Inception Report of the SIA on the EU Ukraine FTA · the EU and Ukraine Ref: TRADE06/D01 Final...

Trade Sustainability Impact

Assessment of the Free Trade

Area in the framework of the

Enhanced Agreement between

the EU and Ukraine

Ref: TRADE06/D01

Final Inception Report

Client: European Commission, Directorate-General for Trade

Submitted by

Rotterdam, 5 April 2007

Personal data in this document have been redacted according to the General Data Protection Regulation 2016/679 and the European Commission Internal Data Protection Regulation 2018/1725

SKH/AC15564/increp 3

ECORYS Nederland BV

P.O. Box 4175

3006 AD Rotterdam

Watermanweg 44

3067 GG Rotterdam

The Netherlands

T +31 10 453 86 76

F +31 10 453 07 68

E [email protected]

W www.ecorys.com

Registration no. 24316726


Content page

1 Introduction 6

1.1 Development of Trade Sustainability Impact Assessment tool 6

1.2 Summary negotiations of Ukraine and effects for the EU 7

1.3 Structure of this Inception Report 9

2 Methodology 11

2.1 Causal Chain Analysis (CCA) 11

2.2 Scenario analysis and CGE modelling 12

2.3 Sector and horizontal issue case study methodology 14

2.4 Consultation and dissemination strategy 17

3 Including CGE Modelling into the TSIA 18

3.1 Context for the baseline scenario and expected scenarios 18

3.2 The Computable General Equilibrium Model 19

3.3 CGE Rutherford-Tarr Multi-country model 19

3.3.1 The Model 19

3.3.2 Use and gathering of data 20

3.4 Service Oriented Enterprise model for Ukraine 21

3.4.1 The Model 21

3.4.2 Use and gathering of data 22

3.5 Summary 22

4 Update on EU-Ukraine trade studies and agreements 25

4.1 The Partnership and Cooperation Agreement (PCA) between the EU and

Ukraine 25

4.2 The Action Plan for Ukraine from the European Neighbourhood Policy

(ENP) 26

4.3 The prospect of deep free trade between the EU and Ukraine (CEPS, 2006) 26

4.4 Prospect for EU-Ukraine Economic Relations (CASE Ukraine, 2006) 27

5 Consultation & dissemination strategy 28

5.1 The network of key stakeholders 28

5.2 The tools, methods and strategy for the consultation process and

dissemination of knowledge 33

5.3 A consultation & dissemination time-plan 35

6 Timeline and way forward 36

6.1 Present a clear and transparent time schedule for the duration of the TSIA

study Error! Bookmark not defined.


6.2 Reporting requirements 38

6.3 Changes in the proposal compared to the tender application 38

6.3.1 Methodological changes 39

6.3.2 Human Resources Management 39

Appendix A CV 40

Appendix B References 41

Trade Sustainability Impact Assessment of the EA EU-Ukraine 6

1 Introduction

This Inception Report is the summary of our intended approach towards achieving the

goals presented in the Tender application and requested in the Terms of Reference. It

clearly states – for each stage of the study – what are the intended actions and what tools

we are going to use. We will make use of all relevant documents to achieve these goals

and where the documents diverge, we make clear in this Report, what our inclination and

interpretation is.

1.1 Development of Trade Sustainability Impact Assessment tool

Since 1999, the EU has used the Trade Sustainability Impact Assessment (TSIA) tool to

flank its trade negotiations with other countries and to use it as a methodological

framework to look into the economic, social and environmental impacts of the

(anticipated) trade negotiation outcomes.1 Over time, the tool has been adapted and

improved and grown to become an indispensable part of the approach of the EU to trade

negotiations and sustainability.2 The combination of academic and empirical research

combined with a strong consultation component in support of and in continuous exchange

with the trade negotiations is a powerful asset.

The TSIA framework has two core elements of analysis:

• Trade sustainability impact assessment (TSIA) – This part gives an integrated

assessment of potential economic, social and environmental impacts of trade

negotiation outcomes;

• Consultation process – This part entails the communication with key stakeholders

and dissemination of results of (parts of) the TSIA and is crucial for the support,

transparency, credibility and legitimacy of the study.

In line with the indications by the European Commission, we will treat each of these two

core elements as equally important. These two core elements will come forward in the

following four reports that will be produced, discussed and disseminated during the flow

of the study:

• Inception report (this document);

• General analysis report (to conclude Phase 1);

• Interim report including the Workshop report (to conclude Phase 2);

• Final report (to conclude Phase 3).

1 Kirkpatrick, C. and N. Lee (1999).

2 EC (2006).


Ukraine and the European Union

Over the past 18 years, the Ukraine has been growing closer and closer to the European

Union, which is reflected not only by observed international trade flows, but also by

deepening levels of cooperation. The Partnership- and Cooperation Agreement (PCA)

signed in 1998 and further cooperation agreed on 21st of February 2005 are good

examples of this.

Notably after the ‘Orange Revolution’, the following core points were reflecting the

closer cooperation between the EU and Ukraine:

(1) Early consultations on an Enhanced Agreement (EA) between EU and Ukraine were

initiated and would be taken forward as soon as the political priorities of the ENP

Action Plan had been addressed;

(2) Possibilities for closer co-operation in the area of foreign and security policy were

explored, including European Security Defence policy, particularly with regard to

Transdnistria. Ukraine would also be invited, on a case by case basis, to align itself

with EU positions on regional and international issues;

(3) Trade and economic relations between the EU and Ukraine were to become deeper.

The review of the existing feasibility study on establishing a Free Trade Area

between Ukraine and EU would be accelerated with a view to enable an early start to

negotiations once Ukraine has joined the WTO. This issue is of the utmost

importance for this TSIA;

(4) Further support to Ukraine’s WTO accession was given and Ukraine was offered

continued assistance in meeting the necessary requirements. The EU was one of the

first partners to conclude its bilateral protocol with Ukraine in March 2003;

(5) Support for Ukraine’s legislative approximation process was stepped up, including

the use of instruments borrowed from the Enlargement process such as TAIEX and

Twinning;

(6) Efforts in the fields of democracy and rule of law should be an immediate imperative

and further targeted assistance including support for strengthening of civil society is

envisaged;

(7) Access to funding from the European Investment Bank (EIB) was maximised,

making up to €250 million of EIB lending available to Ukraine, and provide

increased financial assistance to Ukraine through the relevant instruments in order to

help Ukraine to pursue its reform process.

As mentioned in the Terms of Reference, already in 1998, a Partnership and Cooperation

Agreement (PCA) was concluded between the EU and Ukraine that will be automatically

renewed if not requested otherwise. This partnership covers the traditional areas of

cooperation like trade in goods and services, business opportunities, investment, sector

policies (e.g. energy), etc. In 2005, also the EU and Ukraine agreed on an Action Plan

under the European Neighbourhood Policy (ENP) to further strengthen bilateral relations.

In 2005 it was decided in the EU’s General Affairs and External Relations Council

(GAERC) ‘to initiate early consultations on an enhanced agreement between EU and

Ukraine, to replace the PCA at the end of its initial 10-year period, as soon as the political

priorities of the ENP Action Plan have been addressed’.

A deep and comprehensive Free Trade Area (FTA) is to be negotiated including

substantive regulatory components to further enhance the EU-Ukrainian economic and


political relationship. This FTA is going to be negotiated based on the assumption that

Ukraine will become a member of the WTO roughly around the Summer of 2007. This

aspect, also, is important for this TSIA of the effects of the FTA, because WTO-

membership will serve as the baseline scenario for this study. The effects for the EU

member states are important issues to be included in this analysis. As examples we think

of SPS issues and agriculture.

Building on WTO membership, as is outlined in Chapter 4, Ukraine is going to negotiate

an FTA in the context of an Enhanced Agreement with the EU that will go beyond the

WTO commitments of Ukraine, aiming at a deeper level of cooperation. The FTA

negotiations will not only focus on the remaining tariffs but also on regulatory

approximation, non-tariff barriers and technical standards. For a summary of the

European Neighbourhood Policy (ENP) and the Enhanced Agreement, we refer to

Chapter 4.

1.3 Structure of this Inception Report

In this Inception Report, ECORYS and CASE Ukraine indicate the approach taken

towards this study. In this respect the kick-off meeting is highly appreciated by ECORYS

and CASE Ukraine because it has yielded invaluable additions of interpretation and

relative importance. We got useful information and appreciated the fact several DGs were

present. The comments from the kick-off meeting have been inserted throughout this

Inception Report.

According to Chart 1 of the ‘Handbook’ (p. 12), the Inception phase can be split into two

components to analyse the impact of the FTA for the EU and Ukraine (culminating in the

two reports required by the Terms of Reference, p. 16): the Inception Report and the

Global Analysis Report (to conclude Phase 1).

In line with the Terms of Reference, this Inception Report serves as the starting point for

the subsequent Phases 1, 2 and 3, and will provide the European Commission with the

following:

• An overview of our methodological approach to the study, including the various

phases (Chapter 2);

• Including the Equilibrium Modelling in the TSIA (Chapter 3);

• An update on EU-Ukraine studies, including the CEPS Feasibility Study (2006)3

(Chapter 4);

• A description of the consultation and dissemination strategy (Chapter 5);

• The summary of the way forward including a timeline for the study (Chapter 6).

For the Global Analysis Report (Part 1), we will then use this input to start the screening

and scoping (using Causal Chain Analysis), to preliminary identify priority issues and to

continue our stakeholder analysis (that starts already with this Inception Report). This

split between the Inception Report and the Global Analysis Report (both in Phase 1) is a

3 CEPS (2006)


deviation from previous TSIAs but in line with the ToR and our budgetary man-hour

proposal.


2 Methodology

Regarding the overall methodology, a few core components can be identified and need to

be worked out further and in more detail in comparison to the tender documents. These

core methodological components are:

• Causal Chain Analysis (CCA) (worked out in section 2.1);

• Scenario analysis and CGE modelling (worked out in section 2.2);

• Sector case study methodology (worked out in section 2.3);

• Consultation and dissemination strategy (worked out in Chapter 5).

2.1 Causal Chain Analysis (CCA)

CCA is a conceptual tool used to identify the relevant cause-effect links between the trade

measures proposed and the economic, social and environmental impact this trade measure

may have. What is imperative for a realistic impact assessment is that the CCA is applied

to significant links between trade negotiations and their impacts. In the first phase, Phase

1, of the TSIA CCA is used to provide insights into the Global Analysis, as a tool to

provide preliminary screening and scoping as well as indicating possible priority issues.

CCA is also going to be used in Phase 2 of the TSIA, but that will be explained below in

paragraph 2.3.

Figure 2.1 shows – in a slightly adapted way compared to Chart 3 of the ‘Handbook’ (p.

35) how we view the way Causal Chain Analysis should be applied within the TSIA

framework for the Global Analysis part of the study.

Exogenous and endogenous factors influence a baseline (pre-defined) scenario. The

exogenous factors are present but determined elsewhere, while the endogenous factors are

the possible change variables because of the FTA negotiations within the Enhanced

Agreement between the EU and Ukraine.

The change in baseline scenario to initial economic impact as a consequence of the FTA

negotiations depends on the strength of specific effects (like for example the size of

sectors, levels of international trade, market structures or regulatory environment).

Subsequently, the initial economic impact affects the production structure which in turn

affects the economic, social and environmental impacts. This means there is an indirect

effect of the initial economic impact on the specific fields. On top of that there is also a

direct influence of economic impact. Finally, the economic, social and environmental

impacts of the FTA negotiations between the EU and Ukraine determine sustainable

development.


Scenarios define the scope of the evaluation and reflect the extremes of a likely range of

realistic outcomes of the trade negotiations between the EU and Ukraine.

Modelling

In order to quantify the impacts on sustainable development of a possible FTA outcome,

various modelling techniques are available. For the general overview, Computable

General Equilibrium models (CGE-models) are used. This class of models can provide

insights into the effects of trade and investment liberalisation on trade flows, trade

balances and economic welfare. For sector or regional analyses other tools like input-

output models and gravity models are available. Some of the major issues that need to be

solved are those of NTBs, capital accumulation and last but certainly not least: imperfect

competition and market structure. The place of CGE modelling in the quantitative

framework is shown in Figure 2.2.

The advantages of modelling include the possibility of a quantitative assessment of any

type of impact and the fact these quantitative results rely on clear hypotheses and

assumptions. For the first phase of this project, modelling techniques can help to provide

useful insights.

The disadvantages of modelling results is that even the general equilibrium models

(CGEs) provide only a partial analysis because of lack of data and the fact the models are

inherently static. Berden and Van Marrewijk in the Journal of Development Economics

(forthcoming, 2007)4 have looked at the dynamic welfare effects of trade restrictions,

which is a good addition to these models because it gives indications as to what the long

term FTA effects are. Modelling, moreover, ignores a large part of the trade agenda like

trade in services, trade rules, market access, legal issues like intellectual property rights

and trade rules and investment.

2.3 Sector and horizontal issue case study methodology

The purpose of this inception report is to provide the European Commission with an

overview of the consultant’s approach to the sector studies coming up in Phases 1, 2 and

3. Regarding the sector case study methodology, we follow the methodology previously

mentioned in this inception report – Lee and Kirkpatrick (1999 and 2002).

Once Phase 1 is completed, leading to the focus on specific sectors and horizontal issues

(at least 5 sectors and three horizontal issues, as specified), the Terms of Reference

require the following answers from Phases 2 and 3, the detailed sector/issue analysis

phase and the final overview and recommendations phase:

- A detailed assessment of the economic, environmental and social impacts of

possible results according to the two scenario outcomes relevant for the specific

sectors and horizontal issues through CCA;

4 Berden, K.G. and C. van Marrewijk (2007, forthcoming), ‘On the static and dynamic costs of trade restrictions’, forthcoming

in the Journal of Development Economics (2007).


• An assessment of the expected significance of these impacts for the sector under

investigation, using quantitative and qualitative techniques;

• Identification of the social groups and geographical areas most likely to be affected

positively or negatively by the negotiation outcomes (as assumed in the two

scenarios);

• Organise a Workshop in Ukraine to interact extensively with key stakeholders in the

process, in particular Ukrainian business, administration and civil society in order to

create transparency and inputs for the detailed sector studies and study outcomes;

• A proposal for effective flanking measures that either mitigate or enhance the

(expected) effects at sector level of the negotiation outcomes – this is presented in a

stylised way in general in Figure 2.1;

• Continuously contribute to the debate and dialogue of the TSIA methodology in

general and the TSIA on the FTA between EU and Ukraine in particular and involve

all into the sector studies.

Lee and Kirkpatrick (1999 and 2002) as well as the EC Handbook on TSIA (2006) and

the Terms of Reference specify the steps that ECORYS and CASE Ukraine will follow:

1. Inception Report (this report);

2. General screening and scoping – Global Analysis Report (concluding Phase 1);

3. Detailed assessment – Interim Report (including a workshop report) (Phase 2);

4. Results – Interim Report / Final Report (Phases 2 and 3).

Ad 1. Inception report

This inception report indicates the approach taken towards the analysis of the sectors and

builds upon the application by being more concrete on the methodological issues and

chosen approach.

Ad 2. General screening and scoping – Global Analysis Report

During Phase 1, in the general screening and scoping, we use basic indicators to identify

the current situation of the Ukrainian and EU economies, their interlinkages in goods,

services and capital flows and the size of various sectors. Also we will look broadly at the

issues indicated in the Terms of Reference that are likely to be included in the FTA

negotiations, which are: Trade (in goods and services), Technical barriers to Trade and

SPS, Capital movement & payments, Competition, Intellectual Property Rights, Trade

facilitation, customs and Rules of Origin, Trade and sustainable development and Energy.

It is these issues, the strength of the links at sectoral levels between the EU and Ukraine

and the estimated impact sizes that matter a great deal for the selection of the sectors and

horizontal issues for the detailed assessment in Phase 2 (see Ad. 3 below). Right now we

are looking at more than five sectors and three horizontal issues in order to be able to

drop some during this Phase:

• Sectors: Agriculture, Mining/Extraction, Food, Textiles, Metallurgy, Energy,

Telecom, Chemicals, Machinery and equipment, Distribution services, Transport and

Construction;

• Horizontal issues: Investment conditions, Government procurement, Competition

Policy, FDI, Trade & trade in services, SPS, Technical standards and Intellectual

Property Rights.


As suggested during the kick-off meeting, we will approach civil society and key

stakeholders for suggestions regarding sectors and horizontal issues.

The selection of the five sectors and three horizontal issues takes place, making use of the

following screened and scoped outcomes of Phase 1:

a. The (macroeconomic) importance of a sector/horizontal issue for Ukrainian – EU

relations (e.g. through share of GDP, employment);

b. The size of the expected impact of the FTA within the context of the EA between

the EU and Ukraine;

c. The expected economic, social and/or environmental impact of the sector for the

EU and Ukraine;

d. The comments and feedback from the consultations with key stakeholders and

civil society;

On this basis we will propose to the Steering Committee the five sectors and three

horizontal issues we can research in more detail. The sectors and horizontal issues, not

passing for more detailed analysis in Phase 2, we leave in the general analysis in Phase 1

of the report with a clear indication, why they have not been selected for more detailed

analysis.

Ad 3. Detailed assessment – Interim Report (including Workshop Report)

As mentioned in the application, we take a fourfold approach to the detailed assessment –

bearing in mind the requirements specified in the Terms of Reference:

1. A review of existing sector studies and identification of sector trends (building on

the outcomes of Phase 1);

2. A summary of the scenario outcomes for the sectors (building on the modelling

outcomes of Phase 1);

3. Structured interviews with operators and representatives from industry and

services – this also takes place via the Workshop that will be organised during

this Phase;

4. Analysis of relevant Ukrainian legislation and regulatory environment.

These points will keep in mind the scenario outcomes and add the qualitative assessment

to the preliminary quantitative analysis. Also this phase focuses much more on the sectors

and horizontal issues chosen than on the global analysis in general. It is likely this is

where we build upon the CEPS (2006) report in order to update the outcomes and add

analytical insights relevant for policy-making.5

The non-trade issues, like several horizontal issues, will be analysed using the available

empirical data and a qualitative investigation of the impact they will have on the

deepened economic relations between the EU and Ukraine and the economic, social and

environmental impact aspects like SPS, government procurement and technical standards

have.

5 CEPS (2006).


Ad 4. Results – Interim Report / Final Report

Finally, the scenario analyses, detailed assessments and consultation moments (including

the workshop and the non-trade parts of the Enhanced Agreement) culminate in the final

report and policy recommendations that accompany the study outcomes. These outcomes

may lead to further enhancing measures or to mitigating measures in case unwarranted

effects are expected to follow. It is the non-trade parts of the EA between the EU and

Ukraine that may serve as a basis for recommendation and follow-up for policy advice.

2.4 Consultation and dissemination strategy

This section is presented in detail in Chapter 5.


3 Including CGE Modelling into the TSIA

We are aware of the conditions within which this scenario analysis has to be conducted,

and have discussed so during the kick-off meeting at the premises of DG Trade on the 7th

of February 2007 as well. Because for the CGE modelling to be successful and to add

quantitative value to the TSIA study, the following aspects need to be discussed:

1. The context of the baseline scenario needs to be clear and expected scenarios

need to be defined as realistically as possible;

2. The CGE model that we envisage using, must be able to model and reflect some

of the main issues required for this TSIA study;

3. The data used need to be as recent and useful as is possible given the large CGE-

claim on data and resources;

4. The CGE model needs to provide general outcomes on which the detailed

assessment can build and elaborate further

3.1 Context for the baseline scenario and expected scenarios

In order for the CGE modelling to be effective and useful, the correct starting point, i.e.

the initial situation needs to be defined. At present the following issues apply to the EU-

Ukrainian and World-Ukrainian situation that are of importance for this analysis:

• The Enhanced Agreement between the EU and Ukraine aims at a Free Trade

Agreement (FTA) that goes beyond the WTO rules and regulations. From the kick-

off meeting we learnt that the envisaged starting point of the negotiations lies ‘pre-

summer’;

• The EC has indicated – also specified in the Terms of Reference – that likely topics to

discuss are investment, trade in goods (industrial goods, agricultural products,

processed agricultural products and fishery products), trade in services (financial

services, transport and telecommunications), capital movement and payments,

government procurement, competition, intellectual property rights, customs and rules

of origin, trade facilitation, technical barriers to trade and SPS, trade and sustainable

development and energy;

• There is a strong focus on regulatory approximation in addition to removal of

‘regular’ trade barriers – the latter of which is already being implemented in the bid

of Ukraine to join the WTO that is envisaged to be concluded soon;

• The scenarios should reflect a range of possible outcomes with ‘most ambitious’ and

‘least ambitious’-case scenarios.

The scenarios define the scope of the evaluation and reflect the extremes of a likely range

of realistic outcomes of the trade negotiations between the EU and Ukraine. As discussed


during the kick-off meeting, the starting point, t0, is the situation where Ukraine has

already joined the WTO. This is important information but on top of that, it is imperative

for defining the most likely starting position as well as scenarios for analysis that there is

good sharing of information between ECORYS and CASE Ukraine on the one hand and

the European Commission and DG Trade on the other. This is why – again – we ask the

European Commission to share with us the latest working documents regarding Ukraine’s

WTO accession and state of affairs with the EU as specified in the latest updates on the

European Neighbourhood Policy Action Plans. Naturally, these documents will be treated

with utmost confidence by the Consultant.

3.2 The Computable General Equilibrium Model

CGE modelling is an important aspect of the TSIA since it delivers quantitative results in

a general form that helps to define the necessary detailed assessments at a later stage of

the study. With respect to the model to choose, we have analysed two alternative CGE

approaches in cooperation with the Steering Committee that each have their positive sides

and drawbacks.

Already shortly presented at the kick-off meeting, we present below the two options. We

have finally chosen the first option, based on what information and type of analysis the

Consultant and Steering Committee envisaged and based on a discussion on the strengths

and drawbacks of both models.

3.3 CGE Rutherford-Tarr Multi-country model

3.3.1 The Model

The methodology Harrison, Rutherford and Tarr (HRT, 1996)) employ is a computable

general equilibrium multi-country model that uses several price-wedge distortions such as

factor taxes in production, taxes on intermediate inputs, subsidies in production, value-

added taxes, import tariffs and export subsidies. Production involves the combination of

intermediate inputs and primary factors (capital, skilled and unskilled labour, energy

products). We assume a Constant Elasticity of Substitution (CES) function over primary

factors and a Leontief production function combining intermediate inputs with factors of

production composite. Primary factors are mobile across sectors within a region, but

immobile internationally. Each region has a government and a single representative

consumer.

Demand for final goods arises from a Cobb-Douglas utility function. Within each region,

final and intermediate demands are composed of the same Armington aggregate of

domestic and imported varieties. The composite supply is a nested CES function, where

consumers first allocate their expenditures among domestic and imported varieties and

then choose among imported varieties. In the imperfect competition case firm varieties

enter at the bottom of the CES function. This approach allows for the differentiation in

preferences for home and imported goods.


There is strong empirical evidence for modelling selected sectors as imperfectly

competitive (e.g. Pratten, 1988).6 Increasing returns to scale (IRS) in production will

therefore be incorporated in selected manufacturing industries. Goods subject to constant

returns to scale (CRS) such as agriculture, forestry or public services are differentiated by

the country of origin. Products can either be sold at the domestic market or exported

depending on relative prices and constant elasticity of transformation production function.

In sectors subject to IRS, goods are differentiated at the level of firms. Firms set prices at

the level where marginal cost is equal to marginal revenue. There is free entry, which

drives profits to zero. We will make an assumption of large group monopolistic

competition with constant mark-up over marginal costs.

The study can also analyse elimination of non-tariff barriers (NTBs) and a reduction in

border costs. The starting point will be the methodology applied by Harrison, Rutherford

and Tarr - HRT (1996) in their analysis of the likely impact of the creation of the Single

Market is used. We will single out two types of NTBs i.e. standard and border costs.

The standard costs arise due to differences in regulations and technical standards between

Ukrainian and EU markets. Exporters need to manufacture or package goods in forms

which differ from those required for their domestic markets. The costs of meeting

multiple standards therefore increase the cost of production for exports. The removal of

these costs is assumed to make goods cheaper per se, and also to reduce margins as

consumers become better able to substitute among Ukrainian and EU suppliers.

One of the most observable barriers to trade is due to the existence of borders and

customs formalities, which involve delays and various kinds of administrative costs.

Reform of the customs rules and services envisaged under the FTA will lead to a

reduction of border costs and delays. This will reduce the cost of exports and imports to

and from the EU and should therefore lead to further efficiency gains. These are the sorts

of effects that we will be able to evaluate using the CGE model discussed above. We will

explore different assumptions as to the level of standard costs..

In addition the model will include two scenarios for each policy scenario. We will look at

the short run implications with capital stock fixed and long run (or steady state)

implications allowing for the growth of capital stock. This will allow us to formulate

policy recommendations for different time horizons.

3.3.2 Use and gathering of data

The model is going to cover several regions such as Ukraine, Russia, EU and the rest of

the world. We are going to employ a 2004 social accounting matrix for Ukraine complied

by CASE-UA. It covers 46 sectors (agriculture, 16 manufacturing sectors, 19 service

sectors and disaggregated food products). The data for Russia and the EU are like the

structure from GTAP 6.0 but are updated to 2004.

6 Pratten (1998).


Our estimates of border and standard costs will be based on a recent survey conducted by

CASE Ukraine and they will be sector-specific. In December last year 510 companies

responded to a comprehensive survey covering rules of origin, standards, customs

procedures etc. (CASE Reports 68/2006). The costs of compliance with EU standards

were estimated to constitute between 13 to 16% of investment. These costs will be

reduced if companies can produce goods for domestic and export markets to the same

standards and if the access to and prices changed by the conformity assessment centres

improves. The cost of customs clearance was estimated to be around 6-10% of export

value. Also a reform of the customs should decrease the costs related to customs

clearance. The impact of those changes will be estimated for different variants of the cost

reduction.

Our simulations will allow us to study the impact of the WTO as a benchmark and then

the impact of an FTA on international trade, production, welfare, employment, wages,

return to capital and capital stock.

3.4 Service Oriented Enterprise model for Ukraine

3.4.1 The Model

The alternative is the SOE one-country CGE model based on Jensen, Rutherford and Tarr

(2004) where they look at the impact of liberalising barriers to trade and FDI. It was

applied to investigate the impact of liberalising barriers to foreign direct investment in

services: the case of Russian Accession to the WTO and has been used to assess the

impacts of WTO accession for ht Ukrainian government.

The model is a CGE model that encompasses the improved market access, tariff reduction

and reduction of barriers against multinational service providers. They assume that

foreign direct investment in business services is necessary for multinationals to compete

will with local service providers, but cross-border service provision is also present. The

model incorporates productivity effects in both goods and services markets endogenously,

through a Dixit-Stiglitz framework.

Primary factors include skilled and unskilled labour; mobile capital, sector-specific

capital in the energy sector reflecting the exhaustible resources, sector-specific capital in

imperfectly competitive sectors, primary inputs imported by multinational service

providers, reflecting specialised management expertise or technology of the firm.

One category of sectors is competitive goods and services sectors produced under

constant returns to scale like agriculture, forestry and construction. It also includes public

services like education and post office facilities as well as key mineral industries. Goods

produced subject to increasing returns to scale are differentiated at the firm level. For

simplicity it is assumed that the composition of the fixed and marginal cost is identical in

all firms producing under increasing returns to scale (both in goods and services). The

third category is service sectors that produce in Ukraine under increasing returns to scale

and imperfect competition such as telecommunications, financial services, business

services and transport services.


In this model, the capital stock is allowed to adjust to its steady-state equilibrium along

with all of the model features employed in the WTO reference case. That is, the model

allows for tariff and FDI liberalization with endogenous productivity effects as mentioned

above. This is a comparative steady-state model, which assumes the capital stock is in its

steady-state equilibrium in the benchmark dataset, but capital stock will adjust to a new

steady-state equilibrium based on a fixed rate of return demanded by investors. It is an

upper bound estimate of long-run gains in this framework of assumptions.

3.4.2 Use and gathering of data

The model uses bilateral trade with the CIS (excl. Russia), Russia, New EU members

with Free Trade status, New EU members with full tariffs, EU 15 with MFN status, New

EU members with MFN status, Other European Countries with MFN status, African

countries, American Countries, Asian Countries, Rest of the World.

The sectors that can be analysed are: agriculture, hunting, forestry, fishery, coals and

peat, hydrocarbons, non-energy materials, food-processing, textile and leather, wood

working, pulp and paper industry, publishing, coke products, petroleum refinement,

chemicals, rubber and plastic products, other non-metallic mineral products, metallurgy

and metal processing, machinery and equipment, other production, electric energy and

heat supply, gas supply, water supply, construction, trade, hotels and restaurants,

transport, pipeline transit of oil and gas, telecommunication, postal services, financial

intermediation, real estate transactions, renting, informatisation activities, research and

development, services to legal entities, public administration, education, health care and

social assistance, sewage, cleaning of streets and refuse disposal, social activities,

recreational, entertainment, cultural and sporting activities, other activities.

The model also includes different household types: urban households, urban poor

households, rural households, rural poor households as well as policy parameters like

barriers to FDI barriers in services, import tariffs and changes in world market prices

(market access).

For each sector this model yields output, employment, exports (also by region), imports

(also by region) and price.

The data used are those of 2002 and 2003.

3.5 Summary

In Paragraphs 3.3 and 3.4 the two models are worked out. Table 3.1 below summarises

the two approached with some positive effects and drawbacks. Based on this detailed

analysis we have finally opted for the Rutherford-Tarr multi-country CGE model based

on the information from the Steering Committee that the effects from the EU side are also

important and the fact that some of the initially indicated drawbacks of the RT multi-

country model have been solved, including data availability and environmental variables.


Though neither of the models is 100% adequate, with the major considerations that the

SOE model of Ukraine is a one-country model while the Rutherford-Tarr is a multi-

country model, that the SOE model is slightly more elaborate to assess also horizontal

issues and services/FDI effects, that the data of the R-T model are more recent for EU and

Ukraine (surveys CASE), that the R-T model more explicitly models social and

environmental variables and models two types of NTBs, and that the CGE WTO analysis

could yield the starting point outcomes in both models, we have decided to opt for the

multi-country R-T model. Having added some important features to the multi-country

model and updated recent data in line with requests from the Steering Committee, while

not basing our analysis on the one-country model so we can analyse the effects for the EU

endogenously instead of deriving them, we feel this – in the end – is the optimal choice

for this TSIA study. This is also based on our analysis of the fact that the FTA is not just

a tariff-reduction FTA but goes beyond tariffs alone.


4 Update on EU-Ukraine trade studies and

agreements

In order to be able to understand the situation Ukraine is in currently and to get a first

glance at the expected impacts of an FTA on the EU and Ukraine, we present summaries

of the following core documents that are available at present because they define the

context in which we operate during this study:

• The Partnership and Cooperation Agreement (PCA) between the EU and Ukraine;

• The Action Plan for Ukraine from the European Neighbourhood Policy (ENP);

• The CEPS (2006) study on an envisaged FTA between the EU and Ukraine;

• The Prospect for EU-Ukrainian Economic Relations by CASE-Ukraine.

Having studied these documents in-depth, they provide much needed information on

policy goals and the current economic situation to carry out the TSIA for the FTA

between the EU and Ukraine.

4.1 The Partnership and Cooperation Agreement (PCA) between the EU

and Ukraine

The Partnership and Cooperation Agreement between Ukraine and the EU (PCA) signed

on 16 June 1994 (entered into force on 1 March 1998) constitutes the legal base of the

EU-Ukraine relations and establishes cooperation on a wide range of political, trade,

economic and humanitarian issues that have to lead to progressive economic integration

and deepening of political cooperation. A Protocol to the PCA was signed by the EU and

Ukraine on 30 March 2004 to extend the application of the agreement in full to the 10

new EU Member States from 1 May 2004.

As regards economic relations, the PCA includes provisions on the most favoured nation

regime (the EU extends to Ukraine MFN Treatment), special regime for trade in steel and

textile products, freedom of establishment (the PCA facilitates the establishment of

production and services businesses in certain specified sectors in Ukraine and in the EU),

approximation of legislation (Ukraine has committed itself to approximate its legislation

with that of the Community) etc.

The Agreement has a vast potential in such domains as natural environmental protection,

transportation and telecommunications, space exploration. Creation of a free trade zone

between Ukraine and he EU is assuming growing topicality and may materialize after

Ukraine's accession to the World Trade Organisation. The PCA was initially concluded

for the period of 10 years and expires by the end of 2007. It will be prolonged, however,

if both parties do not request otherwise.


In January 2007 the EU Council has passed a decision on negotiation of a new enhanced

agreement with Ukraine replacing the PCA. However, the mandate for negotiations with

Ukraine doesn't include the issue of Ukraine's perspective in the EU. Through this

agreement, the European Union aims to build an increasingly close relationship with

Ukraine, aimed at gradual economic integration and deepening of co-operation.

4.2 The Action Plan for Ukraine from the European Neighbourhood

Policy (ENP)

In 2003, the EU proposed a new framework for its relations with neighbours, including

Ukraine, called the European Neighbourhood Policy. The main idea of the ENP is to

encourage stability, security and prosperity in the neighbouring states without extending

EU membership to them. The blueprint for the ENP was outlined in the Communication

on Wider Europe issued in March 2003 (EC, 2003), and then elaborated in the ENP

Strategy Paper, adopted in 2004. To make the ENP operational, the EU agreed with each

ENP country a plan of action that specifies priorities that should be realised in the short-

to-medium term (3 or 5 years).

The EU-Ukraine action plan was drafted in late 2004 and signed in February 2005. It is to

be implemented over three years. The Plan sets priorities in different policy areas and

elaborates on what should be done to achieve them. In the economic domain, these

include WTO accession, removal of non-tariff barriers in bilateral trade, improvement of

investment climate, tax reform and approximation of legislation. Underling the EU’s firm

support to Ukraine’s efforts for joining WTO, the Action Plan also foresees looking at the

feasibility of establishing an EU-Ukraine Free Trade Area following Ukraine’s accession

to the WTO.

Both Ukraine and the EU monitor the implementation of the Plan and exchange their

opinions. According to the Commission ENP progress report for Ukraine good progress

has been made since 2005, however, implementation of reform strategies has lagged

behind since the beginning of 2006, mostly due to long pre- and post-election periods of

political instability. Ukraine succeeded in various trade and trade-related areas, e.g. the

WTO accession process has advanced considerably with the last legislative steps and

accession is expected to take place in the coming months.7

4.3 The prospect of deep free trade between the EU and Ukraine (CEPS,

2006)

The report looks on the possible content, feasibility and economic implication of the

possible EU-Ukraine FTA, assuming the WTO accession of Ukraine. They confirm the

earlier results that a simple FTA will have only small impact on Ukraine’s economic

performance and even smaller to EU’s. Deeper forms of market integration (FTA+) on

the other hand could have substantial impacts especially if linked with governance reform

in Ukraine. From a future economic perspective it would be very important for Ukraine to

7 Commission Staff Working Document, Communication from the Commission to the Council and the European Parliament

on Strengthening the European Neighbourhood Policy, ENP Progress Report, Ukraine, 4th of December 2006.


open up, but this requires reforms in many sectors to establish a more favourable business

climate. For example corruption and FDI policies pose big challenges. Standard FTA

with only cuts of tariffs wouldn’t benefit Ukraine nearly at all, while combined with

reductions in capital costs in could lead to 4-5% welfare gain. The opening of the market

combined with improved quality in domestic economic governance could lead Ukraine to

sustainable and strong growth (of even double digits). From the labour perspective the

FTA would be feasible as the educational capacity is good, but the administrative

capacity is weak and needs improvements for the feasibility of the FTA. The competitive

capacity is still to be determined. Sensitive sectors, like agriculture, could be handled

with extended transition periods, but otherwise a standard FTA could be integrated in

rather short period of around 5 years. The priority for the approximation of external and

internal regulatory policies to EU standards (from both FTA and FTA+ point of view)

should conclude: customs services, industrial product standards, sanitary and

phytosanitary standard, competition policy, government procurement agreement with

EU, financial sector, transport sector, telecommunications sector, energy sector,

regulatory authorities, corporate governance, environmental standards, labour regulations,

movement of persons and human capital. The main requirement for FTA+ is de-

corrupted, transparent and consistent economic governance in Ukraine. Some benchmark

and checkpoints could be done to follow the improvement for the implementation of a

possible FTA+. At this moment the WTO accession requirements should be, of course, a

priority. Trade relations with Russia should be also considered and FTA’s between all

EU, Ukraine and Russia might be optimal.

4.4 Prospect for EU-Ukraine Economic Relations (CASE Ukraine, 2006)

The report summarises the recent policy reforms taken under the EU-Ukraine action plan

and what should be still done, for the enhancement of EU-Ukraine relations. In the area of

external liberalisation (trade and financial) the recent policy reform have made substantial

progress, but difficult structural reforms have been less successful (or not started at all)

and some reforms have even made the situation worse. According to the authors there’s a

need for improvement in following sectors: fiscal sustainability, independence of central

bank, removal of price controls, investment conditions, privatization of state-owned

companies (faster pace needed), law on state aid, public procurement practises and laws

for property rights. A short transition period for the possible EU-Ukraine FTA would be

optimal for both parties. Also an FTA+ would benefit both parties. It could consist of

standard FTA plus: customs service reform, reduction of non-tariff barriers, adoption of

agri-food standards, removal of restrictions on capital mobility, support for better

competition policy and support for good corporate governance in Ukraine. The further

integration of network industries (Energy, telocomm. & transport) could also bring big

gains for both areas. The extend of Ukraine’s integration to EU markets will be still

limited in the near future due to border cost and i.e. rules of origin costs. The other main

challenges beyond the liberalization of manufacturing goods are the moderation of capital

mobility in Ukraine and labour migration related issues in both Ukraine and EU.


5 Consultation & dissemination strategy

As indicated in the tender application, the credibility and legitimacy of the Trade

Sustainability Impact Assessment is very important and depends to a large extent on two

key aspects:

• A solid, objective and scientific quantitative and qualitative analysis of the expected

impact of the EA on sustainable development (including thorough sector and

horizontal issue analysis);

• A thorough process of consultation, including information exchange and feedback,

with key stakeholders to the EA negotiations, with the results on the process

becoming available at ‘the right times’ to support the EA negotiations.

The effectiveness and impact as well as the ability to avoid polarisation regarding the

FTA negotiations between the EU and Ukraine among stakeholders and the public,

depends on a solid and permanent dialogue, discussions and openness to critique and

suggestions from the key stakeholders.

To that aim, the following aspects need to be clear:

1. The network of key stakeholders;

2. The tools, methods and strategy for the consultation process;

3. The tools, methods and strategy for the dissemination of knowledge;

5.1 The network of key stakeholders

The target groups for the consultation process and dissemination of knowledge can be

split into three components:

• Key stakeholders affected by the negotiations between the EU and Ukraine;

• Key stakeholders who will be involved in the implementation of the negotiation

results;

• Stakeholders because they are interested in the EU-Ukrainian FTA negotiating

process and results.

That means, for this TSIA, the following interested (key) stakeholders will be targeted,

approached and invited to take part in the consultation process:

• The Ukrainian government;

• The European Union institutions: European Commission (mainly DG Trade but also

other DGs), European Parliament, Delegation of the European Commission to

Ukraine;

• Civil society including environmental and social NGOs in the EU and Ukraine;

• Interested institutions and persons from third countries (contacting in progress);


5.2 The tools, methods and strategy for the consultation process and

dissemination of knowledge

In order to achieve the consultation and dissemination goals that we have ambitiously set

and in order to meet the goals set during the kick-off meeting where the consultation and

dissemination component was to count for 50% of the total TSIA study, we have

developed various tools and methods in line with the Terms of Reference and the

expectations raised during the kick-off meeting in Brussels on the 7th of February 2007.

a. Website consultation

A generic and increasingly popular form of general interaction and information

dissemination is website consultation. We have built a website: www.trade-

sia.ecorys.com.

1. This website, together with the DG Trade website, will first of all contain all the

results of the project: its reports, minutes of public meetings and a Questions &

Answers section.

2. Secondly this website has a digital email-form enabled that is linked to trade-

[email protected] so that any stakeholder, representative or interested person can

communicate their ideas, suggestions, and critiques to us. At ECORYS there is a

junior consultant that will permanently monitor the incoming mails, requests and

comments and guarantees their answering, noting and/or inclusion in our reports.

3. Thirdly, the website has an online forum for real-life feed discussions that we

will organise in the coming months, most likely around one week after a major

interim-report has been published on the website. We will inform our

stakeholders of the posting of the document and at the same time of the time for

the online discussion on the report, which is open to anyone.

In addition to the plans, we will – in line with comments in the kick-off meeting – add a

Question & Answer page to our website.

b. Electronic documentation – digital resource centre

In the tender application we expressed the need for an electronic documentation centre.

The abovementioned website meets the criteria laid out by us, especially when combined

with the website of DG Trade. The documentation centre is continuously improved and

updated so it can serve as the one address to visit when an update on the EU-Ukrainian

FTA impact analyses are wanted.

c. Working meetings with the Commission

The working meetings with the Commission through the Steering Committee are

important to guarantee a good communication between the Client and ECORYS. They

will provide a platform for presenting results, getting questions and feedback as well as

getting new information on EA negotiation progress between EU and Ukrainian

negotiators. A good working relationship benefits the quality of the work as well as the

impact the TSIA study may have. We look forward to the next meeting, after a successful

kick-off meeting, and hope to get going a good mutual flow of useful information.


d. Public meetings in the EU

As planned in the Terms of Reference, public meetings will be held to aid the

dissemination of results of the TSIA study. ECORYS and CASE Ukraine experts and

managers will participate in public meetings in order to present results to other

stakeholders than just the EC. We will communicate these public meetings several weeks

before they take place to our network of key stakeholders.

e. Working meetings with Ukrainian government and stakeholders

In order to ensure a better impact on the decision shaping on the policy towards the EU

within the Ukrainian government and also to maximize the feedback from the Ukrainian

authorities, a series of working meetings with representatives of the Ukrainian

government and other stakeholders will be conducted. The first round of meetings will be

conducted upon the completion of the Global Analysis Report – to introduce the project

to major stakeholders and to get their feedback on the project methodology. For this, a

summary of the Global Analysis Report will be prepared in Ukrainian.

When the sectors and horizontal issues have been chosen, we will invite representatives

of the specific sectors and experts in the fields of the horizontal issues to small working

meetings to discuss relevant parts of the report. We will provide them with summaries of

the relevant sections in Ukrainian, as well as full text in English.

f. Workshop in Ukraine

A core element of the approval phase is organising a workshop in Ukraine for key

stakeholders to take part there. The non-exhaustive list of Ukrainian stakeholders is

presented in Table 5.1. When it is complete in our view, we will present it to DG Trade

for consultation. We are planning to have the workshop on Monday the 9th of July 2007 in

Kyiv. Currently CASE Ukraine is in charge of the organisation and related details.

Regarding the details of the preparation and contents of the workshop, we will keep DG

Trade informed. For now a reference to the tender application suffices. In order to show

the involvement and care of the European Commission, we also intend to invite a senior

policy maker from DG Trade as one of the keynote speakers on this day.

g. Meet and visit civil society in Ukraine

Besides the workshop, we aim to go deeper into getting feedback and comments on the

expected sustainability impact of the FTA negotiations. Therefore, while we are in

Ukraine, we will conduct structured interviews with key stakeholders (top

businesspeople, politicians and boards of NGOs) in the days before the workshop is

taking place, to get:

• A more detailed idea of the backgrounds of the key players and their motivations;

• Answers to questions that ECORYS still has and that are useful to include into the

TSIA study;

• The solid involvement and participation of the Ukrainian stakeholders at the

workshop;

• A good feel of the ‘buzz’ surrounding this TSIA study which allows us to take action

if needed.

Together with our Ukrainian partner, CASE Ukraine, we will prepare a schedule of

meetings (including structured interviews) in the days before the 22nd

of June.


h. Capacity building on Trade SIA knowledge

Next to information and consultation about the project outcomes, we also want to

contribute to capacity building on Trade SIA knowledge. Through the website this is

happening on a continuous basis. However, advised to do so during the kick-off meeting

on the 7th of February in Brussels, we are also contacting previous TSIA study executors

(e.g. Manchester University, Copenhagen University) to bundle forces and add our

support to the already existing networks.

i. Other issues

Next to the tools outlined above, we will not hesitate to use any other opportunity at our

disposal to further present our TSIA results to a larger audience when offered the

opportunity. An example could be that we want to present shortly the TSIA study interim

results at a conference organised by CASE in Ukraine on 23rd

and 24th of March 2007

where a broad audience of economists, EU representatives and representatives of civil

society will attend.

Finally, we will present the final report of the study in Kyiv, Ukraine, inviting the key

stakeholders and others interested.

5.3 A consultation & dissemination time-plan

With regards to the consultation and dissemination strategy, we feel a time-plan is very

much needed since it allows the key stakeholders to plan in advance and it allows

ECORYS and CASE Ukraine to mobilise the maximum response possibilities ahead. This

will lead to better communication with key stakeholders, expectations regarding outputs

that are aligned and it will avoid surprises that may disturb a good two-way

communication process. Table 6.1 shows this time-plan.

Not mentioned in the Table is the communication and invitation prior to the actions

mentioned below. We make sure that the key stakeholders are aware of the moments new

information becomes available and can prepare themselves – this is why we have put

seven days in between the publication of a report and the online consultation session.


6 Timeline and way forward

From the moment of this Inception Report onwards, we have set ourselves some solid

aims within the framework of this study and would like to propose some alterations that

we feel have become necessary subject to further insights we have gained since the tender

application was handed in and since the indication of priorities by the EC during the kick-

off meeting.

The following issues will be addressed in this Chapter:

• Presentation of a clear time schedule and list of activities;

• Reporting requirements;

• Changes in the proposal compared tot the tender application.

6.1 Present a clear and transparent time schedule for the duration of the

TSIA study

The TSIA study is required to take nine months from the moment of signing of the

contract (21st of December 2006) and may at most last three months longer. This means

that regularly the study has to be finished on 21st of September 2007 but extra time is

available if needed until 21st of December 2007. This was also indicated clearly during

the kick-off meeting by DG Trade. Having started little over one month later than

anticipated due to Christmas holidays and time needed to set the kick-off meeting, we aim

to conduct and conclude the study in eleven months. This leaves us with one month of

back-up time if needed for unforeseen reasons. For the overall time management of the

study, it is important to note that at several stages the research can move on in parallel

already into a next Phase without having to wait for the entire set of outcomes of the

previous stage persé. This will allow us to spend the necessary man-days and time for the

various Phases and at the same time keep the time schedule indicated.

Inception phase

This is the final draft of the Inception Phase. With submitting this Inception Report with

comments from the Steering Committee included, we can present the report on the

website very soon.

Phase 1: Global Analysis

Already now, as suggested to us during the kick-off meeting, we are working on Phase 1

(to make up for some lost time), the Global Analysis of the study, to identify the current

situation of the EU and Ukraine in economic terms and to look deeper into the broad

range of economic, social and environmental circumstances for the EU and Ukraine. This

will lead to a 2006-2007 economic snapshot of both economies, as well as the indication


6.3.1 Methodological changes

In line with comments from the Steering Committee, chaired by DG Trade, we will

implement the following methodological changes to our initial proposal:

Quantitative assessment (including CGE Modelling)

Several extra requirements have come forward during the kick-off meeting with respect

to the quantitative assessment of the TSIA study. Contrary to previous studies, the EU –

Ukraine negotiations focus less on tariff reductions and the like because the starting

scenario is where Ukraine is already a member of the WTO and has thus complied with

most of these reductions. This makes the ‘simple’ tariff reductions for which the standard

CGE modelling is used less indicative. So next to the tariff rate reductions, we also want

to look at – and have been suggested to do so during the kick-off meeting – other effects

of the FTA like FDI, non-tariff barriers, market access, a break-down of agriculture into

subparts (more than CEPS, 2006), WTO and FTA shocks shortly after each other and

rules of origin. This could also entail carrying out additional surveys for more needed

information. We understand and agree with the need for these requirements to add

valuable insights into the likely and realistic effects of the FTA, but this requires more

resources for this section than indicated in our original proposal.

Another tool that we are looking at right now, to address the questions posed by the

Terms of Reference and the Steering Committee, is the use of Partial Equilibrium

modelling to supplement the CGE outcomes for specific sectors. Though partial in nature,

a GSIM analysis or gravity model may shed valuable insights into the general outcomes

provided by the CGE model, beyond the major indicators. This is what could be needed

in order to answer the sector questions quantitatively in Phase 2 for a deep FTA.

Consultation and dissemination of results

We will place more emphasis on and pay more attention to the consultation phase, as you

can read from Chapter 5, in line with the comments gathered during the kick-off meeting.

As indicated then, we did not envisage a 50%-50% division of study and consultation.

This will be amended as presented in the previous Chapter.

6.3.2 Human Resources Management

On the 1st of January, has left ECORYS. Since he was involved in the

tender proposal, we found to replace and take over the

commitments and woman-days presented in the proposal. In Appendix A you will find

Curriculum Vitae.

Further changes have not occurred. In case any unforeseen personal changes still take

place, we will inform DG Trade immediately.


Appendix A CV


Appendix B References

Centre for European Policy Studies (Brussels), Institut fur Weltwirtschaft (Kiel) and

International Centre for Policy Studies (Kiev) (2006), ‘The prospect of deep free trade

between the European Union and Ukraine’ (2006).

Commission Staff Working Document, Communication from the Commission to the

Council and the European Parliament on Strengthening the European Neighbourhood

Policy, ENP Progress Report, Ukraine, 4th of December 2006.

European Commission (2006) ‘Handbook for Trade Impact Assessment’, DG Trade,

Brussels (2006).

Harrison, G., F.Rutherford, D.G.Tarr (1996), Increased Competition and Completion of

the Market in the European union, Journal of Economic Integration, 11(3), September

1996, 332-365.

Hoffmann, A.N. (2000), The Gains from Partial Completion of the Single Market,

Weltwirtschaftliches Archiv, 2000 No.4.

Kirkpatrick, C. and N. Lee (1999), ‘WTO New Round: Sustainability Impact Assessment

Study. Report to DG Trade under Framework Contract SIA of Proprosed WTO

Negotiations’ (1999).

Pratten, C. (1988), A Survey of the Economics of Scale. Research on the „Cost of Non-

Europe basic findings Vol. 2., Brussels: The EU Commission.

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