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A preliminary analysis of the impact of a Ukraine-EU free trade agreement on agriculture

Author

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  • von Cramon-Taubadel, Stephan
  • Hess, Sebastian
  • Brummer, Bernhard

Abstract

Agriculture including food products is of particular interest for Ukraine. However, in free trade agreements involving the European Union, agriculture is always given special treatment and subject to less and slower liberalization than other sectors. This paper employs the standard Global Trade Analysis Project model in order to assess how World Trade Organization accession affects agriculture in Ukraine, and how potential bilateral tariff cuts may interact with potential productivity gains within Ukrainian agriculture. The results indicate that, due to trade liberalization, Ukraine can expect gains from a more efficient allocation of its resources in line with comparative advantage, leading to an increase of production and exports of wheat, other grains, and oilseeds, but also of several processed food products that benefit from less expensive intermediate inputs. However, Ukraine's exports are concentrated on a small number of destinations, especially Russia and some other Former Soviet Union countries because they fail to meet quality standards elsewhere. When Ukrainian production of these products increases due to increased allocative efficiency, exports to Russia increase further and prices there fall, generating negative terms of trade effects that largely offset the allocative gains. Ukrainian imports of agricultural products increase as well, partly because Ukrainian consumers switch to higher quality imported goods even though domestic production increases. Regarding free trade agreement negotiations with the European Union, these results highlight for Ukraine the fact that improved agricultural productivity will help to get most out of improved market access. However, the results also highlight for Ukraine the great importance of adopting internationally accepted quality standards in order to diversify its export structure.

Suggested Citation

  • von Cramon-Taubadel, Stephan & Hess, Sebastian & Brummer, Bernhard, 2010. "A preliminary analysis of the impact of a Ukraine-EU free trade agreement on agriculture," Policy Research Working Paper Series 5264, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5264
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    Citations

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    Cited by:

    1. Olexandr Nekhay & Thomas Fellmann & Stephan Hubertus Gay, 2012. "A free trade agreement between Ukraine and the European Union: potential effects on agricultural markets and farmers' revenues," Post-Communist Economies, Taylor & Francis Journals, vol. 24(3), pages 351-363, November.
    2. Anders Aslund, 2013. "Ukraine's Choice: European Association Agreement or Eurasian Union?," Policy Briefs PB13-22, Peterson Institute for International Economics.
    3. Miriam Frey & Zoryana Olekseyuk, 2011. "The EU-Ukraine trade liberalization: How much do the costs of tariff elimination matter?," Working Papers 308, Leibniz Institut f├╝r Ost- und S├╝dosteuropaforschung (Institute for East and Southeast European Studies), revised Feb 2013.
    4. Miriam Frey & Zoryana Olekseyuk, 2014. "A general equilibrium evaluation of the fiscal costs of trade liberalization in Ukraine," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(3), pages 505-540, August.
    5. Zoryana Olekseyuk, 2016. "Modeling of FDI in business services: Additional effects in case of Ukraine's European integration," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(7), pages 1010-1043, October.
    6. Nekhay, Olexandr & Gay, Stephan Hubertus & Fellmann, Thomas, 2011. "A Free Trade between Ukraine and the European Union: Challenges and Opportunities for Agricultural Markets," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114616, European Association of Agricultural Economists.

    More about this item

    Keywords

    Free Trade; Economic Theory&Research; Trade Policy; Trade Law; Emerging Markets;

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