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

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Listed author(s):
  • 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.

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Paper provided by University of Bonn, ZEI - Center for European Integration Studies in its series ZEI Working Papers with number B 26-2004.

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Date of creation: 2004
Handle: RePEc:zbw:zeiwps:b262004
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Keywords: Ukraine; Trade; Integration; GTAP;

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Find related papers by 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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  1. Hanoch, Giora, 1975. "Production and Demand Models with Direct or Indirect Implicit Additivity," Econometrica, Econometric Society, vol. 43(3), pages 395-419, May.
  2. Sulamaa, Pekka & WidgrÉn, Mika, 2002. "EU-Enlargement and the Opening of Russia: Lessons from the GTAP Reference Model," Discussion Papers 825, The Research Institute of the Finnish Economy.
  3. M. Ayhan Kose & Raymond Riezman, 2000. "Small Countries and Preferential Trade Agreements "How Severe is the Innocent Bystander Problem?"," CESifo Working Paper Series 253, CESifo Group Munich.
  4. Alexander Alekseev & Natalia Tourdyeva & Ksenia Yudaeva, 2003. "Estimation of the Russia’s trade policy options with the help of the Computable General Equilibrium Model," Working Papers w0042, Center for Economic and Financial Research (CEFIR).
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  6. Schiff, Maurice & Winters, L Alan, 1998. "Regional Integration as Diplomacy," World Bank Economic Review, World Bank Group, vol. 12(2), pages 271-295, May.
  7. Maurice Schiff & L. Alan Winters, 2003. "Regional Integration and Development," World Bank Publications, The World Bank, number 15172, September.
  8. Paul Brenton & Natalia Tourdyeva & John Whalley, 1997. "The potential trade effects of an FTA between the EU and Russia," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(2), pages 205-225, 06.
  9. Geraci, Vincent J & Prewo, Wilfried, 1982. "An Empirical Demand and Supply Model of Multilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 432-441, August.
  10. Glenn W. Harrison & Thomas F. Rutherford & David G. Tarr, 2014. "Economic implications for Turkey of a Customs Union with the European Union," World Scientific Book Chapters,in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 16, pages 395-404 World Scientific Publishing Co. Pte. Ltd..
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Cited by:

  1. 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).
  2. 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 (Institute for East and Southeast European Studies), revised Feb 2013.
  3. Miriam Frey & Zoryana Olekseyuk, 2012. "The EU-Ukraine trade liberalization: How much do the costs of tariff elimination matter?," EcoMod2012 4362, EcoMod.
  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.

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