The opening of EU markets after the provisional entry into force on 1 January 2016 of the EU-Ukraine Deep and Comprehensive Free Trade (DCFTA) does not compensate losses Ukrainian producers have incurred from the suspension of the free trade deal with Russia, Anatoliy Kinakh, President of the Ukrainian League of Industrialists and Entrepreneurs, told this website.
“It is very difficult for the Ukrainian producers of manufactured goods to meet the high EU quality and safety standards,” Kinakh said, pointing specifically to machinery and vehicles as well as food. He expressed confidence, however, that in time Ukrainian companies will gain a competitive edge, which will help them expand into the EU and other equally demanding markets.
Despite strong opposition from Russia, the DCFTA entered provisionally into force on 1 January 2016. Prior to that, the EU opened its markets unilaterally to Ukrainian exports. Since April 2014, the EU’s autonomous trade preferences grant duty-free access for 95% of industrial products and 84% of agricultural products from Ukraine.
Following ratification of the DCFTA by the Ukrainian parliament in September 2014, Moscow threatened to suspend trade preferences for Ukrainian imports if Kiev went ahead with its plan to implement the DCFTA as of 2016.
Russia’s President Vladimir Putin signed a decree on 16 December 2015 suspending as of 1 January 2016 trade preferences granted to Ukraine under the Commonwealth of Independent States (CIS) FTA deal signed in October 2011. As a consequence, since the beginning of 2016 Russia has been applying most-favoured-nation treatment rules to imports from Ukraine.
“Modernisation requires time and investment but also more intensive communication with our potential partners,” Kinakh said, underlining the importance of increased B-2-B contacts among the EU and Ukrainian companies.
Asked about the overall climate for cooperation following the negative outcome of the Dutch referendum on the ratification of the EU-Ukraine Association Agreement, including the DCFTA, Kinakh remained optimistic. He said that the vote has not affected the situation on the ground. “The DCFTA continues applying provisionally, which allows us to carry on our work. We continue intensifying our cooperation with the Dutch business. The Netherlands is one of our most important trading partners in the EU,” Kinakh said.
On 6 April, the EU-Ukraine deal was rejected by 61% of Dutch voters (2.509 million people) compared with 38.21% in favour (1.572 million). The turnout was only 32.28%, but above the 30% threshold required for the referendum to be valid.
On a more general note, Kinakh underlined the importance of internal political and economic reforms his country has to implement and effectively execute. “In order to modernise and become more competitive we have to do our own homework,” he said.
Background
During the period January-August 2015, Ukrainian exports to Russia fell by nearly 60% compared to the first 8 months of 2014, from €6.9 billion to €2.9 billion, according to EU data. In the first half of 2015, the share of Russia in total Ukrainian exports decreased to 15% (Asia has a share of 30% in total Ukrainian exports).
Overall for 2014 the increase of Ukrainian exports in value terms to the EU was 2,6%. The share of Ukrainian exports to the EU, rose from 9% of Ukraine’s GDP in 2013 to 13% in 2014.
During the first 11 months of 2015, the value of Ukrainian exports to the EU dropped by 25% compared to the same period of 2014, because while the tonnage has hardly decreased, the prices of commodities – which constitute the core Ukrainian exports – have declined dramatically.
By Joanna Sopinska