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Ukraine, EU sign historic trade pact

Ukraine’s new president signed a trade and economic pact with the European Union on Friday, pushing his troubled country closer into a European orbit and angering Russia, which warned of unspecified consequences.

A beaming Petro Poroshenko called it “maybe the most important day for my country” since independence from the Soviet Union in 1991.

Agreements signed on Friday let businesses in former Soviet republics Ukraine, Moldova and Georgia trade freely in any of the EU’s 28 member nations without tariffs or restrictions, as long as their goods and practices meet EU standards. Likewise, goods and services from the EU will be sold more easily and cheaply in the three countries.

The closer ties between Ukraine and the EU have been overshadowed by Russian opposition.

“There will undoubtedly be serious consequences for Ukraine and Moldova’s signing,” Deputy Foreign Minister Grigory Karasin said.

European Commission experts estimate implementation of the deal will boost Ukraine’s national income by €1.2 billion ($1.6 billion) a year. Ukraine won a 15-year transition period during which it can use tariffs to support its domestic auto industry from competition. Moldova will gradually eliminate protections for its dairy, pork, poultry and wine producers over 10 years, while the EU placed limits on imports of chicken from both countries.

Perhaps more important than the trade clauses is an accompanying 10-year plan for Ukraine to adopt EU product regulations. Such rules ease the way for international trade beyond Europe.

The deal also demands that Ukraine change the way it does business. Adopting EU rules on government contracts, competition policy and copyright for ideas and inventions should improve the economy by making it more investor-friendly and reducing corruption.

EU President Herman Van Rompuy said Moscow need not worry about the deal: “There is nothing in these agreements or in the European Union’s approach that might harm Russia in any way.”

Russian officials weren’t so sure. Putin’s spokesman, Dmitry Peskov, told Russian news agencies that the Kremlin would respond to the accord “as soon as negative consequences arise for the economy.” He noted those were possible only after the agreement is implemented.

Amanda Paul, a policy analyst at the Brussels-based think tank European Policy Center, said Russia has levers to inflict serious economic pain on Ukraine, Moldova and Georgia through trade restrictions, cuts in energy supplies or the deportation of migrant workers from those countries.