The EU needs Ukraine to strengthen its strategic autonomy: research presented in the Rada committees

Ukraine can become a key partner in ensuring the strategic autonomy of the European Union, reducing its dependence on geopolitical competitors in the areas of critical materials, industry, and food.

This is stated in the study "Strategic guidelines for deepening trade and economic relations between Ukraine and the European Union", presented on February 26 at a joint hearing of the Verkhovna Rada Committee on Economic Development and the Committee on Agrarian and Land Policy, UNN reports. 

The study was commissioned by the Federation of Employers of Ukraine with the support of the Ministry of Foreign Affairs of Denmark.

At the hearings, the authors of the study emphasized that since 2014, when Ukraine signed the Association Agreement with the European Union, the EU's share in Ukraine's foreign trade turnover has been steadily increasing - from 30% in 2013 to 56% in 2023. And exports of goods to the EU in 2023 reached $23.4 billion, which is 64.6% of Ukraine's total exports of goods. These figures indicate the reorientation of the Ukrainian economy from the CIS to European markets.

At the same time, as Dmytro Natalukha, chairman of the Committee on Economic Development, noted during the hearings, cooperation remains asymmetrical. "The problem with Ukraine's exports is that its structure remains raw material-based. 48% of agricultural products are cereals and oils, chicken, 22% are ferrous metals and ore, and 13% are chemical and engineering products. Imports are polar opposite. It contains much more products with high added value. Therefore, this cooperation is not yet balanced," he emphasized. According to Dmytro Natalukha, this imbalance creates a structural deficit in trade, which amounted to $9.1 billion in 2023.

Ruslan Ilyichev, CEO of the Federation of Employers of Ukraine, emphasized that the option of deepening trade relations developed in the study takes into account the interests of European business and the EU as a whole. "We are eager to convey to our European partners that Ukrainian business is not a threat to the European market and its producers. Not only can we become reliable partners, but we can also be very profitable partners in terms of production integration, joint cooperation and mutually beneficial integrations," he emphasized.

The study identified three key areas where Ukraine can assist the EU in achieving its strategic autonomy on a mutually beneficial basis.

The first area is to provide the EU with critical and strategic materials. Ukraine has deposits of 24 out of 34 types of minerals that the EU has identified as indispensable for the development of advanced industries and green transition goals. The European Institute for Geopolitical Studies estimates that if Ukraine further expands the processing of strategic raw materials, the share of critical materials supplied to the EU could increase from 12% in 2023 to 25% in 2030. This will help reduce the EU's dependence on supplies from China and other geopolitically unstable regions.

The second area is to strengthen the EU's industrial potential and competitiveness. Ukraine retains significant technological and human resources potential for the development of strategic industries. These include, in particular, the defense industry, information and communication technologies, and aerospace, in which the EU has lost its leading position in the global market. The study identified specific products that Ukrainian producers can replace in European markets: metallurgical products, chemical fertilizers, woodworking products, furniture, tractors, buses, electrical products, etc.

The third area is ensuring the EU's food security. Ukraine has established itself as a reliable supplier of agricultural products, accounting for 7-8% of EU agricultural imports and ranking third among the largest suppliers (ahead of countries such as Brazil and the United Kingdom). In the perspective of EU membership, Ukraine will be able to offer the community a new model of agricultural production focused on developing competitiveness and innovation, as well as help it reduce its dependence on food imports from third countries. In the face of the negative effects of climate change and environmental degradation in many countries of the Global South, Ukraine's agricultural potential will be a key stabilizer of the EU and global food market in the future.

"We are already one of the largest suppliers of agricultural products in the EU and we can become much more powerful in this regard," emphasized Dmytro Natalukha.

Oleksandr Haidu, Chairman of the Committee on Agrarian and Land Policy, added that the agricultural sector is the main source of Ukraine's exports today. According to him, the government is actively working to reform agriculture in line with EU policy.

Commenting on the study, Yuriy Melnyk, Deputy Executive Director of MHP, emphasized the importance of cooperation based on transparency and mutual trust: "The integration of the EU and Ukrainian economic systems should be transparent, mutually beneficial and fair. We, as a business, adhere to the principles of transparency and honesty. Recently, we have established cooperation with the diplomatic corps - meetings with diplomats, visits to our production facilities with them to confirm the statement that Ukraine complies with technological requirements and uses technologies that meet European standards.

The Institute for German Economics estimated in 2023 that if Ukraine joined the EU in 2025, the cohesion policy would cost donor countries 50-90 billion euros in funding over five years. However, the active integration of Ukrainian industry and the agricultural sector into the EU's economic complex will help reduce the difference in income levels in Ukraine and the EU average. This, the authors of the study emphasize, will greatly ease the burden of cohesion policy for the EU after Ukraine becomes a full member of the Union.

"When we received the EU candidate status, we clearly realized that in the future Ukraine would become an EU member state, which would not only provide us with trade benefits but also create sustainable production chains and cooperation, which is very important for us today. We will also be more integrated into the EU public procurement system," said Ruslan Ilyichov.

According to the economic modeling presented at the hearings, Ukraine's effective integration into the European economy can bring significant results, the authors of the study emphasize. In particular, it will make it possible to double Ukraine's GDP in 10 years and radically change the structure of production and foreign trade. Investments of $90 billion in the construction of 570 factories in Ukraine will ensure an increase in the output of goods and services by 152.8%, including manufacturing products by 168.9%. As a result, the share of the manufacturing industry in the country's GDP will increase from 7.6% to 20.4%. In total, about 815 thousand new jobs may be created.

The authors of the study emphasized that such cooperation would have benefits for the EU as well. First and foremost, it will significantly reduce the gap in gross national income (GNI) per capita between Ukraine and the EU - from 7.1 to 3.2 times. This will significantly reduce the EU budget expenditures on cohesion policy after Ukraine's future membership in the Union.

The key message that the Ukrainian government and business community should convey to European partners is that the EU needs Ukraine no less than the Ukrainian economy needs support in the face of war to overcome the latest geopolitical challenges and regain its leadership position in the international arena.