Provisions of the EU-Ukraine Association Agreement concerning the creation of a free trade zone will become effective on 1 January 2016.
The decision on the application of the EU-Ukraine Association Agreement to the FTA was adopted in September 2014 by the EU General Affairs Council. What does the Ukrainian economy really expect? Is Ukraine ready for free trade with the EU: barriers and opportunities for business?
Natalia Osadcha, Advocate, PhD in law, Partner of Law firm "Syutkin&partners".
How will import/export be legally governed?
Under the free trade agreement with the EU, the EU and Ukraine will cancel import duties for the most of imported goods.
During ensuing 10 years Ukraine will gradually cancel import duties for a number of European goods. Ukrainian customs duties will be partially reduced to 20% -60% in the ensuing 5 – 10 years.
The abolition of import duties for the majority of the EU goods will take place in the first year of the effective term of the agreement (99% of tariff lines). The resulting increase of imports from the EU will provide a wide range of products for Ukrainian consumers and lower retail prices for imported goods. And Ukrainian producers will have access to a wide range of cheaper industrial products, components and equipment.
One of the main and significant consequences of the agreement for enterprises will be the immediate abolition of import duty for more than 97% of all goods exported from Ukraine to the EU, including agricultural products.
Import duties will not be completely abolished for 3% of exports only (certain agricultural goods). However, even for such goods a certain part of export will be implemented on duty free basis within the tariff quota.
In addition, the Ukrainian goods to be exported and imported to the EU on the terms of free trade will include input components from Ukraine, the EU and certain Mediterranean countries, which will significantly increase their competitiveness.
Undoubtedly, in accordance with the free trade agreement the EU undertakes to enable access to its market sooner than Ukraine, and, consequently, in the first years after the entry into force of the agreement Ukraine will have better conditions for access to the EU market than those the EU will have to the Ukrainian market.
It should be noted that the European Union is the biggest single market in the world, consisting of 28 countries and covering the population, which is 11 times as big as the population of Ukraine. It is over 500 million consumers, whose average income is 39,000 dollars.
In order for Ukraine to be able to easily and effectively sell its products on the market, the relevant regulations, standards, safety requirements should be harmonized with those of the EU. However, changes to the current legislation of Ukraine will be implemented gradually, and, therefore, the rules of doing business in Ukraine will change gradually over a period of time. To implement some measures Ukraine will have 15 years at its disposal. Therefore, Ukrainian enterprises will have sufficient time to adapt to the new rules and to get all the necessary certificates and permits that are required for a particular activity.
What opportunities will open for business? What shortcomings does the agreement have?
Due to the fact that the EU market is the largest market in the world, in my opinion, the opportunities are enormous. Thus, Ukrainian producers will enjoy the possibility to sell goods in the EU as well as very competitive prices for really quality products produced in Ukraine. Due to the hryvnya devaluation prices have become extremely low compared with the prices of goods produced in the EU.
I believe that, under such conditions, it will be difficult to compete with Ukraine against the cost and quality, and, therefore, this is a major advantage of the Ukrainian business environment.
As for drawbacks, personally I do not see any. The only issue is that a big job must be done, in particular, it is necessary to change a lot of regulations, to adopt a large number of new laws, regulations, and to implement appropriate changes. Nevertheless, such changes are necessary for the development of the country and for the future admittance to the EU.
