Veronika Movchan: “IER aims to help Ukrainian society navigate EU accession consciously”

As Ukraine moves deeper into the EU accession process, the question is no longer only what needs to be aligned with EU rules, but also how this will affect the economy, businesses, and ordinary people. Evidencebased analysis and impact assessment are becoming essential for making accession decisions credible, realistic and well understood.  

This time, we spoke with Veronika Movchan, Research Director at the Institute for Economic Research and Policy Consulting. The Institute is one of the winners of Ukraine2EU’s Call for Proposals “Ukrainian CSOs advancing EU accession” with its project “Conscious”, which ams to support a more data-driven preparation for Ukraine’s EU membership. We discussed Ukraine’s progress on the path to the EU, the role of economic modelling in accession, and why good analysis matters for government, business and society. 

When do you think Ukraine can join the EU? 

I really want to believe that 2030 is a realistic deadline. If not membership itself, then at least an accession treaty and the status of an acceding country. 

Can the process be delayed? It can, but I really don’t want it to. The accession process involves 27 countries with their own political cycles, waves of populism, and internal problems. All of this overlaps, and it’s not obvious what the right strategy is: to push hard, as we’re doing now, or to move gradually. 

There’s a lot of talk now about various interim formats – membership lite, associate membership, gradual integration. Any progress towards membership is positive, as long as we keep the key goal: full membership. We don’t want a common market without membership. We don’t want half-measures. 2030 is a good target date. If 2030 passes, we’ll need to set the next clear date, because just “joining” doesn’t motivate anyone. 

At the same time, it’s important not to lose sight of the actual accession process in this search for formulas of partial integration. Roaming at home and “industrial visa-free” (ACAA) are important examples of this gradual movement. But even they require time: roaming was discussed for two or three years, and ACAA, even if successful, will initially only cover the first three sectors out of 27. These are important symbolic steps, but they shouldn’t replace negotiations on membership. 

I am for all the possible “perks” that can be collected on the way to membership, but only as long as we don’t start taking detours and forgetting the final goal. Resources are limited. It’s often the same people dealing with both ACAA and accession negotiations. If we invest too many resources in instruments that will automatically lose their meaning after membership, we’re diverting resources from the negotiation process. 

Where has Ukraine made the most progress on the path to European integration, and where are the most difficult challenges? 

Ukraine has made quite a bit of progress in various areas. The European Commission’s expansion report describes the situation fairly well. 

We have good results in customs: this is not just a free trade zone, but also accession to the common transit system, and development of the authorise deconomic operators institute. It would be good to sign mutual recognition as provided for in the Association Agreement. But you need to understand that all this is relevant only until the moment of accession, because when there’s no customs border, authorised economic operators are no longer so significant. 

A lot has been done for ACAA, in food safety, public procurement. Roaming is actually the first case where Ukraine has really become part of the EU’s common market. No tariffs is good, but there’s still a border and non-tariff barriers. But roaming is already a real single market. 

A lot has been done in energy – gas, electricity – although there’s still a lot of work to be done there. For example, we have started exporting biomethane, but there are still nuances around its recognition. 

I think one of the most important achievements is that we’ve created a foundation. In anti-corruption, a lot has been done. Since we’ve been talking about EU integration for many years, we’ve already had a significant proportion of the debates that need to happen before membership: about state aid, veterinary medicine, railways, environmental assessment. We haven’t completed the process everywhere, but we can’t say anymore that this is news and we need another 10 years to discuss it. There are areas where progress is less because they simply weren’t relevant outside of membership, for example, fisheries or the common agricultural policy. 

In sectors where we had the opportunity to achieve integration, we have fairly good results. The only question is speed. In the last two years we’ve been very focused on screening, and that was important. But now we need to show real movement, otherwise we just won’t make it in time. 

What should Ukraine focus on now, with the opening of the first cluster expected and a new stage of negotiations beginning? 

If we’re talking about a time horizon of about a year and a half, it’s hard to talk about individual priorities – everything is urgent. 

Opening the first cluster is very important. That’s where the most complex things are, including chapters 23 and 24, where there’s actually no large body of EU legislation, but there are questions of implementation, institutions and trust. 

I really hope that the next monitoring by civil society organisations shows progress. If the Ukrainian side tells the EU that everything is moving, but civil society organisations assess progress as poor, Europeans are more likely to believe the civil society sector, whose voice carries great weight in this process even if the real situation is somewhere in the middle. So overall, it’s worth focusing on implementing the fundamentals. 

Regarding the economy, it’s simple: everything that’s already been submitted to parliament needs to be processed and adopted as quickly as possible. There’s no need to invent new priorities where there’s already a schedule in the National Programme for the Adoption of EU Legislation (NPAA), we just need to follow it. 

In terms of the number of acts to be adapted in the NPAA, the largest blocks are transport, financial services, and food safety. But I think the most difficult one will be the environmental block. It’s difficult to implement even for EU member states, and requires very large investments. Here Ukraine will likely need deferrals, transition periods, or other arrangements. 

“Conscious”, your project which is funded by Ukraine2EU, involves updating Ukraine’s CGE model. What is this model and how will it help assess the impact of EU accession? 

This is a computable general equilibrium model. It’s simulationbased. The idea is that it covers all sectors of the economy and all economic agents: government, households, the foreign sector. It accounts for consumption, investment, exports, imports, taxes, and factor markets – labour and capital. So we have a closed loop that describes the entire economy. 

The base version of the model covers 40 sectors, but it can be broken down into 80 sectors. It contains taxes, tariffs, non-tariff barriers – both technical and administrative, related to border crossing. Ukraine is modelled completely, while the rest of the world is through separate trading blocks. 

We’ve also added a labour market block. Standard models often assume that factors of production are fully mobile and fully utilised – that is, labour and capital can move from any sector to any other. But in reality, this is difficult to imagine. 

We also want to break down the household block. The standard model has one representative household for roughly the entire population. We want to divide households into clusters: by urban and rural, income structure, employment, skill level,  for example to understand how EU accession could affect rural pensioners whose income is mostly pensions and social benefits, and who don’t participate in the labour market. CO2 emissions will also be added separately so we can look at the carbon footprint. 

The model allows us to assess macro impacts: changes in GDP, population welfare, exports, imports, budget revenues. But it also allows us to look at sectoral impact: what happens with output, domestic consumption, exports and imports in specific sectors. If the question is large enough, the model allows us to calculate it. For example, excise taxes, the common agricultural policy, structural funds, mutual recognition are blocks we can calculate and see sectoral impacts. 

At the same time, the model has limitations. If it’s a very narrow regulation or a very minor issue, it may not be the best tool. But for policy debates and decision-making at the sectoral or major policy level, it’s very useful. 

How can you make sure the government actually uses your analytics, rather than just receiving another report? 

My ambition is for these calculations to be seen by as many government users as possible: the prime minister, vice prime ministers, the Ministry of Economy, the Foreign Ministry, sectoral ministries, the Ministry of Finance. And also users outside government. I want us to provide all participants with objective information. 

At the same time, I’m not very worried that our work will just end up in a drawer. If you think long-term, a drawer is quite a useful thing. Government works in pulses. Since there are a limited number of people both in government and in expert circles, it’s impossible to deal with all issues at the same time. 

Sometimes the government says: “We need this.” If we’re lucky, we’ve already calculated it and can provide it. If not, we can calculate something quickly or remember this request and come back to it later. Even if, when we send the calculations, they’re no longer needed, in two months the issue may move to the next stage – go into parliament, come back after approvals, appear before the first or second reading or before signing. And then the calculations become necessary again. 

These cycles can last months or even years. So we do both what the government asks and what we think will be needed in the near or medium term, even if this request is not yet fully apparent. 

Is business included in this process and what should Ukrainian companies understand about regulatory approximation to the EU? 

We work with businesses in different ways: we survey them to understand what they’re dealing with, what problems they have, whether they know about upcoming changes and are preparing for them. We invite business to events, both as speakers and participants. We keep them informed through newsletters, social media, articles. Sometimes businesses come to us with the phrase: “We’ve found some regulation, what do we do with it?” But often businesses react when it’s already too late. They need to adapt, not just be at the end of the process. 

Business needs to understand that many changes affect more than just exports. There’s often the misconception: if I don’t export, this doesn’t concern me. But that’s not true. For example, in product safety or ACAA, the condition for mutual recognition is that our entire market operates according to EU standards. 

The same goes for sanitary and phytosanitary standards. We committed to harmonising them back within the Association Agreement, but many small manufacturers or farmers may still think that if they work only on the domestic market, they don’t need to adapt. And then, when they’re told the rules have changed, they’ll make a lot of noise. 

What would be a successful outcome of the “Conscious” project for you? 

Success for me is when calculations and analytics don’t just exist as reports, but are used in discussions and decisions, in parliament, government, sectoral ministries and the business community. So they help put a full-stop to discussions, or at least make these discussions more substantive. When they cite us, it will mean that people have at least heard, remembered and understood this information. They may not agree with everything, but this information will already be in their purview. 

Ukraine2EU and KSE Institute recently launched a joint platform to coordinate work on impact assessments. How do you assess this initiative? 

The platform is very useful just by the fact of its existence, because we hear who is doing what. There’s a regular meeting schedule and understanding of who has progressed where. 

Right now everyone is still in the phase of building models, databases and approaches. But when active advancement of legislation begins and we need to adopt hundreds of acts, the question “what affects what” will be everywhere. Even if we prioritise, assessments, debates and arguments about what’s needed and what’s not will still arise. This kind of exchange will be vital: it’s important not to duplicate, but to complement each other. For example, someone may be assessing the impact of a specific directive, and we need that assessment in a certain format for the model – as an ad valorem equivalent, that is, as a percentage of value. 

Such coordination is important not just as an information exchange. It helps transform individual assessments into a shared picture and makes the discussion of European integration decisions more evidence-based. 

What personally motivates you to continue working on ic ofUkraine’s European integration all these years? 

I like the European Union. I want Ukraine to be a member. I’m sometimes annoyed when people say: “Europe and Ukraine,” “bring Ukraine closer to Europe.” Ukraine is Europe: geographically, historically, culturally, politically, demographically. But I want Ukraine to be part of structured Europe that has succeeded. 

It is also important now from a security perspective. Once, you could theoretically think about some separate path for Ukraine, though I’ve never been a supporter of that. But now we have no other path. There’s either the threat of being absorbed by Russia – perhaps not immediately, but in the short term – or membership in the EU. 

EU membership doesn’t guarantee complete security and doesn’t guarantee that the EU itself will always remain in its current format. But no better union, no better association on Earth has yet been invented. It’s a union of independent states that actually works and achieves results. 

Ukraine often complains that it’s moving slowly compared to Poland. But you need to understand that Ukraine started from a very different position. Ukraine essentially had no experience as an independent state. In the 1990s, we were only just creating independence. Back then the issues were basic: What is fiscal, tax or monetary policy? Why can’t you just print a lot of money? In the Soviet Union there was a centralised planning system, private property didn’t exist in the normal sense, and entrepreneurship was forbidden or criminalised. And a country that in 1990 had no experience in managing an independent market economy is now talking about joining the EU and harmonising the financial sector, competition, markets and standards. We’ve come a long way. Yes, it was indirect. Yes, we made a lot of mistakes. But if you look at where we’ve got to in over 30 years – we’re actually very cool.