The jury is still out on the economic impact of Brexit, but Ukraine emerged in early October as an unlikely early beneficiary of Britain’s EU exit.
The UK and Ukraine signed an historic Political, Free Trade and Strategic Partnership Agreement on October 8 as London looked ahead towards the country’s post-Brexit future in 2021. UK Prime Minister Boris Johnson hailed the agreement as proof that Britain was Ukraine’s “most fervent supporter.” It marks a new chapter in UK-Ukraine relations and includes an ambitious free trade component that could now see economic ties strengthen considerably.
The trade element of the new UK-Ukraine Agreement envisages preferential treatment on a range of goods and services. It is based on the 2014 EU-Ukraine Association Agreement. Around 98% of Ukrainian goods will now receive greater access to the UK market, with tariff quotas maintained in most cases.
According to Taras Kachka, Ukraine’s Deputy Minister of Economic Development, Trade and Agriculture, this agreement will allow Ukrainian exporters to boost exports significantly next year once Britain completes its separation from the EU. For instance, the current quota for Ukrainian tomato paste exports to the EU is 10,000 tons. This will remain intact, while the new British agreement will open the way for an extra 2,000 tons of Ukrainian exports to the UK. There are also plans to expand current UK quotas in the coming years as Ukraine negotiates improved terms with the EU.
The deal offers a range of advantages for post-Brexit Britain. Crucially, freer trade with Ukraine will make a significant contribution to the UK’s food security. Britain is a major food importer and the new agreement means British consumers will benefit from a wider variety of affordable, high-quality Ukrainian products. Ukraine produces a great number of relatively inexpensive food products that are bound to appeal to British shoppers, including everything from honey to walnuts and a wide variety of fruit and veg. Ukraine’s rapidly evolving organic segment may prove particularly appealing to UK customers.
There is clearly room for growth. According to Gov.UK, trade between the UK and Ukraine was worth a modest GBP 1.5 billion in 2019, or around USD 2 billion. Top UK goods exports to Ukraine were aircraft, medicinal and pharmaceutical products, and cars. Meanwhile, key Ukrainian exports in the opposite direction included cereals, iron and steel.
In a further boost to bilateral trade ties, Britain’s UK Export Finance Agency is resuming loans and insurance for major British exports to Ukraine. A memorandum signed during President Zelenskyy’s London visit will help identify investment opportunities in defense, farming, infrastructure, energy, and healthcare.
The recently signed trade agreement is a win-win for both nations. British Prime Minister Boris Johnson has demonstrated his commitment to expanding Britain’s global footprint after Brexit, while Ukrainian President Volodymyr Zelenskyy has secured what is arguably his first major foreign policy victory since taking office in May 2019.
This success comes against a backdrop of grim international economic forecasts. According to an IMF report released in June, global output is set to contract by 8% this year, representing the biggest drop since World War II. Meanwhile, global trade volumes will fall by 10% as a result of coronavirus-related disruption, according to the World Trade Organization.
The coronavirus crisis has amplified existing pressures on global trade. Since 2017, the Trump presidency has marked a shift in US policy away from trade liberalization, leading to the rise of economic nationalism elsewhere. This has been bad news for developing economies like Ukraine, which are traditionally vulnerable to restrictions on exports. The deteriorating international trade picture and pessimistic outlook make the recent breakthrough in UK-Ukraine trade ties even more welcome.
Read the original text at Atlantic Council.