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Does Ukraine want to become Turkey's raw appendant?

Author : Oleksiy Kushch

22:48, 24 April 2018

Does Ukraine want to become Turkey's raw appendant?

Author : Oleksiy Kushch

A dozen years ago, experts considered Poland, Turkey and Ukraine the most promising leaders of the Baltic-Black Sea region, and Ukraine could make the most spectacular spurt. Now our backlog from Poland and Turkey is very big

22:48, 24 April 2018

Read original article at 112.ua

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In the near future, Ukraine can get into the next trade agreement, this time with Turkey. Before the end of 2018, Ukraine could sign an agreement on the establishment of a free trade zone with this country, which will fully work already in 2019, said the Prime Minister Volodymyr Groysman.

While the world's leading economies are making titanic efforts to protect their commodity markets, without neglecting even the frankly protectionist methods of fighting outsiders. Ukraine seems to start creating a "fourth trading international", trying to conclude trade agreements with anyone, even with Antarctica penguins. In our profile ministry, which should primarily focus on the promotion of Ukrainian goods to foreign markets (for which it is not necessary to conclude agreements on FTZs), it seems that they were too interested in the process, not the result, making foreign voyages and memories of new accomplishments. At that time, the US announced its withdrawal from the Trans-Pacific Partnership (TPP), considering that free trade with countries such as Vietnam and Malaysia is not very beneficial for the US labor market and domestic production. They would have to come out of the North American Free Trade Zone, but so far they have decided to give the Mexicans time to build a wall near their border.

Classics of the genre in this regard are the two trading hits of our officials. The first is the signing of an agreement on the establishment of FTA with Canada. In the expert environment somehow it is not customary to talk about this; apparently, the inner piety in front of the country of maple leaves is seen. Although trade is essentially a solution simple enough for those who studied econometrics and economic modeling, transport tasks, and personal feelings toward the country have nothing to do with it. Americans like voyages to Europe, but they are not in a hurry to create a single trade space with it. Personal interest above all. And the fascination with the poetry of Li Bo and Du Fu is not yet a reason to trade duty-free with China. So, following the results of 2017, that is, the period when the FTA between Ukraine and Canada operated in full growth, our exports to this country amounted to just over $ 50 million and imports – to $ 299 million, a negative balance for us reached 249 million dollars. It is easy to see that in terms of free trade Canadian imports exceeded the Ukrainian export exactly six times. Yes, now we import coal from this overseas country.

And this year Ukraine is going to sign a free trade agreement with Albania. In January 2018, our exports to this country amounted to 555 thousand dollars, and imports – to 31.7 thousand dollars. With such trade turnover, the profit will not suffice even for gifts to government delegations.

Our trading "representatives" have one more ace in a sleeve. This is Ukraine's accession to the so-called European Free Trade Association (EFTA). In the fifties and sixties of the last century, Britain vigorously competed with France and Germany for trade domination on the continent. In this regard, the British created the EFTA as a counterbalance to the continental integration efforts of the Germans and the French. Now, this commercial rudiment decreased to four countries: Iceland, Norway, Switzerland and Liechtenstein. Ukraine is planning to join this four, trying to register for all semi-dormant trade associations.

In Ukrainian politics, as in a giant black cauldron, there is a constant brew of all sorts of ideas and concepts, often with the spice of private interest of big business and a pinch of personal profit of this or that official. The subject of today's article will be another trade project with Turkey. However, recently all this has become more complicated. In an appendage to private corporate interests and the wishes of bureaucrats to receive a valuable offering, an ordinary folly has been added. That is why it was much harder to analyze the plans.

What is Turkey for Ukraine? A dozen years ago, experts considered Poland, Turkey and Ukraine as the most promising leaders of the Baltic-Black Sea region, and Ukraine could make the most spectacular spurt. Now our backlog from Poland and Turkey is very big. In recent years, we have already dropped a few times in the class and almost quit the competition because of non-payment of "contributions".

Our export structure today is like Turkey's in the early nineties of the last century: the same 40-50% of agricultural raw materials in the total mass of goods sold on foreign markets. But only since then the Turks have made impressive structural changes: today in their exports up to 30% are manufactured goods and equipment with a high level of added value. We reduced the given parameter from 20% to less than 10%. In addition, in the structure of selling food products, the Turks dominate with goods with a high level of processing, while we sell simple raw materials. It would seem that the statistics of mutual trade is very favorable for us: in 2017, the export of Ukrainian goods to Turkey amounted to $ 2.5 billion, and the import of Turkish goods – to $ 1.26 billion. At first glance, we have a significant trade surplus. But as it is known, the devil is in the details, and the essence of international trade – is in its structure.

Among the indicators of our exports it is necessary to note: grain ($ 236 million), oilseeds ($ 300 million), food industry waste ($ 171 million), vegetable oil ($ 106 million), timber ($ 137 million) , ferrous metals ($ 1068 million), ore raw materials ($ 96 million).

The structure of Turkish imports includes fruit ($ 123 million), vehicles ($ 141 million), textiles, footwear ($ 93 million), reactors, boilers ($ 133 million).

In this regard, you can certainly tell about the "raw curse" that we give them raw, and they give to us goods with a high level of added value. But it will be a little manipulation because the same structure of trade we have with the EU, but this does not mean that we need to get out of the agreement with Europe. Unfortunately, the structural changes that have occurred in our economy in recent years have made Ukraine a raw material appendage, and we will have a technological imbalance with any more developed economy.

In the context of Turkey, it is important to understand another thing. This country is a unique example of maximum trade integration into the European market, which in the case of another state would be possible only with full membership in the EU. To defeat Turks in trade is like trying to make more films than India.

At the moment, Turkey makes maximum use not only of the EU markets, but also of its regional leadership and, given the objective resource constraint, "squeezes out” less expansive neighbors. The Turks buy oil and process it at their petrochemical plants, supplying finished products to the European market. The same thing they do with our sunflower oil. They not only buy a Ukrainian "seed" and make a finished product out of it, but they also buy our finished oil, transported by special tankers, and then bottle it under their brands, adding "vitamins and carotenes" which even the Nobel laureate on biochemistry could not find. They export already Turkish oil, which is much more expensive than ours. The same thing happens in metallurgy: the Turks buy semi-finished products from ferrous metals in the form of slabs, rolls, square blanks, and also iron, and then produce steel and high-end products at their enterprises and sell this product in the markets of Germany, Sweden, and other European countries, but at a much higher price. In addition, Turkey is the largest consumer of scrap: last year it increased its imports by 18% - to 21 million tons worth more than $ 6 billion (data of the Turkish Iron and Steel Producers' Association).

To create an FTA with such a country means putting on the brink of survival not only our engineering industry but also the light industry, which in the last year began to show good growth rates and conquer not only the EU market but also our own. In addition, our producers of vegetables will not be able to withstand competition with the Turks - we will have to forget about Kherson tomatoes.

It is not difficult to see that almost half of our exports to Turkey are ferrous metals and ore raw materials. The creation of a free trade zone in this scenario is just another curtsey of power in front of one of the country's largest group. And for this it is not a problem to sacrifice Ukrainian machine-builders, Kherson tomatoes, seamstresses and shoemakers, turning Ukraine into an exporter of "seeds", scrap and semi-finished products from ferrous metals.

A similar sacrifice brought to the altar of the FTA's agreement with the EU was explained by the historical inevitability of the vector of European integration. And how can we explain the "dissolution" in the Turkish market? With the role of a raw appendage of Europe, Ukraine has already resigned. But to be a raw appendage of Turkey ... It’s not comme il faut ...

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