Trade policy & deterring war: The case of Ukraine

University of St.Gallen professor of International Trade and Economic Development Simon Evenett looks at the economic support Ukraine has received since from the invasion of Crimea in 2014 and the potential consequences of those actions.

15 February 2022. While potential military developments—including steps that reinforce Ukraine’s capacity to defend itself—may be decisive in the days ahead, the ability of that country to finance and strengthen its armed forces over the medium term depended in part on its access to foreign markets.

This note presents evidence that calls into question the extent to which Western commercial policies effectively supported Ukraine since the annexation of Crimea in 2014, in particular whether their unilateral trade policy actions aligned with the West’s broader diplomatic goals of shoring up Ukraine and deterring war.

The principal findings of Evenett's analysis are:

Without well-equipped armed forces, a nation’s foreign adversaries are less likely to be deterred from military action. Having the tax base to afford effective national defence forces is key and export revenues that result in economic growth help. Improved and secure access to the markets of allies is especially important when export sales to other markets and production facilities are lost due to earlier hostile acts by neighbouring nations.
Even though the West promised economic support to Ukraine after the invasion of Crimea in 2014, only the EU took major steps to boost Ukrainian exports and living standards by opening their markets. But even this help wasn't enough to stop Ukraine's exports stagnating over the past decade.
US policy, especially under President Trump, made life much more difficult for Ukraine's exporters. The UK's treatment of Ukraine's exports is a little better than the world average. In short, the US and UK haven't backed up their military support for Ukraine with sustained economic support.
Had Ukraine received sustained economic support from the West since the invasion of Crimea, it would have been in a better position to defend itself than today. The West saw the risks in 2014, it pledged help but didn't follow through.

For inquiries contact Simon Evenett at simon.evenett(at)unisg.ch.

The download of the document for the investigation is possible under the following link.

Image: Unsplash / Max Kukurudziak