“Trade wars take place when the thing is about competition in the sphere of trade. Now we are speaking about an economic war,” former deputy ministry of foreign affairs of Ukraine, currently deputy director-general of Razumkov Center, Valerii Chaly, is convinced. For, the expert notes – and The Day has already written about this – both sides will suffer losses.
What is the aim of this action? To incline Ukraine to Customs Union membership? So rudely and unceremoniously? If so, the Kremlin has not apparently achieved the planned effect: the Ukrainian business has responded that it is not going to change its lobby vector concerning the political course.
If one digs a bit deeper and tries to give an answer to the question about the motives and logic of the moment of “trade blockade,” the Vilnius summit is not a defining point here. There is something more interesting, which actually gives reason to call what happened in late July at the Russian customs an act of an economic war.
In the end of July, Ukraine’s Ministry of Revenues and Duties reported about improved macroeconomic indices. According to its data, the master budget has received 240.9 billion hryvnias of revenues over seven months of 2013, which is 9.2 billion hryvnias more than for the same period of previous year. So, Ukrainian economy has showed signs of growth. Meanwhile, the Ministry of Agrarian Policy and Food of Ukraine was actively circulating the news about the “record harvest,” and the Cabinet of Ministers – about the Chinese loan. All these “good” news pieces indicated that the Ukrainian government was seemingly standing all chances to avoid the predicted default, hence, if the financial situation improved, to build its foreign policy in a well-weighed way.
And voila – half of our producers face problems that entail the stoppage of production lines, growth of the negative trade balance, drop of GDP, firing of people, increase of unemployment levels, and a whole lot of social problems linked to the “insufficiently filled budget.” What prevents the RF from opening on Ukraine’s territory several charity foundations and “handing out” several hundred hryvnias of material assistance to Ukrainians? Moreover, last week Kyiv saw the presentation of the RF Foundation of Support of Small and Medium Businesses. Will the European sympathies of Ukrainians stand this carrot-and-stick pressure?
Yet if the grandiose intention of trade intimidation does not work, Russia will find itself in a blockade (details in the below commentary of the head of the Center of Economic Development Oleksandr PASKHAVER).
So, is not it high time to look for compromise?
COMMENTARIES
“ONLY JOINING THE EU MARKET WILL HELP US GET RID OF TRADE INTIMIDATION”
Oleksandr PASKHAVER, head of the Center of Economic Development:
“Trade restrictions imposed by Russia are caused by its understanding that we are standing quite real chances to sign an agreement with the EU. When our neighbor understood this, it started to realize the reserve plan based on the memorandum on how to influence Ukraine, already highlighted by the Ukrainian press. I doubt that Russia takes interest in destabilizing the internal situation in Ukraine by damaging Ukrainian economy. Russia finds it more efficient to influence Ukrainian businessmen who, one way or another, are determining the economic situation in Ukraine. At the moment Russia is showing impulses for possible trade blockade which, no doubt, will have a negative effect on the work of Ukrainian economy. However, I cannot assess the scale of this effect. Why? Economy has an adaptive function: if it gets worse on one market, the goods will break through to another one. In my opinion, if Ukraine signed the agreement with the EU, Russia would have abruptly changed its policy and started to look for opportunities to make use of this new format of our relations with the EU to the full. I think that there will be no more lengthy trade blockades. Only joining the EU market will help Ukraine get rid of Russia’s trade intimidation.”
“WITHOUT A NEW PRODUCTION BASIS, UKRAINE WILL ALWAYS PLAY THE ROLE OF A WEAK PARTNER”
Oleksandr KENDIUKHOV, head of All-Ukrainian Association of Economists:
“Russia considers Ukraine a sphere of its economic and political influence. Therefore its current actions are a reaction to the approaching Vilnius summit, which is crucial for Ukraine. And there is no sense in cutting the economic ground from under Ukraine. If Russia wanted this, it would have done a simpler thing. If we assume such a possibility, I cannot say what effect it will have on the moods of the society. And not necessarily will it arouse in Ukrainian society the desire to integrate closely with Russia, because the mass media currently have enough information about the aggressive policy of our neighbors. The only version is that the Russian side does not see any prospect in the quality of negotiations with the current Ukrainian leaders. Otherwise this scenario would be quite possible, because undermining economic growth and worsening social tensions will make it possible to change the ruling regime, hence – the negotiators. The trade blockade will affect Ukraine’s economic indices. On the whole, the yearly result of this blockade will be at the least a 3-3.5 billion dollars’ trade deficit with Russia. I think the week-long blockade may drag on. If Ukraine meets the EU halfway, the pressure will be turned on, if it yields its Eurointegration aspirations, the pressure will be reduced. We could have avoided this situation, had we shown over 22 years an economic miracle of our own by creating a new production basis instead of reforming property rights and making colossal investments into separate infrastructure projects. This would have ensured a positive trade balance with any partner. Without a new production basis Ukraine will always play the role of a weak partner having to accept other’s conditions.”
“THIS IS ALSO A WAY TO DESTABILIZE THE INTERNAL SITUATION IN THE COUNTRY”
Anatolii KINAKH, president of Ukrainian Union of Industrialists and Entrepreneurs:
“The entire situation is no new for us, and there is no political secret that the Russian Federation treats Ukraine’s integration into the European space quite negatively. In November, we have a chance to sign the Association Agreement with the EU in Vilnius and starting with January 1, 2014 to cooperate with the EU on the basis of free trade area agreement. In spite of this, current trade problems with Russia are of political nature, aimed to turn up the economic pressure in the context of entering the Customs Union. In my opinion, these methods won’t yield any positive results, and there won’t be any victors on any side. Since Russia is a member of the WTO, and the free trade agreement with the CIS countries is based in many ways on this membership, we need to sit down at the table of negotiations and shape transparent relations. Moreover, the EU integration does not run counter to creation of favorable conditions of cooperation with the Customs Union. Clearly, such Russian actions are connected with the improving economic situation in Ukraine, because this is a way to destabilize the internal situation in the country. I have a very negative attitude to this kind of methods, because they are uncivilized, and all controversial questions between two trade partners must be resolved on the basis of the existing international standards. Surely, this trade blockade will have a negative effect on the economic indices of both countries, because Ukraine provides vast supplies to Russia (mechanical engineering, aircraft engines, locomotives, transportation vehicles). Everything will depend on how the situation unfolds. Now the effect is minimal, but if the situation is exacerbated, the losses will be colossal. Will Russia dare to hold the blockade for any longer? Russians have enough common sense to refuse from aggravating the situation with the help of uncivilized methods, all the more so the international community has already reacted to this. Besides, Russia is a WTO member. In case of further violation of international standards, Ukraine will appeal to the WTO and defend its interests. Finally, Ukraine and Russia are strategic partners and will remain so. Healthy pragmatism and responsibility will prevail over political maneuvering after all, and no exacerbation will follow.”
P.S.: The board of the Eurasian Economic Commission (EEC) resolved to impose a special protective duty on table and kitchen chinaware made in Ukraine and China until September 28, 2016.
