Ukraine and EU Association Agreement (AA) leading to Free Trade Area

It is expected that EU and Ukraine will sign the Association Agreement (AA) in the end of November 2013. The most important thing for businessmen is that the AA includes the economic chapter on the free trade area DCFTA (Deep and Comprehensive Free Trade Area). After the AA has been signed in November 2013, the interim agreement DCTFA will become valid after the ratification by Euro-parliament and Ukrainian parliament. Moreover, the representative of Lithuania, which now holds the rotating EU presidency, said that envoys from EU member states agreed 23 September that most of the AA could be applied without a long ratification process. ”Once it is signed, it will be possible to implement around 90 percent of the free trade agreement, without a ratification process,” the Lithuania’s foreign minister Mr. Linas Linkevicius told to AFP on Monday 23 September.

Ukrainian market and politics – sharp turn towards Europe

Ukraine, 45+ million people ex-Soviet Union country borders mainly with Russia and EU. Russia considers Ukraine as its zone of influence and always tries to keep the country involved into its policy orbit. Until the last month Russia was sure that no EU-Ukraine agreement will be signed at all. After the receiving of some signals from European politicians that the AA would be signed, massive anti-EU association informational attack and even economic blockade against Ukrainian goods were organized by Russian authorities. But Ukrainian president Mr. Yanukovich confirmed that the choice was made and Ukraine would sign the Assotiation Agreement with EU. This is something unreal and unbelievable for people who are familiar with Ukrainian reality. The Agreement is considered by Ukrainian elite like a silent revolution and a sharp turn from Russia dominated CIS system towards Europe.

Decreased barriers to trade for EU and Finnish companies

First of all, EU and Ukraine agreed to eliminate or reduce drastically tariffs on more than 95% tariff lines. All this improve the position of Finnish companies on the 85+ billion USD Ukrainian import market. Even now import from EU countries counts about 30% of the whole Ukrainian 85+ billion USD import. By estimations of experts, the import from EU to Ukraine after the signing of the AA will arise by 5% at least. Actually, the Ukrainian market is rather underestimated by Finnish companies and this is true. From the other hand, improvement of import conditions in Ukraine plus no visa requirement for EU citizens make Ukraine worth to be checked at least.
Also, Ukraine will liberalize the trade in services, covering all methods of service provision, but also provisions on investment, protection of intellectual property, including geographical indications, governmental procurements, competition rules, transparency of regulation, sustainable and harmonious development. This means great possibilities for Finnish companies in a future. For example, the volume of public procurements in Ukraine exceeded 63 billion USD in 2012. With the exception of some foreign suppliers, this market was ‘cultivated’ by local Ukrainian companies in previous years. After the implementation of EU legislation, Ukrainian governmental procurement market will be accessible to EU companies.

Very important thing is that AA includes provisions to eliminate and prevent non-tariff barriers to
trade, including technical barriers, standardization, metrology, accreditation and conformity assessment, as well as sanitary and phytosanitary measures. Ukraine takes obligations to implement a lot of EU standards and norms into national legislation.

What does AA mean for Ukrainian producers?

It means that they must modernize their production facilities, if they want to survive in a competitive fight with developed manufacturers from abroad.

What does it mean for Finnish businessmen?

It means easier access to the Ukrainian market, excellent possibilities for manufacturers of different equipment , engineering companies etc.

There are also some indirect mid- and long – time possibilities for EU suppliers of goods and services. For example, if all goes in a right way, Ukraine will modernize its economy and increase its market potential. It will mean better tax income and higher salaries. Accordingly, Ukrainians will purchase more different goods and services, from FMCG to educational services.

– Vadym Kovalchuk, Sarus Ukraine

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© 2011 Sarus Oy