March 20, 2014 / 11:27 AM / 6 years ago

Ukraine moves closer to unfettered trade access to European Union

* Deal with EU to save Ukraine 500 mln euros a year in tariffs

* Unilateral measures part of wider EU trade and aid for Ukraine

By Robin Emmott

BRUSSELS, March 20 (Reuters) - Influential European lawmakers backed a package of nearly 500 million euros ($695 million) in annual trade benefits for Ukraine on Thursday, opening the way for duty-free Ukrainian exports into the European Union from late April.

Brussels is giving Ukraine unfettered access to the 28-nation bloc’s 500 million consumers even before a proposed bilateral free-trade accord comes into force later this year to cement Kiev’s historic shift away from Russia.

“The people of Ukraine fought on the Maidan for democracy and rule of law,” said EU lawmaker Daniel Caspary, a member of the European Parliament’s International Trade Committee, which approved the deal. “The EU must not let them down.”

The committee approved the plan by 22 votes to 2, with 1 abstention. The move is an important step to revive the trade and aid accord with Ukraine which ousted president Viktor Yanukovich rejected in November in favour of cash from Moscow.

That rejection triggered the protests that led to bloodshed in Kiev and Yanukovich’s flight to Russia last month, giving the European Union a second chance to offer a so-called Association Agreement to Ukraine.

The ouster of the pro-Russian Yanukovich led to a standoff between Russia and Ukraine that eventually resulted in Crimea’s voting to secede from Ukraine and join Russia. European leaders will meet later on Thursday to discuss possible retaliation for Russia’s takeover of the region.

EU leaders and Ukraine’s prime minister will sign the political part of the free-trade agreement at the two-day summit in Brussels from Thursday. The full European Parliament is due to sign off on the EU’s unilateral measures in mid-April.

That will allow 98 percent of all customs duties to be removed for Ukrainian goods entering the European Union from April 23, a deal worth 487 million euros a year and a boost for Ukraine’s near-bankrupt economy.

Ukraine had been teetering towards default even before pro-Western unrest in Kiev and Russia’s occupation of the Crimea. Trade benefits alone will not save the economy, but they should help stabilise it along with EU and IMF financing.

“Ukraine’s new government needs strong and immediate EU help to fight off external pressures and to overcome economic and financial hardships,” said lawmaker Pawel Zalewski.

While the bilateral trade relationship is relatively small - 38.3 billion euros in 2012 - the European Union is Ukraine’s top trading partner, representing about a third of the country’s total trade, slightly more than with Russia.

The EU’s offer will run until Nov. 1, at which time both sides aim to have the full free-trade deal enacted under the Association Agreement, and following May presidential elections in Ukraine.

Ukraine will not have to provide extra access to EU exports in return until both sides sign the free-trade deal. ($1 = 0.7189 Euros) (Reporting by Robin Emmott; Editing by Larry King)

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