the increase of investment and innovation activity in capital-intensive industrial sectors," reads a press release presented to the press at the press conference.
Deputy Director of National Economic Forecasting of Russian Academy of Science Marat Uzyakov said that Ukraine's joining the CES was not a difficult task from a technological point of view.
"We have grown from one hearth, from one country. We have common technological space, a similar structure of expenses and a similar effectiveness level. In our opinion, there are no obstacles to broad interstate integration in many types of activities. We think that Ukraine's joining to the CES will lift all barriers to integration, including in the movement of labor and capital," he said.
Uzyakov said that one of the most important benefits Ukraine could get from the step would be a reduction in the prices of basic resources, which would promote economic development.
He said that among benefits from the integration that Russia would obtain is priority access to the Ukrainian market and the saving of funds in infrastructure projects like South Stream.
The potential minuses for Ukraine could be a partial loss of control over some economic sectors; complications in its talks on joining the European Union and a possible increase of competition in some sectors of the Ukrainian market, so that Ukrainian goods could be pushed out by Russian ones.
According to the study, if Ukraine joins the Customs Union, exports of Ukrainian goods to Russia (not taking into account exports of hydrocarbons) will grow by $4.6-8.8 billion in three years. If Ukraine did not join the Customs Union, exports to Russia could fall by $1.4-1.9 billion.
According to the study, with one step alone - the cancellation of export duties on hydrocarbons inside the Customs Union - the rise in the surplus of Ukraine's balance of trade will reach $2.9 billion.
The press release also says that a possible fall of the price of natural gas exported from Russia to Ukraine to $180 per thousand cubic meters (the price for Belarus in 2010) would produce a rise in Ukraine's balance of trade of up to $5.1 billion.
In addition, the effect of the cancelation of protective measures in mutual trade is assessed at $500 million and the lifting of technical barriers in trade will add over $1 billion.
According to the study, if Ukraine does not participate in the Customs Union and a free trade zone with the European Union were formed, this would worsen the conditions of trade and economic cooperation with Russia and other Customs Union members.
"If the prices of gas continue growing, the energy-intensive metals, chemical and metal complexes in Ukraine, which generate the biggest profits and which are drivers of economic growth, will remain outside the profitability zone and the country would have to shut down most of the production facilities that made products for export," the authors of the study said.