The world has entered a period of radical changes of unpredictable results. It requires each state or uniîn of states to answer the most fundamental questions. Ukraine is no exception, and even more so, being at the intersection of many interests, it, whether it wants or not, should clearly state its position on key issues. Sitting in the trenches is no longer possible as well as waiting for the favorable market conditions (returning to the old dogmas), or hoping for a lucky break. When determining the strategic direction it is vitally important to move away from the dogmas and myths that are often imposed on us from outside. For example, it is extremely harmful and dangerous to use the black-and-white approach or attempt to force us to make an imaginary and a clear choice between "East and West", replacing the scientific and balanced analysis by political and media campaigns.
One of such questions is determination of a place for Ukraine in architecture of the Great Europe or Eurasia, so to say. In my opinion, these terns are equal.
For the start we should analyze the dominating Euro-integration model, considered to be a priority and approved by the law. Why does Ukraine need European integration? Is it possible to equate European integration of Ukraine to the EU membership, especially regarding to current situation and short-term prospects? How much will it cost Ukraine? Is Ukrainian society well informed about the key elements of this process or is it in captivity of myths and ideological cliches? What place does EU give to Ukraine? What are its interests in Ukraine's integration and how they coincide with the Ukrainian ones?
I should say that most of politicians as well as experts and analytics, not mentioning ordinary citizens, do not raise those questions. However, sincere and right answers could post other questions, especially in economic issue, concerning the cost of these or those steps.
For example, how many of us have ever estimated the cost of FTA implementation here and legislation correspondence? Are we aware of the corresponding forecasts from EU, Ukraine and Russian Federation? The researches, conducted by Western brain centers (two of them with participation of Ukrainian experts), predict FTA benefits in middle- and long-term perspectives, amounting to 1-7% of growth (stating however no concrete figures about changing in turnover between Ukraine and EU). Meanwhile, co-research of two institutes - of the National Academy of Sciences of Ukraine and the Russian Academy of Sciences in April 2011 (1) leads to a rather critical conclusions about the benefits of "deep and comprehensive free trade area", providing the arguments and figures of a significant benefit from greater co-operation in Eurasian area (6-9 bn USD per year).
The new research, conducted by both institutes, called "Estimates of the macroeconomic effect of different variants of Ukraine's participation in projects of regional economic integration" and presented on December 15 in Kyiv, implies more convincing figures. The survey shows that FTA implementation will lead to 10% exports growth and 15% imports growth for Ukraine, besides Ukraine will lose about 1.5% of GDP annually. However, in case Ukraine joins CES (common economic space) overall positive effect for Ukrainian economy in 2011 – 2030 will make 219 billion USD in 2010 prices.
Let us also analyze the figures and the structure of trade with EU countries – it is not that beneficial (we export mainly raw materials and semi-finished products and import finished products. Besides, it is not correct to compare the volumes of both markets – European and Eurasian (the first one is many times wider). More important is a real opportunity to supply products to a specific market (the non-tariff barriers are much more important than tariff ones) and to compete there. Talking about EU it is not expected that we’ll significantly increase our export to EU countries.
We also cannot but alarm the expansion of the crisis in the euro area (regarding to the situation in Greece, Italy and the relevant discussions within the EU about next one to ask for help). Structural unbalance and together with lack of financial and fiscal discipline led to the most crucial crisis in Europe.
Thus, we need thoughtful approach to building our policy, based on serious analysis and facts. We simply have to estimate the situation and choose the most safe and profitable way. Today the country has no room for error, its price may be too high.
Ukrainian society sincerely wants to build in same socio-economic model that dominates in the EU. Ukrainians are mostly interested in achieving the living standards, which are typical for EU countries. Effectiveness of government agencies and their accountability to civil society are also important. While much of the change and reforms are our "homework", it is not everything that depends on our efforts and actions. European uniîn is not yet consolidated about Ukraine – its place and future role. Let’s admit that we have already divided the EU concerning this issue on "simpaticos" and "skeptics." We must also frankly admit that the EU position - "neither yes nor no" – will not change in the nearest future. Ukraine should consider it, rather than dwell in illusions, which are often too costly.
So we can make an important conclusion: in the present conditions out Euro-integration should be a movement towards concrete standards and values but not the membership as it is. The latter is an imperative and can be questioned due to objective circumstances and EU position. Certain clichés and stereotypes are long to build and hard to break, but we must have the courage to alter or revise our views, if they no longer fit the realities of life - whether we like or not!
Now let's look at the Eurasian model, which has been actively promoting by Russia. What is it actually? Is there any benefit for Ukraine to participate in it? What are the possible risks for Ukraine? Is not it antagonistic to European integration, which is a priority for us? What prevails there - a sober approach and benefits for all participants or geopolitical considerations?
The idea is not that new, but it got a new meaning after the article of Vladimir Putin, which can be estimated as a political statement on foreign affairs. In essence, it was proposed to create a dynamic area of development and growth on the principles of rational benefits for each participant. I would like, as I believe many co- citizens, to know - how beneficial may be the cooperation on this issue and in this regard how promising is it at all?
Simple figures clearly show a significant growth potential of the Eurasian region. Ukraine can benefit from it. If we compare the GDP growth of the EurAsEC economies and the EU economies, we’ll see that in 2001 - 2010's the first group rose 2.7 times faster: GDP of the Eurasian Economic Community in 2001 - 2010 grew on average by 89.9%; GDP of EU in this period grew by 33.2% (2). The forecasts of economic growth for both regions are more interesting regarding to the fact that European development in short-term perspective is not that reliable; it threatens the stability of neighbors and the World financial system stability.
According to UN projections for the next two years the euro area GDP will grow by 1.6-1.7% in the baseline (0.1-1.1% in the pessimistic scenario), when CIS countries at the same time will grow by 4% (3,5-3,6% as per pessimistic scenario) (3). European Commission forecast differs not much: EU GDP growth by 1.8-1.9% in 2011 – 2012; CIS growth of GDP - by 4.5% - 4.1% correspondingly (4).
If we look through the long-term forecasts for the period of 2030 - 2050's, they all state much more dynamic growth (2-3 times) of Eurasian countries (this implies developing economies) in comparison with EU countries. As for Russia, for example, Goldman and Sachs (2007) (5) predicts that it will surplus the Italian economy in 2017, French - in 2024, British - in 2027, German - in 2029, and Japan - in 2037. Russia's GDP per capita will increase by 11 times from 2006 to 2050. Our neighbor is to reach the current G7 standard of living, and to become the 4th economy, after U.S., Korea and Britain, by the middle of the century.
So the need to carefully analyze the prospects of enhancing cooperation in the Eurasian area is under a weighty argument. All this, of course, does not preclude the use of some elements in the political order from Russia. But these are side effects, the realities of our time. But does not EU pursue its political objectives in the integration process with Ukraine?
If we take the economic dimension, the Eurasian market is vitally important for Ukraine - both in quantitative and qualitative measurement. The latter is particularly important because this market is the key for export of our products with high added value. The structure of our exports and imports proves it. Look through Ukrainian trade with the Russian Federation (eg, 2010) (6) as a key economy in the region: products of high and medium degree of processing predominate in our exports. They are: mechanical engineering (37%), metallurgy (20.1%), food (13.4%) and chemical industry products (8.4%). At the same time, imports are absolutely dominated by energy (66.7%) and then with a substantial lag go engineering products (9.8%), metallurgy (7.2%) and chemical industry products (8.1%). If we take the total import and export, the value of works and services in our exports to the Russia draws attention (28.8%), while their share in imports is negligible (3.2%).
This market provides employment for our most advanced industries and sectors. Should the development of such facilities not be a major element of sustainable development of our economy? The active use of the local market of Eurasia can bring substantial benefits to Ukraine. The above figures show convincingly in favor of this thesis. As you know, facts - are stubborn things. Regarding to the availability of natural resources and "bottomless" of the Eurasian reservoirs with great prospects of stocks in the Arctic, the attractiveness and profitability of cooperation with Eurasia increases.
Ukraine needs to plan its development, taking into account that:
- It will not be an EU member in the medium term, not just because of our unwillingness to meet the criteria for membership;
- Eurasian market shows steady growth and it provides great opportunities for development in this period for Ukraine;
- The dominant trend in the vast Greater Europe / Eurasia will be a gradual convergence between the major players and associations, the removal of unnecessary barriers and focus on win-win solutions - preference paradigm «win-win», and not a zero-sum games.
We must move away from the stereotypes of the past, and offer our vision of Ukraine's place in the new realities of the Wider Europe/Eurasia. In this situation, the only right strategic decision for Ukraine is to consolidate itself as the primary liaison between the Western (EU) and Eastern Eurasia (EAEC) as in geopolitical so in geoeconomic spheres (7).
Benefits from such a step would be not only economic, but they will also guarantee our security together with sustainable development throughout the country and state. In other words - the process of European integration and the Eurasian model (in the broader sense and not manipulative) do not contradict each other, but in Ukrainian case - may be even very organically complement each other.
Our real interests objectively lead us to encourage the widest possible rapprochement between the two poles of the Wider Europe/Eurasia, which should be the pillars of our future sustainable development. And the successful launch of two FTA’s in European and Eurasian areas may be a first step in this direction.
This vital issue for Ukraine's economic development is proved by our foreign trade with the EU and the countries of the Eurasian space since 1996. Taking five "reference period" for the comparison, we can clearly see the dynamics of vectors and interests of our foreign trade. Notable is the fact that the EU share in total foreign trade of Ukraine increased significantly from 1996 to 2004, but now is gradually decreasing, especially by the share of our exports there. But the share of CIS countries after the fall in the late 90s, remains at 40% and even continues to grow (8).
Ukraine should not wait for others to take over its decision, and actively initiate economic integration processes in the vast Greater Europe/Eurasia. We simply have to present our vision and not hope for a favorable scenario. Ukraine has all chances to become one of the puzzles of the Eurasian mosaics of the XXI century, which is now actively being formed. But for this we need to define our own interests soberly and clearly articulate them. In addition, critical is the ability of people to realize thoughtful concepts.
I believe that successful and sustainable development of Ukraine is guaranteed only when we will responsibly develop our own positioning, regarding to the interests of our partners and offering mutually beneficial solutions.
The trend of convergence in the spaces of the Wider Europe/Eurasia prevails not only in the economic field. Security issue has become an advancing idea, especially as per Euro-Atlantic security Initiative (EASI). The initiative aims to work out the concept and principles of the new Euro-Atlantic community's security with equal participation of U.S., EU and Russia. It's about building a fundamentally new architecture of Euro-Atlantic security from Vancouver to Vladivostok, which is based on cooperative and accommodating principle of integration into NATO, the CSTO etc. The initiator of the EASI is Carnegie Foundation - a leading "think tank" - with the active assistance from government circles in the U.S., Russia and the leading EU countries.
“United World” International Foundation was the co-organizer of the EASI meeting in Kyiv. Today the Foundation is ready to take the lead in such initiative in the economic sphere, and to propose a formula of the Eurasian economic initiative as a model for the strategic partnership between the EU and the Eurasian Economic Community with the active participation of Ukraine, moreover this issue has already been put into the agenda of EU and Russia.
My conclusions and recommendations are not the ultimate truth, but I'm sure that it's time to open dialogue on the issue. I am convinced that only frank and professional discussions will give Ukraine the answers to questions about its strategic development, and our foreign partners will understand Ukrainian interests and suggestions. And all the words must be followed by actions.
Eduard Prutnik, The Chairman of the Board of “United World” International Foundation
(1) The study was conducted by the Institute for Economics and Forecasting of NASU (V.Geyets) and the Institute of Economic Forecasting (W.Ivanter).
(2) Own calculations, based on State Statistics and European Statistics
(3) World economic situation and prospects 2011. Global outlook. United Nations, New York 2011. In: http://www.un.org/en/development/desa/policy/wesp/wesp_current/2011wesp.pdf
(4) European Economic Forecast. Spring 2011. European Commission, Directorate-General for Economic and financial affairs. In: http://ec.europa.eu/economy_finance/publications/european_economy/2011/pdf/ee-2011-1_en.pdf
(5) BRICs and beyond. Goldman Sachs global economic group. 2007. In: http://www2. goldmansachs.com/our-thinking/brics/brics-and-beyond-book-pdfs/brics-full-book.pdf
(6) State Statistics Service sata
(7) Analyzing the movement of commodity flows from West to East and back in the Wider Europe, one comes to the conclusion that Ukraine can play a kind of "economic transformer": Western technology adoption and its use, followed by delivery of finished products further to the East, to Eurasia.
(8) We would like to acknowledge the role of "third pillars" of our foreign trade, which primarily operates in Asia and Africa. With these countries we have a constant and fairly significant surplus, in addition we supply a large quantity of products with high added value there
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