Impact of a Free Trade Agreement between Ukraiand the European Union on Ukraine's Agricultural Sector

Some key Ukrainian agricultural production (i.e., wheat, barley, maize, sunflower seeds, and sunflower oil) could potentially benefit from a preferential trade agreement with the European Union. In the first part, we assess the economic burden of the current agricultural protection regime of the EU on Ukraine for selected agricultural products. We find that the costs to Ukraine of the existing highly-volatile EU protection regime for cereals are substantial. In all, a well-engineered preferential trade agreement with the EU could significantly expand Ukraine’s key agricultural sector output and exports with a total (net) welfare gains exceeding US$200 million a year or 0.4 percent of Ukraine’s GDP. The bulk of these gains would originate from the liberalization of the EU’s cereal imports. These gains would shrink to less than US$50 million if the EU were able to negotiate exclusion of some key agricultural commodities. Yet, gains in the agricultural sector would only be one of the positive effects expected from a deep and comprehensive preferential trade agreement with the EU.