Moldovan exports and the impact of the DCFTA
Exports play an important economic role in Moldova, as they account for 44% of GDP. Over the years, a significant re-orientation of exports away from the CIS and towards the EU took place. Since 2004, exports to the EU increased in average by more than 10% per year in USD-terms. As of today, almost ⅔ of Moldovan exports are destined to the EU.
This development was supported by a series of trade measures, which culminated in the signing of a free trade agreement (“DCFTA”) in June 2014. Against this background, it is quite surprising that the DCFTA has come under attack, with calls for stronger ties with the Russian-led Eurasian Economic Union (“EAEU”) and a revision of the DCFTA. In our view, an intensification of trade with the EAEU makes sense, since it accounts for 17% of exports. However, this should not take place at the expense of trade with the EU, for three simple reasons. First, it is not advisable to cast doubts on an agreement with a trading partner who buys ⅔ of your exports. Second, the EAEU’s GDP is only 9% of the EU’s and offers thus much less potential. Third, and most importantly, there is no need to choose between the EU and the EAEU. Thus, in our view, Moldova should continue the DCFTA implementation discontinue the harmful debate on its trade orientation, which has a negative impact on investment and on the wellbeing of its people.
