European countries are primarily interested in developing their own producers

Author : Olena Holubyeva

Respondent : Mykhailo Nepran

Source : 112 Ukraine

On the eve of the 2nd International Trade and Industry Conference FTAs, the first vice-president of Ukraine's Chamber of Commerce told about the first results of a free trade area with Europe
23:12, 1 December 2016

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On the eve of the 2nd International Trade and Industry Conference "Free Trade Area: Opportunities and Challenges for Ukraine and partners," the first vice-president of the Chamber of Commerce in Ukraine (Chamber) Mykhailo Nepran told about the first results of the action of a free trade area with Europe. He told about how the impoverishment of the population saves the Ukrainian manufacturers of fierce competition with European mega-corporations and how in terms of complete absence of state support Ukrainians manage to make their way to the EU market. The conference to be held December 1-2.

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Mykhailo, a free trade zone with the EU is in force since 1 January 2016. Can you talk about the first results of its actions in Ukraine?

You have to understand that when such a global agreement is signed, the outcome does not always come the next day. In economics, there is such a thing as inertia: for example, any decision taken or canceled today, and the result will be known in a year, sometimes two or three years. When we talk about a free trade zone with the European Union, it is necessary to understand - this is a strategic way of development of the Ukrainian economy. Actually, we had two options: either we stay with Russia, we continue to quietly rotting in the Customs Union, or we go to a free trade zone with Europe, which is very tough, very competitive, yet very attractive on the container and the money market. The market on which to sell their products, services, goods are much more expensive, more promising.

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The Russian market was, in principle, more comfortable for Ukrainian producers. There and consumers are those that do not require the level of standards, both in Europe. And a good price level. And no need to strive for quality, as required by the European market. In addition, supply chain have been established for decades, since the days of the Soviet Union. As you know, only about 70% of agricultural products we delivered to the Russian Federation.

If we talk about the impact of the FTA on the Ukrainian economy in figures…

In figures, after the rapid fall in 2014-2015, export of Ukrainian goods to the EU is slow, but it resumes. During the first 9 months of 2016, it grew by 3.3%. And before the end of the year, analysts predict an increase of 6%. Imports from the EU grew by 7.3%, the mutual trade turnover - by 5.6%.

For example, take our glorious vodka, for which Russia was a major export market. According to Eurostat data, in 2014, the supply of Ukrainian alcohol to the EU amounted to EUR 19 million, and in 2015 - already 30 million euros.

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Speaking on the types of products in the EU is good agro-industrial complex, we are now among the leaders in the export of honey to Europe. Ukraine has a strong position in the supply of sunflower oil crop production.

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Ukrainian wheat, unfortunately, is of poor quality. This class 4-5 - fodder. Its main customers is Saudi Arabia, Asia, areas with difficult climatic conditions.

Harder situation is with animal products (cheese, dairy products, meat), because the EU is much more stringent requirements, technical barriers. Ukraine has certified enterprise, but to sell, for example, in France Ukrainian cheese, you know. This is also how we have to try to sell the imported vodka.

We considered that there might be another promising niche marketing of organic products. It is now a trend in Europe is very popular.

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You mean that it is too early to loud the success of export of agricultural to the EU?

Of course, when I spoke of agricultural products, we cannot say that all is well and we are there. Last year, when we held the International Trade and Industry Conference "Export-import relations EU-Ukraine 2016: the willingness of authorities and business", we invited representatives of the European Commission at the level of heads of departments, so that they addressed the Ukrainian exporters, set out their vision. How do they see where our place, because a political agreement was signed, that is to say, the beginning of the process. The doors opened, but you need to take a step.

What can participants expect from this second conference?

Firstly, the planned comprehensive discussion of the provisions of existing and potential agreements of Ukraine on free trade with the EU, the CIS countries, with Canada, since almost 70% of trade accounted for by these countries. It is also a promising area of cooperation is the GUAM format (creating so-called "Silk Road" in Central Asia, China, the Trans-Caspian corridor.

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An interesting exercise is to become the financial and banking panel discussion with representatives of the National Bank, Ministry of Finance, experts from international institutions. It is proposed to discuss the exchange of market liberalization, access to modern mechanisms and instruments of trade financing, international cooperation between customers of different countries, the financial program of export development.

We expect the participation of Foreign Minister Pavel Klimkin Ukraine, First Deputy Minister of Infrastructure of Ukraine Eugene Kravtsov, Deputy Minister of Agrarian Policy and Food of Ukraine on European Integration Trofimtsevoy Olga, First Deputy Finance Minister Oksana Markarova.

As an innovation in the framework of the conference are planning to hold a meeting of representatives of international chambers of commerce and business associations, with the participation of representatives of the diplomatic corps in Ukraine. During the meeting, scheduled to discuss the general tasks that promote trade, industrial cooperation, investment. Participation in this event today confirmed by representatives of Spanish-Ukrainian, Canadian-Ukrainian, American Chamber of Commerce, Chamber of Commerce of Italy in Ukraine, German-Ukrainian Chamber of Industry and Commerce, Israel, the Belarusian Chamber of Commerce. Also, representatives of the EU in Ukraine, China Trade Association.

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You say that the question of trade with the CIS countries will be discussed. Recently we heard statements by politicians that we should break all agreements linking Ukraine with CIS.

Of course, politicians can make decisions such as they deem necessary. But from the point of view of a particular businessman, people who receive salaries, which, for example, a business with Belarus tomorrow to tell him - everything. And while it no one will offer any compensation. What does it lead to? In addition, there will be more unemployment, is the economic downturn.

We do not want to focus on just trade with the EU. Yes - this is our priority, our strategic choice and our future. But to refuse to work with the CIS countries, Iran, China, Africa, the Balkans - it is, at least, unwise.

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We would not, of course, lose the markets of the former Union, and the CIS countries. It mean Belarus, Kazakhstan, Kyrgyzstan, Azerbaijan, Armenia.

Does Ukraine trade with these countries?

Trades, of course. The only thing that logistics, which has been through a Russian territory, today is disabled. Trade process has become more complicated, more expensive. That's two weeks ago met the intergovernmental Belarusian-Ukrainian commission. On our side was Deputy Prime Minister Gennady Zubko. Theirs was also a deputy prime minister. They gathered in Minsk, where they discussed issues of cooperation. Because we are interested in them, they are of interest to us. We are interested in how the country Belarus to supply our goods, but let's say so - Belarus is integrated into the Russian Federation. Indirectly, Belarus - is the Russian market, which is close to us. This is an opportunity to supply through Belarus in the CIS markets. We have a turnover with these countries - not at such a level as we would like, but it is. And foolish to give up trade with them.

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Entrepreneurs recently often expressed dissatisfaction with the size of the duty-free quota deliveries, set for them in the EU. Will you raise at the conference the question on the need to increase them?

This year the European Commission met Ukraine’s requirements, offering to unilaterally increase the volume of quotas for many headings, is barley, corn, oats and other grains, processed tomatoes, honey, and reset duties for fertilizers, footwear, electrical and metal. While the expected relevant decision of the European Parliament and of the Council. But even now - it is a victory of the Ukrainian side. If adopted by the European Parliament and the Council of the EU European Commission proposal, additional preferences will be valid for three years. It is possible that the results of statistical analysis for the year Ukrainian side will raise the issue of increasing the quota again, preparing a more reasoned position.

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I would not want to have false hopes that tomorrow Brussels would send us golden rain. It will not happen.

Ukraine, by the way, on the number of positions does not chose a quota. For example, garlic and mushrooms.

Why is this happening?

In order to deliver, the process should be stable, it is necessary to create an industrial lot for during the time of the contract. Reasons like "mushrooms did not grow" do not pass. Ukrainian producers, especially small and medium-sized enterprises, are often not ready.

Markets of which countries can still be promising for Ukrainian products?

As you know, we have signed an agreement on free trade zone with Canada - current negotiations on a FTA with Israel, Turkey intensively go. And all this, on the one hand - the possibility for Ukrainian exporters, on the other hand - a challenge for the Ukrainian economy. Because the free trade zone - it is to be understood, two-way street. This will not only enable us to sell, and this we open its market to goods from another country.

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For example, a free trade agreement with Turkey is on a par with the advantage (the ability to supply products to the Ukrainian market with a population of 70 million) to be a serious challenge for the Ukrainian light industry. As you know, Turkey is one of the leading garment. Do you remember the Turkish jackets, jeans, knitwear - strong competitors for Ukrainian goods, even in the presence of trade barriers.

In principle, our salvation is now in the low purchasing power of the population. Because, if large European companies, mega-corporations have come to our market ... They do not go because we are not interested in them.

But do they have such a possibility?

Of course. And as soon as the standard of living in Ukraine will begin to rise, then they will come. Because now we do not but imported chocolate, we take cheaper one, Ukrainian. Also imported sausage. Therefore, they do not look in our direction.

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Taking into account stringent requirements, which makes the EU market for Ukrainian producers - whether our state plans to support local exporters?

This is another issue that we want to discuss with our officials at the conference, as the state is going to support the Ukrainian export.

We hope to hear a response to this question. Now under the leadership of Stepan Kubiv Ukraine would elaborate export support strategy.

This would be export support program in all sectors of the economy?

Of course, this is the program for the industry. Because it has come to the point - we were going to Kyiv exporters last year. And they say: "You cannot help, at least not interfere with returns at least the time of VAT, increase foreign exchange earnings as possible."

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Now, many are considering options for cooperation, to finish the process in Europe and then sold on the EU market. I recently spoke with representatives of the Committee of Pharmacy at the UCCI, they are actively selling their products to the EU market. To do this, we have acquired a number of companies and will promote their drugs. This is one of the best ways, because the Ukrainian medicine is difficult to register.


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 Prime Minister Groisman with the Prime Minister of Croatia, Andrei Plenkovich visited our House. 80 businessmen came with him. For our part, we invited entrepreneurs.

Croatia was the latter country taken to the EU. And we can consider this as an opportunity to go through it to the EU market.

In this regard, not all the new EU member countries are of our interest?

No, in each case it is necessary to look separately. Romania, for example, is not very tuned us to open its market. And Poland supports us.

Is there EU support for Ukrainian business? Can we expect the base of joint ventures with European mega-corporations, which could convey Ukrainian businessmen their experience in the development of the EU market?

You know, we have had the illusion that Europeans will stretch us out and open their markets. But business is a tough thing. And any country in the first place to protect your business and your market. If you come to us to create a joint venture, it is only on the basis of selling their products here in Ukraine. Or that's the same Leoni (German company), it is advantageous to have the plant in Ukraine in terms of logistics, plus the wages are lower than in Europe. Now their plant is in the Lviv region - the center of electrical equipment for the entire European motor industry. Moreover, now they want to build in the Ivano-Frankivsk region, because there is not enough staff in Lviv. As it turned out, this is our second problem is that a lack of qualified employees. Because vocational personnel system, which was in the Soviet era, died, and the new, we have done nothing. A worker must now be trained at a level of at least an engineer. Simple machines, in which he could stand no longer.

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Just come in and do a joint venture in order to cultivate a competitor in Ukraine, let us be realistic, it will not. Salvation drowning - the handiwork of drowning.

Domestic machinery after FTA is in a less advantageous position than the agricultural sector, right?

This summer, the Razumkov Center presented a detailed study on export. And as it turned out, our exports of agricultural products has already exceeded the volume of industrial exports. We are from the industrial-agrarian country has turned into an agrarian-industrial country. Good or bad - scientists have said it a topic for another discussion.

In principle, if we are because of our geographical features we can feed the world - why don’t we do that.

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This turning vector from industrial-agrarian agrarian-industrial dimension began with the conclusion of the FTA agreement with Europe?

Including a free trade zone. And in general, if we talk about Europe, while our engineering there really uncompetitive. I remember back in the late 90's Roman Shpek, Minister of Economy, when asked for help, our pilots said, we do build the world's best aircraft, said to them: "Guys, you can be the best aircraft in the world, but in Europe there are Airbus, the United States has a Boeing." Germany or France did not want to buy Ukrainian airplanes, even if they are a hundred times better than the Airbus, because they were interested in the fact that taxpayers and voters were provided with jobs. If we want to sell our products, we need to be integrated into Europe. While we are not members of the EU, we must realize that European market is one of the most demanding and competitive in the world. And each country is interested in the first place to develop their own.

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Now we have the agricultural sector and the IT sector - two main leader in the export of goods from Ukraine. Metallurgy and chemistry today really went down. They surrendered their lead.

So what our companies should do, close?

No need to close – they should do retooling, re-equipment. In order to be able, if not to make the final product, then participate in the value chain.

I mean the state export support system.


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