| Abstract: |
The EU-Russia Partnership and Cooperation Agreement, which entered into force
in 1997 foresees the possible establishment of a free trade area (FTA) between
the parties. The aim of our study is to evaluate the possible economic, social
and environmental impact of such a free trade agreement between the European
Union and Russia. The results of the analysis indicate that an EU-Russia FTA
will be beneficial to the Russian Federation and the EU27. Some sectors are
expected to contract in the medium term, but their importance in total output
is small. Over the long run, the majority of sectors in Russia are expected to
expand, while only a few sectors in the EU27 are expected to register
negligible decreases in output. We estimate that welfare losses from the
environmental damages would be very small for Russia (possibly even smaller
due to the implementation of greener technologies), and negligible for the EU.
Despite some significant negative medium-term social implications in selected
sectors in Russia, the overall increase in economic activity and wages,
coupled with likely domestic policies aiming at easing the impact of
transitional unemployment, are expected to allow for the overall reduction in
poverty rates. Overall, the results show that significant welfare gains (2.24%
of GDP for Russia) would accrue from the deep FTA scenario involving a
significant reduction of NTBs along with additional flanking measures,
particularly on competition, IPR protection and corruption, which would help
re-branding of Russia as a safe and attractive investment location. Also a
number of countries such as Finland, Ireland, Netherlands, Denmark, Estonia,
Slovakia, Slovenia and Sweden are expected to see their welfare increase by
around 0.5% of GDP. |
| Keywords: |
free trade agreement, WTO accession, European Union, Russian Federation, labor market, environment, NTBs, CGE |