What opportunities free trade area with the European Union opens up for Ukrainian business

Ukrainian business can sell its products to the European Union countries without paying high import duties. This rule works within the Free Trade Area (FTA), which has been in action for 2 years. Entrepreneurs perceive the agreement as an opportunity to enter the markets of European countries.

Since the beginning of the conflict in eastern Ukraine, not only Ukrainian exports abroad, but also the country’s economy as a whole have shrunk. Nevertheless, the situation has started to change gradually. In 2017, sales to other countries grew by 20%.

The engine of growth is mostly exporting to the European Union, with which Ukraine has created the Free Trade Area and which now accounts for more than 40% of Ukrainian exports. In 2017, Ukrainian sales to Europe grew by 30% to $17.5 billion compared to 2016.

The key goods of Ukrainian export not only to Europe, but also to other countries, remain raw materials of agriculture and metallurgy. But gradually the supply to the EU of products with higher added value is growing. In 2017, for example, local companies started to sell to Europe butter, tower cranes, signaling systems for trams and railways, lighthouses and even airplanes. Another example – in recent years, exports of IT services to Europe have been growing.

Ukraine is already known in the EU not only as a supplier of grain and products of metallurgy, said Yuriy Yakovlev, the chief designer of the Ukrainian company Aeroprakt, but also as a quality manufacturer of light planes. Last year, Aeroprakt sold a record number of planes – 91. And half of them went to the EU countries.

Ukrainian entrepreneurs appreciate the FTA first and foremost for the abolition of duties on import of goods. After all, this made Ukrainian products cheaper for European customers. For some categories of goods, duty rates dropped from 10-20% to zero. Others, namely milk, meat, honey, juices, cereals (a total of 36 commodity items), can be exported duty-free in limited quantities per year.

Such a norm should help business. Absence of duties makes products more affordable and easier to market, says Hennadiy Shestak co-founder of Ugears company, a quarter of whose wooden constructors is sold to Europe.

The cancellation of duties gives an incentive for Ukrainian business to produce goods with high added value (extra costs added in the process of finalizing, processing and marketing goods on the market). Export duties for such products have been completely removed.

Nevertheless, for the Ukrainian business to benefit from the cancellation of duties, the state should take care of the abolition of the so-called “non-tariff barriers”. For entrepreneurs this means that the requirements for companies and for manufactured goods in our country and in the European Union will be the same.

Sanitary and hygienic norms for companies of the agrarian and food sector are abolished and replaced with mandatory modern HACCP requirements to organize safe production. For companies that manufacture non-food products, obsolete state standards are abolished, while new updated technological regulations are introduced.

Now the key requirement for business is to ensure safety of production and products. And safety concerns everything – the composition of goods, the conditions of production, and packaging.

Ukrainian entrepreneurs, who are already familiar with the procedures in Europe, argue that all requirements are adequate and justified. For example, workers should work in headgear and gloves, and lamps on the production line must be protected with shades, so that the glass does not fall into the product.

It is not so difficult to get the necessary documents for a business that wants to work according to European standards, says Yuryi Yakovlev from Aeroprakt. You just need to show the technical characteristics of the plane, which confirm its reliability, and prove that there is an agreement with a dealer for its maintenance.

When Ukrainian business meets all modern requirements, it will become more competitive not only in Europe, but in the world. That is, exports will grow. And exports mean growth of production, new jobs, higher incomes for business and employees, and as a result, the growth of our country’s economy. And most importantly: Ukrainians will have the opportunity to consume safer products. For more information on the opportunities that the Free Trade Area with the EU offers, see the “Free trade” section on the EU4Business website.

The article was originally published on Segodnya (print version)