Export accents of today
Association Agreement between the European Union and Ukraine, namely a part thereof on deep and comprehensive free trade, in force since January 1, 2016 made it possible to create proper conditions for rapid growth of export, as well as to minimize the our country’s losses caused by reduction of its cooperation with CIS countries. Growth of the export of our products started notably in year 2017. It made 43.3 billion USD, and exceeded the same of 2016 in 19%. By the results of 2018, the total export of Ukraine made 47.3 billion US dollars, in 9.2% higher if compared to the same in the year 2017.
Generally speaking, during 12 months of the year 2018, the export to the EU countries has grown in 15% and reached the biggest ever value of 20 billion US dollars. For reference, the last biggest value of export was fixed in the year 2008 on the level of 18 billion US dollars.
The cost of goods, being exported by Ukraine to the EU during the 1st quarter of this year made 5.7 billion US dollars, i.e. 5% more than in the same period of the year 2018.
At the same time, one can observe reduction of the export to Russia. It constituted only 11% during the same 1st quarter of 2019. As for the CIS countries, Ukraine has earned only 1.5 billion US dollars for export thereto in the 1st quarter of 2019; that’s in 6% less than in the same period a year ago.
Ukraine has reached quite reasonable progress in meeting legal and institutional demands as to implementation of provisions of the agreement on deep and comprehensive free-trade area between the EU and Ukraine (DCFTA – ed.note). The key achievement of Ukraine was its joining to the EU Program “Competitiveness of Small and Medium Enterprises (COSME (2014-2020))”. Since January 2019, Ukraine and the EU apply provisions of the Regional Convention on pan-Euro-Mediterranean preferential rules of origin in their bilateral trade. Ukraine approved the projects on the comprehensive strategy in reformation of the system of sanitary and phytosanitary supervision in Ukraine and the Roadmap of public procurement reform.
The free-trade area with the EU became Ukraine’s main tool for holding euro-integration processes. It has ensured liberalization of trade in goods and services, and capital flows. And this, in turn, allowed Ukraine:
– to implement the EU rules on public procurement (to make Ukrainian companies able to compete for public orders in the EU countries on equal footing with the companies of Europe);
– to give the enterprises of Ukraine an opportunity to trade in certain services with the EU countries on better conditions than those of any other countries, and in some cases – to apply a national regime. The Agreement entitled Ukrainian suppliers to establish their representative offices;
– to ensure compliancy of its regalements and procedures with the European ones (the certified goods are considered to meet the requirements of the EU and do not need any additional tests).
A complex program for adjustment of the regulatory rules in trade-related spheres to the standards of the EU is a specific trait of the free-trade area Ukraine-EU. It allows to reduce any non-tariff (technical) barriers and to ensure an extended access to the internal EU market for the exporters of Ukraine and vice versa – for the European exporters to Ukraine.
Thanks to the mentioned conditions, the scope of production in Ukraine extends also. For instance, since 2017 upon conditions of the Free-trade area the growth has been observed in all the spheres, 3% averagely. According to estimates, it provides the increase of Ukrainian GDP in 0.5% each year, as well as general improvement of the citizens’ welfare in 1.2% annually.
Special attention is attracted to the increase of production itself, and to export of the agrarian industry (AIC). During the 5 recent years, a share of AIC products in export gaining of Ukraine increased from 31% in 2014 to 39.3% in 2018. Although, it is worth to mention that agrarian export is still supported mostly by raw products, i.e. plant goods – wheat, corn, barley and soybeans. The share of these products in its structure equals to around 55%.
Great share of agrarian sector is occupied by sunflower oil. In year 2018 its sales reached 4.1 billion US dollars. For several years in a row Ukraine remains world leader in production and export of sunflower oil. The rest key places are possessed by grain crops (corn, wheat, barley), oil crops (soybeans) and oil crops derivatives (sunflower cattle cake). These top-10 products ensure 81% of the whole agrarian and foodstuff export from Ukraine.
On January 21, 2019 Ukraine concluded a Fee-trade area agreement with Israel. It allows exporting a wide range of agricultural products, foodstuff, medicines, cosmetics, products of chemical and consumer-goods industry, building materials, electronics to Israel without customs duties. In three years, cancellation of customs duties on spices, seeds, flour, ketchups, canned goods, garment, furniture, glass is also expected. The Cabinet of Ministers of Ukraine explained that pursuant to the Road map of public strategy on trade development in 2017-2021, Israel is in the top-20 of the most promising markets for Ukrainian goods, remaining one of the main trade partners of Ukraine in the Middle East. The spheres of agrarian industry, tourism, carbohydrates processing, communication, medicine, power efficiency and ecology are considered to be the most perspective for cooperation between the two countries.
Joining the Regional Convention on pan-Euro-Mediterranean preferential rules of origin creates extremely profitable conditions for our European partners to open their production sites on the territory of Ukraine. This agreement shall promote development of consumer-goods, engineering, metal and other industries.
Participation in the Regional Convention on pan-Euro-Mediterranean preferential rules of origin will make Ukrainian producers able to purchase raw stock and spare parts in the EU countries, involved into the Free-trade area, or in the Mediterranean countries, but to export the ready goods to the EU, preserving status of its preferential origin (to import goods with a decreased or zero entrance duty).
Unfortunately, Ukraine is still characteristic of its rather low export of high-tech goods and services. This is the evidence of rather improper structure of Ukrainian business competitiveness, based mostly upon price factors and comparative advantages in cost of natural resources and workforce. At that, existing high-technology abilities of some industrial branches are not applied properly.
Development of spheres that supply high value-added goods shall be the main priority in elaboration of a basis for increasing values and improving structure of the export of Ukraine towards extending share of high-tech commodity.
According to the State Statistic Service of Ukraine, the balance of our trade with the EU countries is negative due to our import of natural gas, oil, oil products, cars and pharmaceutical products.
Ukraine has a specific export niche, and, as some experts say, it will increase in not less than 20-30% each year. What this means is export of services, especially those in IT. Compared to goods, cross-border trade in services makes balance of Ukraine positive. For instance, from January to September 2018 this trade in services brought 4.6 billion US dollars.
Large volume of export in IT services to the UK and Germany attracts attention. Surprisingly, we have a negative trade balance of the UK’s neighbor, Ireland. It’s worth to mention, though, that European offices of leading IT-companies of the whole world are located there. Respectively, purchase of services from world technological giants, like, for example, advertising in social media or search services is made through Ireland. This country could be a good example for Ukraine how to involve the most well-known world IT giants into cooperation on the level of state.