A free trade agreement between Ukraine and the European Union: potential effects on agricultural markets and farmers' revenues

The negotiations on a deep and comprehensive free trade agreement (FTA) between Ukraine and the EU are currently in process. Such a FTA can be expected to imply opportunities as well as challenges for agricultural markets. This paper provides a model-based quantitative assessment of the potential impacts of a FTA on agricultural commodity markets in the EU and Ukraine. For the quantitative analysis the dynamic, partial equilibrium model AGLINK-COSIMO has been adapted and applied. The modules for the EU and Ukraine have been extracted from the global model and prepared to run together. Thus, the focus is on the bilateral trade positions and not on the effect on other countries. The simulation of a FTA between the EU and Ukraine was done through the elimination of import tariffs for main agricultural commodities. Results of the simulation indicate a positive change in producer revenue of 393 million € in Ukraine and of 860 million € in the EU. Thus, this FTA entails opportunities for the agricultural sectors of both trading partners. However, gains from a FTA are not distributed homogeneously and vary significantly among commodities.JRC.J.4-Agriculture and Life Sciences in the Econom