In the run-up to the referendum on the association treaty with Ukraine I’ve changed my mind quite a few times, but in the end I decided to vote in favour of the treaty. In making this decision I think there were three questions that were most important to come to a conclusion.

Is the treaty good for Ukraine? Is this expanding our sphere of influence and should we be doing so? And last. Is the treaty good for Europe?

In the end I think the answers to all of these questions lead to a vote in favour of the treaty, although there are certainly points from both sides on each of these topics.

Is the treaty good for Ukraine?

I think Ukraine at the moment faces 3 big challenges. It has an trade deficit that is growing because the trade with Russia, historically Ukraine’s biggest trading partner, is dwindling. Ukraine has a government that’s very corrupt. Ukraine is internally divided.

Economics

Since the tensions with Russia have been rising the trade between the two countries has been dwindling. I don’t know what exactly the cause of this is but it is, it could be the fact that Russia has reinstated its tariffs on Ukrainian goods, it could be that Russians and Ukrainians are less willing to work together after the annexation of the Crimea and the civil war in the east of Ukraine. Whatever the reason trade between Russia and Ukraine is unlikely to restore to the level it was at before.

The association treaty could help prevent the Ukrainian economy from collapsing, due to dwindling trade with Russia. One of the obstacles in this is that the Ukrainian economy has been adapted to Russia, with Russian standards. However this could be fixed, I’m not sure how easy this will be, but both the treaty and the subsidies Europe already gives to Ukraine should help Ukraine adapt to the European market.

Also it should be easier for the average citizen of Ukraine to buy goods off the European market (something that was mentioned in the debate I posted about a while back), so they are less dependent on big businesses or oligarchs to bring those goods to them.

The No campaign claims the Ukrainian economy is too outdated to compete in the free European market. However, I think that’s why parts of the reductions in protectionism will only go into effect gradually, and why we offer Ukraine some subsidies. Furthermore I think that, as long as Ukraine keeps its own currency, a negative trade deficit will reduce the price of the Ukrainian Hryvnia (Ukraine’s currency), making it cheaper for us to import Ukrainian goods. This decrease of the Hryvnia will in theory continue until we reach an equilibrium where Ukraine’s imports are of equal value to Ukraine’s exports. The goods they import will, in theory, be goods where they have a relative disadvantage in their production, and the goods they export will, in theory, be goods where they have a relative advantage in the production. This will, again in theory, lead to more and or better goods for both Ukraine and the European market.

So in the end I think the association treaty is good for the Ukrainian economy. Sure the theory relies on Ukraine eventually reaching such a equilibrium, and political actions, or other global changes can put a wrench in that progress, but letting the Ukrainian economy collaps seems like an even worse outcome than not reaching the equilibrium of equal value trade that fast.

Corruption

This is not to say there isn’t a risk that, because of the power of the Ukrainian oligarchs, the economic gains would not reach the hands of the people. However, I think the treaty is likely to reduce political corruption and the power of the oligarchs in general.

First of all there is the remark I already made in the economic section. It will make people less dependent on the oligarchs/ big business for their access to the European market. This already increases the economic enfranchisement of the ordinary people.

Furthermore, in the treaty, Ukraine also voluntarily adopts many of the EUs policies. Among them policies that force it to explain their decision when outsourcing contracts, making it harder for the government to give a contract to a friend/oligarch in the business world. So the treaty itself helps against corruption too.

But beyond the treaty itself, it also gives the Ukrainian government an additional incentive to adopt anti-corruption laws (something they’ve already done) and gives the European council a new mechanism to use as a potential stick (blowing up the treaty) to get the Ukrainian government to adopt more anti-corruption legislation. So the treaty might aid in the battle against corruption, even beyond what is present inside the text itself.

The No campaign claims that the treaty will make it easier for oligarchs in Ukraine to stash their wealth in the Netherlands and use our too liberal laws on tax construction to hide that wealth from the Ukrainian people. However, that’s something that’s already being done and I am not aware of a mechanism in the treaty that would make it even easier. Also if we wanted to do something about this, which we probably should, it’d be better to make regulation against these shady tax constructions, not to bring it up in the context of a trade treaty.

In the end, on the question of corruption in Ukraine, I think the treaty helps more than it hinders. Sure the Ukrainian side might have put stuff in the treaty that helps the oligarchs more than the actual people, but I don’t think that happened since the treaty has been endorsed by several human rights groups, and Europe had a hand in shaping the treaty too.

Internal divisions

Beyond the economic and the political question there is the question on the internal divisions within Ukraine. I haven’t looked that much into this question, but since much of the divisions were caused by this treaty in the first place, prolonging the political process surrounding it with a no, doesn’t seem like a good idea to me.

The Ukrainian people

Beyond these topics, I think whether this treaty is good for Ukraine, is something that should be more up to the Ukrainian people than up to us. Because of the amount of corruption we’re not always sure if the positions of the government actually represent the people, but the Ukrainian people seem to be largely in favour of the agreement (45% in 2013 and 64% in march 2016 ).

Is this expanding the EUs sphere of influence and should we be doing so?

Part of this referendum is not just about the treaty itself but also about Geo-politics. Specifically about Russia’s relation with the EU, Russia’s relation with Ukraine, and the EUs sphere of influence.

I think that in terms of relationship damage, most of it has already been done. Like I said in the economics part of the previous question, Russia has already reinstated tariffs on Ukrainian goods and now there are more reasons for the relationship between Ukraine and Russia to stay bad than just the Association treaty with the EU.

About both the relations between Ukraine and Russia, and the relations between the EU and Russia, it is relevant to note that the treaty is already in part implemented and signed and that any damage in relations is unlikely to be restored by a Dutch no on the association treaty.

Furthermore Russia was included in trilateral talks on cooperation between the EU and Ukraine, these unfortunately failed (http://trade.ec.europa.eu/doclib/docs/2015/december/tradoc_154126.pdf and http://europa.eu/rapid/press-release_IP-15-6389_en.htm), but by providing these talks I think both Ukraine and the EU have been more than fair to Russia.

This leaves the question of Europe’s sphere of influence. The treaty itself will probably increase corporation between the EU and Ukraine on several areas, however it never excludes cooperation with other nations (discussed somewhere in this Dutch talk) and is not necessarily a barrier for cooperation between Ukraine and Russia.

The treaty, because it allows Ukraine free access to the European market could cause Russia to keep its current tariffs against Ukraine, even if other reasons for doing so disappear. This because the Russian government pursues a fairly protectionist trade policy and doesn’t want European goods to be able to come on the Russian market without tariffs, which they could if Russia has free trade with Ukraine and the EU has free trade with Ukraine.

However, like I already discussed earlier, there are currently more reasons for the Ukraine Russia relationship to stay bad, and to make corporation between Russia and Ukraine difficult.

Additionally a Dutch no on the trade treaty will, probably not straight out cancel the entire treaty, because some aspects of the treaty do not fall under the jurisdiction of the individual nation states, and the other members of the EU could still go through with the deal without the Netherlands. This will leave Ukraine inside the EU sphere of influence to almost the same degree.

In the end I think at the moment Ukraine is in Europe’s sphere of influence already, because of the popularity of pro-European parties in Ukraine. I also think that this is at least in part a good thing (because of the analyses I provided in my previous question, and analyses on human rights, Nuclear legislation and quite some other things left untouched in that question). Yes it comes in part at the cost of a potentially neutral Ukraine, but a neutral Ukraine is far from guaranteed in a No vote, the Ukrainians could remain very pro-Europe, they could also, out of desperation, switch back to a more pro-Russian nation, also very unlikely. But even in the “best” outcome, of a more neutral Ukraine, there is the problem of dwindling trade with Russia, which would without European trade to aid in the recovery, probably cause the Ukrainian economy to severely contract, leaving Ukraine to become a state that in my opinion would not be powerful enough to form the Neutral barrier between Russia and Europe that the No campaign would want it to be.

Is it good for Europe?

In part this question has already been answered in the sections about what is best for Ukraine (in the economic part), and what will happen to Europe’s sphere of influence. But a balance between different arguments still needs to be drawn.

On the economic section, I think free trade in the end helps everyone involved. In the short term, I’m not sure if Europe will get as much out of this as Ukraine, because we will provide aid to Ukraine, but this aid will happen with or without the treaty, so with the treaty we’re at least also getting something back.

On the question of Europe’s sphere of influence, we in the long term also have to ask if we want to keep expanding the EUs spheres of influence. But considering all the damage in expanding our free trade zone into Ukraine has already been done, and considering the treaty doesn’t put any actual barriers in place to prevent Ukraine from cooperating with Russia or any other nation, I think regardless whether you want to expand the EUs sphere of influence or not it’s probably better to have the association treaty with Ukraine.

I’m not sure if you’d want to read more about this. But in case you do underneath are some sources I’ve read (or in a few cases planned to read):

Some IR:

General Free trade source one of my friends thought was ok but I thought was way too one sided:

Another friend posted these sources as rebuttal but I haven’t really read them jet, but probably should, also probably not applicable to the Ukraine deal;

A source I came across when I was doing some research on Greece. How a single currency can screw up trade I really liked this article but you could have explained the same concept with 4 numbers and 2 lines of text too, not really relevant here, since Ukraine isn’t joining the Euro, but still something that can be interesting:

A talk by an “expert” at a discussion in delft about Ukraine (In Dutch)

Some German history I think is relevant within the context of the Geo-politics discussion

A blog post that tries to describe what is in the deal (In Dutch)

Some stuff about Russia:

These should be Russian sources in English (plus wiki about the source to create context) covering stuff that’s relevant but there might be some copy paste errors in some of the sources (both below and above)

Some unsorted sources