important role in the overall economy (e.g. in a country such as Ukraine), these impacts should be considered.

The numerical simulations reported in this paper are produced using the Global Trade Analysis Project (GTAP) model. GTAP has emerged as the largest and most dynamic global network of modeling experts and policy makers worldwide, and the GTAP model is used by numerous governments, ministries of agriculture and research institutions. GTAP offers a relatively disaggregated depiction of agriculture (12 farm and 8 processed food products) and the most recent GTAP database includes Ukraine for the first time. Hence, GTAP provides a useful platform for the planned Ukraine-EU FTA analysis.

# **iii) Assessing the impact of stylized Ukraine-EU FTA scenarios**

The first scenarios that are presented in this paper are not meant to be realistic, because it is too early in the FTA negotiating process to know exactly what the negotiating parties will bring to the table. Instead, these first scenarios are used as simple examples to illustrate how the GTAP model can be utilized to guide analytical discussions about potential trade policy changes. These scenarios are especially meant to provide transparency with regard to the use of the GTAP model, the types of results it can produce, and its limitations.

Two scenarios are simulated. The first assumes that all bilateral tariffs between the EU and Ukraine are reduced by a rate of 50%. The second scenario is identical to the first except that it also includes a 5% exogenous boost in technical change in Ukrainian agriculture.

The results indicate that both Ukraine and the EU would benefit from trade liberalization. They highlight the importance of improving the productivity of Ukrainian agriculture so that Ukraine is able to draw the greatest possible benefit from the opportunities provided by increased access to EU markets, and to stand up better to the increased competition that goes hand-in-hand with this access. In agriculture, the key change is an increase in production of wheat and other grains in Ukraine, and corresponding increases in Ukraine’s exports of these products to the EU.

The simulation of these stylized FTA scenarios is based on a database that does not reflect Ukraine’s WTO commitments. Since Ukraine became a member of the WTO on May 16, 2008, the basis (e.g. Ukraine’s tariff levels) upon which FTA negotiations with the EU will take place has changed since the data incorporated into the GTAP 7 database. Hence, in a next step we have focused on incorporating Ukraine’s final WTO commitments into the GTAP database to provide an up-to-date platform for the future assessment of more detailed and realistic FTA scenarios.

# **iv) Assessing the impact of Ukraine’s accession to the WTO**

To provide a quantitative assessment of how WTO accession affects agriculture in Ukraine, four scenarios are simulated. Scenario 1a assesses the impact of Ukraine’s immediate WTO accession commitments, which will presumably be implemented in 2009. Scenario 2a considers Ukraine’s final WTO commitments, of which the last must be implemented by 2013. Scenarios 1b and 2b are equivalent to 1a and 2a, respectively, but assess how improvements in the production efficiency of primary agriculture in Ukraine would modify the impact of WTO accession.

Simulation results indicate that Ukraine can expect gains from a more efficient allocation of its resources following WTO accession. More efficient allocation of resources in line with comparative advantage will spur Ukrainian production and exports of products such as wheat, other grains, and oilseeds, but also of several processed food products that benefit from less expensive intermediate inputs. However, overall gains are modest.

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