THE IMPACT OF THE EU-UKRAINE DEEP AND COMPREHENSIVE FREE TRADE AREA ON THE UKRAINIAN INDUSTRIAL SECTOR

“Democracy House ” thanks to support of the Representative Office of Friedrich Ebert Fund in Ukraine and Belarus, prepared the research “THE IMPACT OF THE EU-UKRAINE DEEP AND COMPREHENSIVE FREE TRADE AREA ON THE UKRAINIAN INDUSTRIAL SECTOR”

Using vector autoregression models, we have analysed the impact of the aggregate rate of the EU import duty and a share of the general costs exporters to the EU have to pay to ensure conformity to EU standards on the functioning of selected Ukrainian industries. For this purpose, we tested the research parameters for a unit root and carried out a causal analysis.

The research findings show an inconclusive effect of the DCFTA on the mentioned sectors of economy. Under the influence of the DCFTA, exports, imports and the average salary in mining and metallurgy are expected to grow while production and foreign direct investment will see a slight decrease.

The chemical industry will experience an insignificant reduction in exports and a slump in imports. As in metallurgy, the average salary of permanent industry staff will increase.

Modelling results show that as a result of the Association Agreement, sunflower oil production will decrease insignificantly while its exports to the EU will grow. The findings also show that grain exports to the EU will decrease in the short term but will change their dynamics in the long run.

The machine industry will see an insignificant decrease in exports (at a slowing pace), while imports will increase in the short run but decrease in a longer term, which corresponds to a decline in manufacturing.

The research THE IMPACT OF THE EU-UKRAINE DEEP AND COMPREHENSIVE FREE TRADE AREA ON THE UKRAINIAN INDUSTRIAL SECTOR