The Harper government says it’s returning to the bargaining table with Ukraine on a free trade deal amidst an ongoing war and a year and a half delay in negotiations.
Trade Minister Ed Fast announced the renewal of Canada-Ukraine free trade negotiations on Jan. 26 in the Ukrainian capital of Kyiv, promising “an ambitious and comprehensive agreement.”
“Preparatory work is currently underway by our officials for a full round of face-to-face negotiations in Kyiv in the near future,” Mr. Fast stated at the time of the announcement, which comes amid renewed conflict in eastern Ukraine.
Fighting between Ukrainian forces and rebels in the eastern region of Donbass has reignited following a few months of shaky ceasefire. Mr. Fast’s announcement came only two days after shelling in the Ukrainian city of Mariupol killed at least 30 people.
Marko Shevchenko, Ukraine’s chargé d’affaires, acknowledged that his country is in a state of “undeclared war” during a recent interview with Embassy.
“We have a real war. A part of our territory was annexed by a neighbouring country [Russia]. Another part of our country is faced with mercenaries supported militarily by a neighbouring country, and aided from time to time with direct involvement by a neighbouring country’s armed forces. We are in a war, but Ukraine would not declare this war first,” Mr. Shevchenko said.
German chancellor Angela Merkel met separately with US President Barack Obama and Prime Minister Stephen Harper on Feb. 9 in hopes of coordinating a Western response to Russia’s ongoing involvement in the war.
NATO says Russia has been providing assistance to rebels in eastern Ukraine after annexing Crimea last March in a referendum that drew accusations of rigging. The UN’s Office of the High Commissioner for Human Rights estimates that more than 5,000 people have been killed and nearly 11,000 injured since fighting began last April.
The Harper government sees Ukraine as a priority market with opportunities for Canadian business in the aerospace, agriculture, education and oil and gas sectors. Pharmaceuticals and processed foods are among the biggest Canadian exports to Ukraine, while coal has been the top export in the last two years as Ukraine seeks to end its dependence on Russian energy.
“Russian gas that we buy from Poland or Germany is cheaper than gas we buy directly from Russia. That’s why we’re looking for other suppliers. Canada, a well known country for its energy exports, could be a good supplier for any kind of energy source to Ukraine,” said Mr. Shevchenko, adding that his country also wants to attract Canadian energy companies to develop its own shale gas reserves.
“Canadian companies can offer not only extraction, but also participate in any kind of subcontracting activities supplying services related to shale gas,” he said.
Canada began negotiating a free trade agreement with Ukraine in the spring of 2010, but talks broke off in 2013 after the government of then-president Viktor Yanukovych tried to renegotiate tariff levels that it had previously committed to as a WTO member. That’s no longer the case under current Ukrainian President Petro Poroshenko, said Paul Grod, president of the Ukrainian Canadian Congress.
“In 2013, there was very little political will from the Canadian side to move forward,” Mr. Grod observed. “You have Canada with the political will to do this today because they’re working with a government that respects human rights and is making significant reforms. [Secondly], you have a very willing Ukraine that is prepared to forego some of the WTO disputes that they were initially going to launch under the previous government.”
Despite the potential for increased trade and investment between Canada and Ukraine, the ongoing war casts uncertainty on a prospective deal. Foreign Affairs currently advises Canadians to exercise “a high degree of caution” in Ukraine and discourages non-essential travel in certain parts of the country.
There may be economic opportunities for Canadian companies in Ukraine, but there are also political opportunities for the Conservatives to announce renewed trade negotiations with the embattled country. The move reinforces the Harper government’s position that it’s pro-Ukraine and pro-trade in an election year in which Canada’s Ukrainian diaspora is expected to wield significant clout at the polls.
One former Conservative staffer told Embassy that Mr. Fast’s recent announcement is part of the government’s ongoing strategy to portray itself as supporting Ukraine. “It’s part of the principled foreign policy that they think plays well. This further buttresses the leadership credentials of the prime minister,” the source said.
There are more than 1.25-million Canadians of Ukrainian heritage living in Canada according to the latest National Household Survey. Data shows that 33 federal ridings had Ukrainian-Canadian populations of more than 10,000 in the last election, with 32 of those ridings located in the provinces of Manitoba, Saskatchewan and Alberta.
Dominique Arel, chair of Ukrainian Studies at the University of Ottawa, said that time will tell whether the announcement of renewed negotiations is sincere or simply posturing.
“With any announcement on Ukraine, there’s necessarily a dimension of diaspora politics, but it doesn’t mean that it’s empty, insincere and won’t lead to anything,” he said, noting that Canada has taken tangible steps to assist the Ukrainian government since the war broke out early last year.
The Harper government has contributed $3-million to multilateral aid efforts in Ukraine, and another $50-million for institutional reforms and capacity building, and two low-interest loans totalling $400-million to assist with stabilizing the Ukrainian economy.
“There’s been a degree of involvement that is actually concrete and perhaps superior to what other states have provided to Ukraine,” Mr. Arel observed.
Canada has also provided "non-lethal" aid to Ukraine, but has so far refrained from providing weapons despite a direct request for arms by President Poroshenko when he addressed Parliament last fall.
Opportunities and uncertainty
The ongoing conflict and institutional corruption in Ukraine continue to make it difficult for the country to attract foreign investment. The Poroshenko government has pledged to tackle corruption and has gone as far as appointing non-Ukrainians to top cabinet posts as part of its reform efforts, but uncertainty remains an obstacle to economic development.
“In the middle to long-term, the structural problem in Ukraine is the same as in Russia. How can you invest if you’re not sure of whether your property will be secure? We’re talking about a rule of law problem here,” Mr. Arel said.
Neither war nor corruption have prevented Ukraine and the European Union from signing and beginning to implement their own association agreement that includes economic and political cooperation. Whether that agreement is fruitful depends on the willingness of companies to enter the Ukrainian market as investors.
Cyndee Togham Cherniak, a Toronto-based trade lawyer, said opportunities are emerging in Ukraine and it’s important for Canada to prepare for when the conflict eventually comes to an end.
“At some point in time, Ukraine will be rebuilding from the devastation that it’s experiencing at this point in time,” she said. “We’re so far off from what’s in the deal, that we shouldn’t be worried about the conflict. The first step is, what do Canadians get?”
Mr. Shevchenko added another benefit for Canada to secure a trade deal with Ukraine: the advantage of early entry into Ukraine’s new and uncertain economy.
“Our market is growing, and usually a company that enters the market in a period of growth can influence and form this market and the rules of the game in this market,” he said. “Those who enter it earlier are winners. I would like Canadian companies to be a part of this process. I would like Canadian companies to be the top five or ten players in the Ukrainian market.”