With Ukraine, one of the most ambitious deals the European Union has ever negotiated is being prepared for final signature in November: the Deep and Comprehensive Free Trade Area, it is called (DCFTA). This big deal for both sides is full of suspense: Russia doesn’t want it, and Ukraine is defying several EU states’ human rights insistence that former prime minister Yulia Tymoshenko be let out of prison as a condition.
There are judicial, electoral and business reforms to be made; meeting EU food standards is also a huge challenge. Take the dairy sector, for instance; at a French multinational, we asked a bit about that.
Dario Marchetti, general manager of Danone Ukraine told Euronews: “The biggest difference is the source of milk. In Ukraine 80% of the milk comes from the individuals, otherwise known as ‘babushki’, who supply a huge amount of the milk that’s processed today. Danone-Ukraine has been working with this sector; over the last five years we’ve attracted over ten million euros of investments in the sector, and we’ve organised cooperatives which have dramatically increased quality – almost to European standards. It is something that can be done mainly through using milking machines and training.”
With the DCFTA deal, Ukrainian goods could gain access to the nearly half-billion-consumer EU market with most tariffs eliminated. Russia hates that. It used to be Ukraine’s biggest trading partner but not any longer. Moscow has been putting enormous pressure on Kiev to join its Customs Union.
Gennadiy Chizhykov, the head of the Ukrainian Chamber of Commerce, appeared confident that the DCFTA, if signed, could give the country’s economy a new impulse for growth. Chizhykov said that is because there is innovation in three quarters of European goods. At the same time, he added, some difficulties are to be expected, since concerns, fears and losses are bound to come up in any transition from one model to another.
Feelings for Russia aside, Ukraine and the EU seem determined to sign the agreement, even if reservations remain. With 46 million people and a 300 billion euro economy, Ukraine is also an opportunity for the EU. A failure to work together, it’s feared, could weaken EU ties with other eastern European countries, making democratic reform suffer.
The EU’s Trade Commissioner, Karel De Gucht, has been meeting top Ukrainian officials in Kiev, such as President Yanukovich and Prime Minister Azarov, along with top business representatives from EU and Ukrainian companies.
The head of the euronews bureau there, Sergio Cantone, asked the Trade Commissioner about the latest progress being made.
Sergio Cantone, euronews:
“Don’t you think that the Association Agreement, with the free trade agreement, is a kind of crossroads for the EU between values and realpolitik?”
Karel De Gucht:
“The [EU] Council of Ministers [representing the governments of the member states] has established a number of benchmarks that have to be fulfilled before signature, and they are political ones, like the electoral law, or selective justice. On top of that, we also have to see now that the business climate is going the opposite way. I mean it is deteriorating. That’s, of course, not what we should have in mind.”
“There are some concerns among Ukrainian companies about their future; they are afraid that adapting to the EU standards will be too costly for them.”
“This approximation of regulatory measures, of course, will take some time, you have to do it in a progressive way. But on the other hand that’s, of course, the entry ticket to the biggest market on Earth.”
“Don’t you think that Russia could feel excluded from this agreement with Ukraine, and take measures in order to retaliate against it?”
“We have now tried for years already to have this new agreement with them. We would like to have many more elements of what you would call a classical free trade agreement. What I see is that since Russia became a member of the World Trade Organisation they have [been having] difficulties respecting the rules that they have acceded to, and [I see] that they have come to a standstill with respect to negotiations for a new agreement. So we are open to negotiations with the Russians.”