BRUSSELS, Jan. 1 (Xinhua) -- The European Union (EU) and Ukraine have started applying the Deep and Comprehensive Free Trade Area (DCFTA) from Friday which formed part of the Association Agreement signed in June 2014.
The rest of the Association Agreement has already been in force since November 2014.
EU's Commissioner in charge of trade Cecilia Malmstrom expressed confidence in the prospects for Ukraine.
"The entry into force of this trade area on 1 January 2016 creates unique opportunities for Ukraine to stabilise, diversify and develop its economy to the benefit of all its citizens. Assistance from the EU will be made available to help Ukrainian SMEs seize these new opportunities, to grow, and thereby create jobs. EU businesses will benefit as well by gaining improved access to a market of 45 million people. The change will not occur over night, it will require work and investment. Gradually, the DCFTA will contribute to a prosperous Ukraine and to stronger economic integration with the EU," she said.
Independent studies suggested that the simple implementation of the AA/DCFTA would bring benefits of about 6 percent of additional Gross Domestic Product over the medium term and 12 percent in terms of increased welfare for Ukrainians. Much more can be expected if Ukraine genuinely implements the reforms foreseen by the Agreement, as they would improve the business climate and help to attract foreign investments and technology transfers, according to the statement released by the European Commission, EU's top executive body.
However, Moscow said the EU-Ukraine deal could lead to a flood of European imports into Russia and make its own exports to Ukraine less competitive. Russian President Vladimir Putin in December signed a decree suspending Russia's free trade deal with Ukraine beginning on Jan. 1, 2016.
Ukraine's exports to Russia stood at 10.7 billion U.S. dollars in 2014, according to Russia's official customs data.
Under the decree, Ukraine will no longer enjoy the most favored nation treatment under the framework of the Commonwealth of Independent States (CIS) free trade deal, as well as a host of preferential policies in areas of migration, customs, quarantine inspection, and investment.
The EU and Ukraine signed the Association Agreement with its Deep and Comprehensive Free Trade Area on 27 June 2014. EU exports to Ukraine amount to 17 billion euros and Ukraine imports from the EU equaled 14 billion euros (data for 2014). Main EU exports to Ukraine consist of machinery and appliances, transport equipment, chemicals and manufactured goods. Ukraine's main exports to the EU are base metals, vegetable products, mineral products, machinery and appliances.