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Analyzing trade opening in Ukraine: Effects of a customs union with the EU

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  • Harbuzyuk, Oksana
  • Lutz, Stefan

Abstract

This paper analyzes the possible a customs union between and the European Union. The GTAP multi-country simulation model of Purdue University's Center for Global Trade Analysis is applied. The welfare measure evaluated is the change in equivalent variation (EV). As all incomes in the model accrue to a representative household, EV fully assesses possible welfare benefits for Ukraine from a bilateral tariff elimination on trade with the EU. As the model includes Ukraine in the aggregated „Former Soviet Union“ region (FSU), EV is estimated for the FSU and then disaggregated on the industry level proportionally to trade shares. The results of our simulations suggest that Ukraine’s EV is particularly sensitive to the inclusion of the agricultural sector into a customs union. Due to the highly protected nature of this sector within the EU, Ukraine would be better off if agriculture were excluded from liberalization. If this scenario is assumed, Ukraine's monetary gain would be in the order of $40 million.

Suggested Citation

  • Harbuzyuk, Oksana & Lutz, Stefan, 2004. "Analyzing trade opening in Ukraine: Effects of a customs union with the EU," ZEI Working Papers B 26-2004, University of Bonn, ZEI - Center for European Integration Studies.
    • Handle: RePEc:zbw:zeiwps:b262004
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    2. 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.
    3. Cai, Songfeng & Zhang, Yaxiong & Meng, Bo, 2015. "Spillover effects of TTIP on BRICS economies : a dynamic GVC-based CGE model," IDE Discussion Papers 485, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    4. Miriam Frey & Zoryana Olekseyuk, 2011. "The EU-Ukraine trade liberalization: How much do the costs of tariff elimination matter?," Working Papers 308, Leibniz Institut für Ost- und Südosteuropaforschung (Leibniz Institute for East and Southeast European Studies), revised Feb 2013.
    5. Schürenberg-Frosch, Hannah, 2011. "How to model a child in school? A dynamic macro-simulation study for Tanzania," Conference papers 332068, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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    Keywords

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    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F15 - International Economics - - Trade - - - Economic Integration
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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