official opening of negotiations on a free trade area between Ukraine and the
European Union took place February 18, 2008 in Kyiv under the chairmanship of the
President of Ukraine and the EU Commissioner for Trade. On July 19, 2012 in Brussels,
the initialing of the Association Agreement between Ukraine and the EU in terms of the
provisions on free trade took place. Thus a line was drawn under the
negotiation process that lasted more than 4 years.
The provisions of the Association Agreement on establishing a free trade area
are an integrated core part of the future Association Agreement between Ukraine and the
European Union and account for nearly 85% of the total amount of the Agreement
and include the following chapters:
Trade in Goods including tariff
Technical Barriers to Trade;
Sanitary and Phytosanitary
Customs and Trade Facilitation;
Trade in Services;
Current Payments and Movement of
Intellectual property rights (IPR);
Competition: Antitrust and Mergers,
Trade and Sustainable Development;
A special dispute settlement
mechanism under the FTA.
future FTA aimed at achieving the maximum economic
integration, to which both sides will be ready, and has a unique practice of
establishment of free trade regime is part of Deep and Comprehensive Free Trade
Area in the format "FTA +" with a focus on
of "FTA +" implies that the reduction and
liquidation of trade barriers within the free trade regime deals not only with
the liberalization of bilateral trade in goods, but also accompanied with the
Sides' agreement to liberalize further areas such as trade in services, foreign
direct investment and government procurement.
difference of “FTA +” from classical free trade areas
is spread of free trade regime on the service sector and (partly) the liberalization
of the labor force, as well as an extensive program of economic and sectoral adaptation of Ukraine's norms and standards of the
European Union, which will allow to eliminate nontariff barriers for Ukrainian
exports to the EU internal market.
attention to the fact that an integral part of Deep FTA
is bringing Ukrainian legislation and practice into conformity with the norms
and regulations of the EU, the particular importance is given to the
application of international and European standards and tools in the relevant
areas of cooperation.
Among the major achievements of the concluding
Agreement generally can be identified, primarily:
improvement of conditions of exports of Ukrainian products to the EU
primarily due to the elimination of import duty and reduction of non-tariff
barriers to trade in agricultural products.
Note: the EU unites 27 Members States
with an area about 4 million sq. km., where more than 503.68 million people live
(more than the population of the U.S.
together), with the average level of income in 39 th. U.S. per capita is one of the world's major
markets, which many countries are seeking to get access to.
In recent years, the share of the EU market is on average 33% of total
exports of goods in Ukraine.
Share of imports from EU countries-members was on average 35.6%. Thus the EU
market has a significantly higher tariff protection, primarily for agricultural
goods and products (current average arithmetic rate of importable duty in the
EU only on customs tariff is 7.6%, Ukraine - 5.0%, and by goods groups
Nomenclature 01-24 (agriculture) - 19.8% and 9.2% respectively. Meanwhile,
rates of import duty from the EU side for individual tariff lines are 1.5 - 14
times higher than rates of import duty of Ukraine.).
establishment of a Free Trade Area will provide additional benefits to domestic
exporters in the market with high enough protection. According to the reached agreements
the liberalization covers more than 97% of tariff lines (or more than 95% of
bilateral trade between the Sides). Thus, the abolishment of EU import duty on
most goods will take place in the first year of the enforcement of the
agreement (with 99% of tariff lines).
the Ukrainian exporters will have an additional advantage on trade in goods on
which the EU offered to introduce tariff quotas. First of all it is about pork,
chicken, sugar, etc.. These products are sensitive for
the EU and are usually excluded from the FTAs and are
covered by the general customs tax regime. However, as a result of
got the opportunity to export to EU fixed volumes of above mentioned goods
under zero import duties. This is not about restriction of imports, but only
about that the import of these goods which will be above fixed volumes falls
under the general import regime which is applied to Ukraine today.
above will facilitate the growth of exports of goods and services (most notably
may increase exports of agricultural products and food products, including
confectionery, in particular - exports of textile and leather industry,
metallurgy and metal processing, chemical manufacturing, transportation
services and services for legal entities).
a slight increase in imports of goods and services will be observed (the
largest increase is being expected in imports of chemical products and
machinery; significant growth - in food production and agriculture, production
of non-metallic mineral products, textile and leather industry, other
manufacturing, transport and financial mediation);
Note: According to preliminary
estimates of the World Bank that were based on General Equilibrium Model, an
establishment of Free Trade Area with the EU, compared with presently existing
high tariff protection of EU agriculture could significantly expand production
of the agricultural sector in Ukraine and render Ukrainian exports with a
general economic effect of $ USD 200 million per year, or 0.4% of the GDP.
of economic growth. Additional growth is expected
mainly due to economic activities such as agriculture and food processing,
textile and leather industry, metallurgy and metal processing, transportation
services, services for legal entities;
of the number of employees in economic activity: growth
relative to baseline expected mainly due to economic activities such as agriculture
and food industry, trade and repair, transportation. Meanwhile expected slight
decrease in the number of employees in the chemical industry, production of
machinery and equipment;
of the state budget revenues. With international experience of
functioning FTA, short-term loss of revenue due to
tariff liberalization will be offset by an increase in other items of revenue
from domestic taxes;
foreign direct investment in Ukraine: the
establishment of “FTA +” with the EU will become a
powerful additional argument in favor of foreign direct investment in the
production of goods or services targeted on export to the EU countries using
the existing competitive advantages of the Ukrainian economy;
the business and investment climate for domestic business operators:
the process of adaptation of “FTA +” and enhancing
the quality of its implementation will result in improvement of the business
environment in Ukraine
for the Ukrainian consumers: the gradual elimination of
existing tariff and regulatory barriers to increase the variety and quality of
products and services available to consumers. In addition, competitive
pressures, stemming from liberalization of market access, encourage
specialization, thus encouraging innovation and lowering costs;
EU rejection to use export subsidies in trade with Ukraine.
the result of the completion of administrative reforms to be implemented for
the realization of Ukraine's obligations under this Agreement, will be an
improvement of the efficiency of public administration in the area of food
safety and bringing it into line with EU requirements. The technical regulation
reform will lead to the acceptance and application of technical regulations for
specific industrial products based on the main provisions of EU, the creation
of appropriate infrastructure of designated conformity assessment bodies and retrofit
of testing laboratories and the implementation of their accreditation, as well
as the modernization of production to provide production in accordance with the
requirements of technical regulations. In turn, this will allow domestic
producers to compete with their European counterparts.
Along with this,
the development of protection of geographical indications in Ukraine provided under
the Agreement, as well as involvement experience and resources of the EU will
lead to the development of marking goods that will emphasize on the national
identity of Ukrainian products on the domestic and global markets, spreading
the positive image of the state as a producer of special in quality products
and as a consequence, will facilitate sales and exports due to reputation.
for the application of rules of origin of the European Union will also have a
great importance for Ukrainian exporters (producers of goods) to the EU that
will provide bilateral cumulation of origin between Ukraine and the
EU. According to the agreements concerning the Agreement provisions on the
capital flow and payments provided to guarantee the free capital flow relating
to direct investments made in accordance with the laws of the country, as well
as related to commercial loans.
of the Agreement will also contribute to strengthening ties in trade,
environment and social policies and practices for further promotion of the
objectives of expanding trade between Ukraine and the EU, consideration
and complementarity of economic, social and
environmental interests in the development of state and society.
considering the completion of the negotiation process and the drafting of the
Association Agreement to be signed, the Government of Ukraine held significant
measures associated with the preparation of the internal market to operating
conditions within the Free Trade Area between Ukraine and the EU. In particular, reforms are carried out in
areas such as sanitary and phytosanitary measures,
technical regulations and standardization, public procurement, state aid, etc.. The work of harmonizing
the legislation of Ukraine with the
EU legislation is conducted on an ongoing basis , including in the
framework of Ukraine-EU Association Agenda and the National Programme
of Adaptation of Ukraine's legislation to the European Union (Law of Ukraine on
March 18, 2004 № 1629-IV as amended).
example, as for today 7061 national standard has been approved and harmonized
with the international and European ones and 40 technical regulations developed
on the base of EU legislation, 27 of which have already been implemented. In
addition, large-scale measures are being taken related with the preparation of
the internal market to operating conditions within the Free Trade Area between Ukraine and the
EU. For this purpose, On June,15, 2011 there was approved the order of the
Cabinet of Ministers of Ukraine № 548-р "On the approval of a plan to
increase the benefits and minimize the negative effects of an establishment of
Free Trade Area with the European Union for the Ukraine's economy."
above has already provided for domestic exporters an access to the European
market on certain goods, particularly on foods of animal origin.
As of on
January 2013 the European Union included Ukraine in the list of countries that
had approved plans for state monitoring of residues of veterinary drugs and
contaminants in animal products such as milk, eggs, honey, poultry and
aquaculture (Commission Decision № 2011/163/EU).
So today Ukraine is able
to export to the EU member states as follows:
fish (for human
of animal origin not for human consumption (by-products),
and egg products.
The work of
obtaining permission for export of poultry
is on the final stage, while the work on the requirements and permission for
export of milk is still ongoing. To
expedite obtaining final permission to export these products to the market of
the EU Member States Ukraine must fulfill a number of requirements, which
requires considerable resources.
addition, in recent years there has been a tendency of growth of exports
agricultural commodities and products (crops and seeds and oleaginous fruits)
to the EU. In particular, grain exports increased by 92%,
or USD 949.9 million and seed exports increased by 33.5% or USD 308.0 million.