But debate about it was the spark that lit the Maidan street
protests in 2013 and a pro-Russian insurgency that led to more than
9,000 deaths. The disruption sent exports to Russia into freefall
and depressed sales to the European Union.
Now many exporters are worried that the deal, in place provisionally
since January, does not offer enough to compensate for the collapse
in trade with Russia to just $4.83 billion last year from $15.06
billion in 2013.
"Our company does not feel any change," said Taras Barshchovsky, the
founder of T.B. Fruit, the parent company of Galicia-Trade, which
makes juices from apples, carrots, cherries and other fruits.
Under the deal tariffs were lifted on most products traded between
Ukraine and the EU. Quotas for textiles were lifted and will be
phased out over 5 years for mineral products, chemicals, plastics
In agriculture, by far the largest sector of the economy with a 12
percent contribution to gross domestic product, and also an area
where Ukraine can successfully compete with European producers, many
quotas were unchanged including for maize, alcohol and fruit juice.
Barshchovsky said the low quotas were a problem for his company and
showed the deal had limited benefits for Ukraine.
"In my opinion, they're pulling the wool over our eyes," he said.
The EU rejects any idea the deal is unfair and Ukraine's exports to
the EU rose 3.3 percent in January, the first month of the deal, to
1.02 billion euros compared to a year earlier, according to data
from EU's statistics agency Eurostat.
And Ukrainian attitudes towards the EU remain broadly positive. A
survey in November showed 58 percent of Ukrainians supported the EU
deal, versus 15 percent who wanted a customs deal with Russia.
There is, however, growing disillusion with how Ukraine has turned
out despite promises of the Western-backed leaders who came to power
after Maidan. Corruption is still endemic, the separatist war in
Ukraine's Russian-speaking east is raging, and a political crisis
has delayed talks for new overseas aid.
At the same time, Ukraine's chief backers, the United States, the EU
and the International Monetary Fund, are getting increasingly
frustrated with the slow pace of change, and the IMF has threatened
to end a multi-billion dollar aid package.
The Association Agreement itself may be under threat after Dutch
voters rejected it in a referendum on Wednesday, although Ukrainian
President Petro Poroshenko said the result won't push his country
from an EU path.
Under pressure from Russia, the Kremlin-backed former Ukrainian
President Viktor Yanukovich pulled out of signing the Association
Agreement in 2013, setting off a chain of events that culminated in
his ouster in February 2014.
Some see Wednesday's Dutch rejection of the deal, even if the result
is non-binding and was already signed by the Dutch prime minister
and all other European Union nations, as playing into Russia's
With Russia also imposing a trade embargo on Ukraine and blocking
the transit of Ukrainian products to Asia, Alex Lissitsa, Chief
Executive Officer of Ukraine's agricultural lobby UAC, estimates
Ukrainian farmers are losing about $1 billion a year in business
"At this stage Ukraine has received few benefits from the free trade
zone - it is simply a political and long-term deal," he said.
"Markets that were open have remained open, while those that were
closed, remain closed," he added.
Ukrainian potatoes were left to rot, he said, because the markets of
Russia, Crimea and the war-torn Donbass region had gone, and sales
to the EU can't make up the shortfall.
Sugar producers have a similar complaint. Ukraine produces 1.5-2
million tonnes of sugar a year. But its quota to sell to the EU is
just 20,000 tonnes, Ukrainian sugar union Ukrtsukor said, saying the
EU should raise this to at least 300,000.
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Ukraine's main poultry union says its businesses lost $60 million a
year from being shut out of the Russian market.
Russian restrictions on the transit of Ukrainian goods meant
Ukrainian businesses were forced to reroute trade through costly
routes such as Georgia and Azerbaijan, the union said.
"The main problem is that there is a very small quota for certain
types of produce, including poultry products," it wrote in an email.
Yuriy Kosyuk, who owns Ukraine's largest poultry company and an ally
of President Poroshenko, went as far as to say publicly that Ukraine
had been "duped".
However, the poultry union acknowledged that while the EU is a huge
opportunity for poultry producers Ukrainian companies need time to
bring their products up to EU standards.
For other sectors of the economy, the deal has also made little
"For metallurgists the agreement with the EU did not lead to any
changes in terms of quantity or quality of trade. We have traded
openly with the EU since Ukraine joined the WTO (World Trade
Organization) after tariffs were scrapped on metal product
supplies," said Roman Kurashev, marketing director for Metinvest,
Ukraine's largest steel maker and exporter.
Both the EU and Ukraine's government have played down the effect of
the quotas. Protesters didn't man the barricades at Maidan "just to
sell a jar of honey to Europe," Agriculture Minister Oleksiy
Pavlenko told Reuters in an interview.
"I wanted my children to live in a European country with European
values," he said. "Any process is long-term process and you cannot
get everything at once."
The EU's representative office in Kiev said in a statement the deal
gives Ukraine fast access to EU markets with quotas "limited to a
small number of agricultural products."
Ukrainian exporters aren't able to sell enough products in many
cases because their products don't meet the standards stipulated in
the agreement, it said.
"Rather than blaming the EU and asking for additional quotas, many
producers should rather lobby the Ukrainian government and urge it
to focus on the implementation of the sanitary and phytosanitary
chapter of the (agreement)," the statement said.
Ukraine and Brussels have a huge stake in showing they can make
their relationship work and that Kiev's pain of losing its alliance
with Russia will be worth it in the long run.
Mired in internal feuding and struggling to put Ukraine's war-torn
economy back on track, the popularity of the post-Maidan government
has collapsed. That in turn could bring about snap elections later
this year that could see a sharp rise of populist parties such as
the Radical party, which has railed against the EU deal as well as
the IMF's austerity measures.
"What they signed is categorically not in the interests of Ukraine,"
said Radical party leader Oleh Lyashko about the deal.
"It is not mutually beneficial if they give us peanuts and, in
exchange, demand we take off our trousers, sell our land, our wife
and our country."
(Additional reporting by Margaryta Chornokondratenko and Robin
Emmott; Writing by Matthias Williams; editing by Anna Willard)
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