A FREE TRADE ZONE BETWEEN THE EUROPEAN UNION AND UKRAINE: TRADE IMPLICATIONS FOR POLAND

In March 2007, the European Union and Ukraine opened negotiations on an association agreement to replace the existing agreement on partnership and cooperation. The main part of the new agreement will be a deal on the establishment of a free trade zone between the EU and Ukraine. The paper aims to examine the commercial implications of such a zone for Poland, especially as Ukraine is one of the largest export markets for Polish goods and Poland is the second largest commercial partner for Ukraine in the EU27 in terms of trade volume. The authors estimate the results of reducing import duties in terms of trade creation and diversion effects. They also examine the potential implications of lifting export duties by Ukraine and of using trade protection policies by both sides. Even though the estimated commercial effects are moderate, the authors say, they conclude that a free trade zone between the EU and Ukraine would benefit Poland's trade. The zone would enhance Polish-Ukrainian relations without harming bilateral commerce, according to Ambroziak and Kaliszuk.