A New Division of Europe
LIUBOV KHAZANOn May 1st the European Union admitted ten more countries: the Greek part of Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. Even before this, official Kyiv had been counting the likely political, social, and economic cost. The political loss, in the sense that Ukraine was now actually further away from European integration instead of the recent prospects which seemed to be offering close association or even the chance of joining. Back in 1991, when voting on the underlying domestic and foreign political principles, the Verkhovna Rada determined that achieving a European living standard would be Ukraine’s strategic objective, although at the time no-one would have risked predicting full European membership. Over time, however, such membership had become an actual, albeit remote opportunity.

Another Iron Curtain?
Now the situation appears somewhat paradoxical. Ukraine geographically borders on the EU, something never dreamed of previously, which means that this country is close to the Union, however it is this border that now actually severs Ukraine from Europe. To use a rigid historical metaphor and to draw an historical parallel, May 1, 2004, served to bring down yet another iron curtain separating Western and Eastern Europe. Not as heavy or solid as during the cold war, but substantial enough to mark a new division of Europe.
The social consequences mean, first of all, more rigid visa rules. Their negative effect will be suffered by tourists, businessmen, journalists, and worse of all, by the people living in the border areas who cross the borders to earn a living, so escaping domestic unemployment.
Finally, the economic losses. It is impossible to sum them all up, as they depend on numerous, often not obvious, factors. One is that the EU’s expansion has produced the world’s most powerful trade and economic bloc. Is this good or bad for Ukraine? The opinions of the two polarised points of view offer polarised answers, of course.
The Pros and Cons
Some refer to Russia’s GDP of $346 billion, compared to the $20 trillion worth of goods and services produced annually by the Euro-Atlantic community. Which is the winning side? Should Ukraine shift its course eastward?
They also point to a rejuvenated European Union that offers the best market opportunity, now that among its members are 25 countries with a total population of 450 million; allegedly, this should automatically expand Ukraine’s trade opportunities, especially as industrial import rates will go down from nine to four percent.
By the way, 105 million persons that inhabit the newly admitted EU member countries are among the New Europeans, almost one-third of the EU membership. This means another positive inference, namely that many of the new EU members are accustomed to doing business with Ukraine, and this will persuade the EU not to do anything to change this tradition. From 1995-2003, Ukraine was increasing its foreign trade (e.g., from 13 to 25%), mostly due to the new EU members. Ukraine also had a positive trade balance. Some analysts prefer to believe that from now on the EU market will figure at the top of Ukraine’s export lists.
Another probable advantage is stated by Helen Cray, the European Commission co-ordinator for technological aid to Ukraine. She says that Ukraine will shortly receive more aid from the EU, as part of the Union’s new neighbourhood strategy. Whereas since 1999 this aid has amounted to an average of v100 million annually, (however this year it is down to v62 million, although likely to go up by a further v6 million), the new EU programmes will increase it by a quarter. However, there is no ruling out the possibility that the Europeans will want Ukraine to use some of this money to equip new eastern border checkpoints. By way of a comparison, the new members will transfer only v15 billion to the European budget, in the first three years, but will receive v40 billion in return.
Shortcomings and Advantages
One of the shortcomings is the structure of Ukrainian exports. The national assortment remains limited, composed mostly of low-technology non-precious metal and agricultural, food and light industry products.
Kyiv is interested in a substantial increase in the Ukrainian steel import quotas for the EU countries - raising them at least to a level which allows preservtion of the traditional trade flows between Ukraine and the new EU countries. Talks are underway and analysts can only ‘read tea-leaves’ to predict the outcome. In a way, this depends on how soon Ukraine can join the WTO, if at all, considering the crawling pace of the process.
The immediate prospects do not inspire much optimism; for instance the cancellation of the free trade agreements with the Baltic countries amount to some $15 million worth of losses. Unless the Ukraine-EU export steel quotas are increased, such losses could reach $200 million.
Now and then we hear that Ukraine will actually be better off with the new rules, set by a single partner, the European Union, compared to what it was like with Ukraine having to deal with ten independent countries. However, the EU product quality requirements are considerably higher than in the former socialist camp. The pessimists believe that foriegn trade will therefore decrease, however this could also spur Ukrainian business into action, forcing them to pay more attention to quality.
Whichever, Premier Viktor Yanukovych was the first to beat the alarm. His cherished dream of a free trade area with the EU has yet to become a reality. “The expansion of the European Union over such a short period will not be without problems for Ukraine,” he stated with a sigh. However experts of the Ministry of Economy and European Integration came up with the consoling conclusion that EU expansion would have a medium- and long-term positive effect on the Ukrainian economy.
Will Ukraine’s co-operation within the SES format serve to make up for its European losses? Not likely. Well, there is a-bird-in-the-hand consolation; the Ukrainian-Russian trade turnover is expected to reach $20 billion this year. Not bad, all things considered.
Ukrainian Brussels?
Indeed, joining the great European family of nations has advantages and disadvantages for Ukraine. As is often the case with large families, budget allocation may not always appear fair, at least not in the opinion of all the family members.
Poland seems to have reached its cherished goal. It should be happy. But is it? Many an observer note fear in that country of higher prices and increased unemployment.
For now the EU doors are locked. The next planned expansion phase is not before 2007, with Bulgaria and Romania perhaps the next contenders, if they achieve the EU’s demands of a stronger democracy and improved economy.
Ukraine is now out of the new admissions list. At a banquet commemorating the admission of the ten new EU member countries, European Commission President Romano Prodi said Ukraine would never be a member of the Union. He, of all people, should know better than that; the EU Treaty envisages no membership limitations. However, Mr. Prodi’s opinion was echoed by the European Commissioner for Enlargement Gunther Verheugen who said that EU membership could not be considered, even as a remote possibility, for Ukraine, Russia, and Moldova.
Anyway, passions are gradually abating, replaced by a more considerate approach. Economists are already saying that Ukraine would feel ill at ease as a Union member before raising its economy at least to the Central European standard.
The Ukrainian Premier put it aptly: “Wouldn’t we be better off, figuratively speaking, off building our own Brussels in Donetsk or in Lviv, rather than going a train with second class tickets?”
To quote the old saying if the mountain will not come to Mohammed, Mohammed must go to the mountain. Whichever, it can be a hard and difficult journey.