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Opinion
February 1, 2019 www.intellinews.com I Page 26
And the IMF programmes, while clearly necessary and good for the overall health of the economy,
on the whole do not bring immediate relief to the long suffering population. No one is going to set up a factory because the IMF forced a gas tariffs hike on the government.
Dropping the trade quotas on Ukraine would have a much more immediate affect. Able to sell more goods into a huge and lucrative market, where Ukrainian producers can compete on cost, busi- ness should flourish. As cash pours in, owners would invest into new modern facilities and hire more workers. Salaries would go up that would spur consumption and that would provide more earnings, more investment, more jobs and more growth. Indeed it is the virtuous circle that was working in Russia in the boom years of the nough- ties, fuelled by rising oil prices which the gov- ernment passed on to the public via 10% public sector wage hikes every year for nearly a decade. At base booming trade was responsible for that boom, which saw the Russian economy double in size in under a decade.
Politically this scenario could also work wonders for Ukraine. Firstly there would be a rush of Rus- sian businesses into Ukraine to gain access to the EU market through this newly opened backdoor. Commerce would be the salve for the red-raw relations as the Kremlin’s own powerful oligarchs start to lobby for better relations to protect their burgeoning business ties.
And pressure would come from below too. A Ukraine that became more prosperous than Rus- sia would turn the entire Russian population on the Kremlin. Long used to being the “big brother”
in the Russo-Ukrainian relationship, the Russian population would feel the same pangs of jealousy any big brother does if their younger siblings out- perform.
Of course nixing the quotas overnight is unwork- able. Following WWII Europe’s governments have all decided that producing enough food to feed the country is a national security issue, and that led to the Common Agricultural Policy. The farming and food industry lobby is one of the most powerful in Europe. Ukraine’s egg and poultry sector is large enough and produces at a low enough cost that
it could largely destroy the industry in Western Europe. Clearly if quotas are to be lifted it would have to be done in steps. It also means Europe would have to fundamentally change the make-up of its economy and downgrade agriculture. None of that is likely to happen any time soon.
But it should be possible as everyone benefits. Unlike the IMF programmes, it would be Europe’s citizens that bear the cost of Ukraine’s transfor- mation through the money they spend on buying Ukrainian imports (mostly agricultural products). And they should be happy to do so as prices would fall, which would also hold down inflation in the west – an economic boon the EU would receive in compensation for opening its market. It's the ba- sic economic concept of “comparative advantage” at work on a grand scale.
Relaxing the restrictions on Ukrainian exports to Europe would benefit everyone, except the Euro- pean agricultural lobby, and that makes it a very tough decision to make and implement. In the meantime the Ukrainians suffer and Russia has the upper hand.