How Close To Europe Is Ukraine: Trade Policy Analysis

This year the largest expansion of the European Union has taken place: 10 countries became full members of the EU. The economic effect of this event can be different for separate countries and regions, but according to Francois and Rombout (2001) the overall impact on European trade will be huge. Ukraine, which after May 1, 2004 directly borders the EU, will doubtless feel the changes. As the theory of international trade suggests, there will be trade diversion after Ukraine’s trade partners enter the EU, which means Ukraine’s firms will lose ties with some of their counterparts in those countries. Having announced its objective to become a member of the EU, Ukraine should take some actions to prevent the loss of the important links. A possible way would be to become more open to the EU, implying changes in trade policy. This is exactly what the European officials expect from Ukraine. At the latest EU/Ukraine Summit in Yalta in October 2003, the head of European Commission Romano Prodi has stressed the importance of removing existing trade barriers for the improvement of bilateral cooperation1.