Free trade not for all: Ukraine's exports statistics by regions

Author : Yuriy Panchenko

Source : 112 Ukraine

For the first time since 2013 Ukrainian exports to the EU began to increase
11:16, 22 March 2017

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2016 became the first year of free trade area between Ukraine and the European Union.

For the first time since 2013 Ukrainian exports to the EU began to increase. The growth rate is not very large - 3.7%. However, the EU was the only region where Ukrainian exports show positive dynamics. And accordingly, by 2016 the EU's share in the structure of Ukrainian exports rose again. Currently it is 37.1%.

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Instead, Russia's restrictions lead to a further reduction in the share of the CIS countries. Last year Ukrainian exports to the CIS fell by almost a quarter (22.7%). As a result, the share of exports to CIS countries fell to 16.6% - to the amount of more than half that export to the EU.

It is worth recalling that the results of 2013 the share of the CIS in the structure of Ukrainian exports accounted for 34.8%, and the EU - only 26.5%. But how this dynamics impacted the economies of Ukrainian regions? To explore this, we turned to the State Statistics data.

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We have been analyzing regional changes in Ukraine's foreign trade for about three years. During this time, the number of regions, where exports to the CIS countries dominated over export to Europe decreased from 18 to four.

Currently, high dependence on the CIS market remains only in Sumy, Chernihiv, and Mykolayiv regions. And in neither of them share the CIS does not exceed 50% - three years ago there were five such areas. A recent CIS region with a share of over 50% was Kharkiv.

Moreover, Chernihiv and Mykolayiv regions dominated by exports to "third countries". It also shows that the Russian trade ultimatums has passed.

Exports to the EU expectedly dominated in Western Ukraine. In particular, in the eight western regions accounting for over 50%. The most "pro-Western" situation is in Luhansk region. Here the share of European exports amounts to 57%. Moreover, the volume of exports to the EU from Luhansk region last year increased and more than doubled - to 114%.

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Share of exports to the EU in Donetsk region is just slightly smaller - 49%, although in absolute terms, exports fell by 2%.

It should be explained that here the Statistics Service considers the companies that are situated on the temporarily occupied territories. Loss of control over them can lead to a significant drop in the share of exports to the EU - at least in the areas of statistics.

There is a concerning trend - the share of exports to CIS countries not only remains high in the eastern border areas (except Donbas), but growing in Chernihiv region (primarily due to the rapid fall in exports to the EU). While this indicator can be considered unusual, but in case of continuation of this trend consequences could be mixed.

A disturbing trend is that positive effects of free trade with the EU embraced not all regions. The fall in exports to the EU was recorded in nine regions and in Kyiv.

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And this dynamic is observed even in western regions Rivne and Ternopil, which (supposedly) first adapted to the conditions of trade with the European Union.

Moreover, statistics in exports to the EU shows that among the traditional "economic giants" actual increase exports to the EU took place only in the Dnipropetrovsk region (+ 23%), Mykolaiv (+ 26%) and Lviv (+ 8%). Even in Kyiv, absolute volume of exports to the EU fell by 3%. Exports to the EU from Kharkiv fell by 3%. And from Odesa region - generally 15%.

A threatening trend is falling exports from Chernihiv region to the EU – by 32%.

From this, we might conclude that:

- Currently, the government and other players are actively contributing to companies from the East and South enter the European market, but the help of the West is needed.

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- The success of Western companies has been achieved through exports to neighboring Poland. While total exports to Poland is growing - in 2016, it increased by 11.3%. But this is time to expand the geography of sales, reducing dependency on neighboring market.

- Access to Western markets remained "weak spot" for most Ukrainian companies.

European right turn reflected on the choice of European consumers.

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We should be prepared for the fact that these buyers would become less loyal to import - and this requires new approaches from Ukrainian producers.

How the opening of the Ukrainian market has affected the volume of European imports to Ukraine? Overall, the results of 2016, imports from the EU increased by 22%. The growth of European imports recorded in almost all areas.

However, this was expected. High rates of imports are much higher than the growth of exports from Ukraine. It should be explained with a gradual recovery of the Ukrainian economy, and the fact that the EU has opened its market for Ukrainian goods yet in 2014.

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Much more surprising matter is the growth of imports from the CIS countries by 34%. In particular, in the Volyn region, imports increased for more than 8 times (!), in Cherkasy - more than twice, and in Chernivtsi - 86%.

Last year, Ukraine imposed restrictions on imports of certain goods from Russia. As a result, imports from Russia fell by almost a third - to 31.3%. Instead, increasing imports from other member states of the Eurasian Economic Community, of Belarus (13.4%) from Armenia (11.4%) and Kazakhstan (15%).

The worsening trade balance with the CIS is the problem, the answer to which should be given as soon as possible.

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