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International Finance
Economy

European Union Association Agreement

European Union Association agreements are international agreements that the European community / European Union has concluded with third world with the aim of setting up an all embracing frame work to conduct bilateral relations. 24th September 2013 Kremlin has warned Ukraine that if it goes ahead with a planned agreement on free trade with the EU, it would lead to the severing of trade ties...

European Union Association agreements are international agreements that the European community / European Union has concluded with third world with the aim of setting up an all embracing frame work to conduct bilateral relations.

24th September 2013

Kremlin has warned Ukraine that if it goes ahead with a planned agreement on free trade with the EU, it would lead to the severing of trade ties between the two countries and possibly the collapse of the state. Russian President Vladimir Putin said if Kiev does sign the pact in November it would face protectionist measures from his country which will damage the relationship between both the countries, Russia says signing the pact would flood its market with cheap EU goods entering Ukraine free of import duties and being re-exported across the long border with Russia. Russia, on the other hand has invited Ukraine to join the Russian led customs union to bolster ties between the two countries, Russia, is still Ukraine’s biggest single trading partner and the Russian President said joining Russia’s custom union, whose members include Kazakhstan and Belarus will give them bargaining powers with the EU for better trade conditions. But Ukraine has dismissed the suggestions of Russia saying the threat of illegal goods to Russia is hypothetical, its Prime Minister Mykola Azarov categorically put to rest all speculations on any risks to Russia, by saying that he would give personal assurances to Russia and its trade allies in the Moscow led customs union.

Sergei Glazyev a close aide of the Russian President hit back at Azarov saying that Russia might be obliged to impose import duties on any goods arriving from Ukrainian territory, which will be a huge financial constraint on the cash strapped country. But, Ukrainian President Viktor Yanukovych on Friday reiterated that Kiev was committed on signing the key agreements with the EU in Vilnius, Lithuania, making a paradigm shift away from its former  Soviet master Russia towards integration with Europe.

What is the Association agreement?

European Union Association agreements are international agreements that the European community/European Union has concluded with third world with the aim of setting up an all embracing frame work to conduct bilateral relations. These agreements provide for the progressive liberalisation of trade such as creation of Free Trade Area, Custom unions etc. The EU concludes Association agreements in exchange for commitments to political, economic, trade or human rights reforms in a country, conversely, the members nations may be offered tariff free access to some or all of EU markets along with financial or technical assistance, the Association agreements have to be ratified by all the EU member states. Some of the countries which have an EU Association Agreements include Albania, Algeria, Chile, Egypt, Iceland, Israel, Jordan, Lebanon, Norway, Morocco, Serbia, South Africa, Syria, Turkey and a few other countries.

Our View

The association agreements improve trade ties with EU and can improve their export competitiveness in the longer run, it will open up the market in the third nations by inducing more competition and lowering the price of the goods, however, the threat includes using the agreement to create political opposition and weaken a certain economy by forcing the third country to be a member of the association agreement. While the trade ties of the agreement definitely provide an impetus to improve relations between countries it also puts to risk its political relationships between non-EU members who enjoy significant political clout in a region, while signing of the free trade agreement and association agreement will open up a huge market to European goods it stands to disrupt its ties with other countries whose market will be taken over by cheaper goods manufactured in Europe.

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