OREANDA-NEWS. November 26, 2013. The first myth is that Russia is the main market for Moldovan exporters. It is a false argument, the expert said, stressing that the main market for Moldovan products had been the European Union over the last years.

It has been steadily surpassing the Commonwealth of Independent States’ (CIS) market since 2006. Thus, in late 2012, 45.7 per cent of the overall exports were directed to the EU, and 40.5 per cent to the CSI. Moldova’s most important trade partner for exports remains Russia (30.3 per cent of exports in 2012). Nevertheless, about two thirds of these exports are in fact re-exports.

"The Russian market is important, yet not crucial for the Moldovan economy", says Adrian Lupusor.

According to him, losing the Russian market is another false argument, often used as a bogey to compromise the desideratum of signing the Association Agreement with the EU. "The truth is that the Deep and Comprehensive Free Trade Agreement, which is part of the Association Agreement, is compatible with other free trade agreements Moldova is part of. In this context, the CSI Free Trade Agreement is no exception either", mentions Lupusor.

Thus, he added, after signing the Association Agreement with the EU, Moldova would be able to export without customs duties both to the EU and in the CIS. Moreover, the free trade agreement with Turkey will also enter into force, with Turkey currently being the third most important market for Moldovan exports.

"The EU Association Agreement will create prerequisites for diversifying markets for domestic producers and does not imply losing other markets. There is a risk of Russia applying restrictions on the import of Moldovan wine, fruits or other products in the short-term. Yet, they will not be maintained for a long period, given their political character and the existence of the WTO (World Trade Organisation) Arbitration, within which such practices can be challenged at any time, ", notes the economist.

Another myth is that the eastern Moldova economy would suffer loss after signing the Association Agreement with the EU. The major risks deal with the cancellation of the customs duties imposed by the region, which at the moment amount to about 7.3 per cent compared to 4.6 per cent applied in the rest of Moldova, says the executive director of the Expert Group Centre. Therefore, the "liberalisation of the tariff policy could result in reduced revenues in the region by about 6 -10 per cent and could expose local companies to a major competitive shock."

Nevertheless, the most important producers from the region will have access to the EU market, which currently accounts for 45 per cent of all the exports; the raw material imported by the Transnistrian companies will be cheaper and, as a result, their competitiveness shall increase. Another effect would be reducing non-tariff barriers on the EU market as a result of the implementation of the minimum quality requirements.

The expert debunks the myth that after signing the Association Agreement with the EU, the market will be flooded with goods from the EU and Turkey, which will "destroy the local producer". Moldova’s tariff policy is already relatively liberalised. The highest customs taxes are applied to imports of agricultural products, for which transition periods of up to 10 years are provided.

Thus, concludes Adrian Lupusor, the Association Agreement would not oblige the Chisinau-based authorities to immediately cancel the tariffs, but would provide a sufficient amount of time to allow domestic companies to modernise and work more efficient and qualitatively. At the same time, trade liberalisation would allow the more competitive companies to expand their businesses.

According to Expert Group estimates, as a result of trade liberalisation with the EU, the prices for consumer goods would decrease by 9 per cent for clothing, 3.3 per cent for textiles, 7.1 per cent for vegetable and animal oils and fats, 3.4 per cent for fruit and vegetables and 2.1 per cent for alcoholic beverages and soft drinks.

As a conclusion, Adrian Lupusor reiterated that the “Association Agreement with the EU would not lead to the “destruction of the domestic producer", would not represent a collapse for the Transnistrian economy, would not result in losing the CIS market for the Moldovan exporters nor would it imply Moldova’s accession to the EU and the NATO”.