Executive summary

EU-Ukraine bilateral trade has increased significantly over the last decade. EU food and drink exports to Ukraine have grown during this time by nearly 500% and imports by more than 300%(1). This reflects not only the statistical effect of the last two EU enlargements, but also real trade expansion. With 45 million consumers, the Ukrainian market continues to offer opportunities for further export development to EU food and drink producers. At the same time, the Ukrainian agri-food sector has a big production potential and already provides Europe with some important quantities of agricultural raw materials and animal feed(2).

The Confederation of food and drink industries of the EU (CIAA) has been supporting a Free Trade Agreement (FTA) between the EU and Ukraine since the negotiations began in 2008. CIAA believes that an FTA could create even stronger economic ties and improve market access for the EU food and drink exports to Ukraine.

Considering that EU exports to Ukraine are hindered both by tariffs and non-tariff barriers, CIAA would like to emphasise the need to use the FTA framework as an opportunity to approximate the regulatory frameworks and strengthen regulatory cooperation between the EU and Ukraine.

Acknowledging the difficulties surrounding of the negotiating process, CIAA continues looking forward to the conclusion of a balanced agreement bringing solutions to both tariff and non-tariff barriers.

CIAA priorities for the Free Trade Agreement with Ukraine:

1.     Reduction of the Ukrainian Tariff Protection

As a result of Ukraine’s accession to the WTO in May 2008, Ukrainian tariffs were lowered, simplified and made more predictable. Despite this improvement, the weighted average tariff applied by Ukraine to agri-food products still amounts to 19%(3). At the same time, the weighted average MFN tariff applied by the EU to imports from Ukraine was only 2.26% in 2009(4), with even lower tariffs being available to Ukraine under the General System of Preferences (GSP). Considering this situation, CIAA emphasises the fact that the future agreement should be balanced in terms of tariff conditions conceded by both parties.

For products with offensive interests a free trade agreement with Ukraine represents an opportunity. CIAA considers that import duties and charges should be dismantled on the basis of reciprocity offering similar market access opportunities to both partners. CIAA members also expect symmetry in timing when tariffs are dismantled.

Nevertheless, for certain sensitive sectors with defensive interests, an FTA can be a challenge. On the one hand, the Ukrainian agri-food industry has access to more competitively priced agricultural raw materials, while on the other hand, it is becoming increasingly efficient and competitive.

Therefore, CIAA admits that sector-specific treatment (limited number of tariff line exclusions, longer lead-in times for specific products, etc…) have to be provided to respond to particular sensitive and defensive interests.

2.     Elimination of export restrictions on agricultural raw materials

CIAA is concerned by Ukrainian attempts to withdraw from its earlier commitment regarding export taxes on sunflower seeds. The terms of the Ukrainian WTO accession provided for an immediate cut in the export duty to 16% and a further yearly reduction by one percentage point until the duty rate reaches 10%. The issue was also subject to a bilateral arrangement according to which Ukraine is supposed to lift its export taxes once the FTA is implemented. CIAA very much appreciates the Commission’s strict approach on this issue and calls for the elimination of these export taxes as soon as possible, according to a clearly defined timeline.

Considering the effects on prices and on the availability of raw materials, the EU food and drink sector is equally concerned by Ukraine’s decision to restrict grain exports. CIAA calls upon the EU to insist that these measures can only be temporary and should not expire later than originally planed.

3.     Non-tariff barriers

Non-tariff measures hinder the access of European foodstuffs to the Ukrainian market. CIAA acknowledges the difficulty of the bilateral talks regarding the sanitary and phyto-sanitary (SPS) chapter of the future agreement. However, we are convinced that the added value of the agreement would be very limited without a comprehensive and biding SPS chapter and a far-reaching law approximation exercise.

The latter should include the EU General Food Law and main food safety legislation such as hygiene and the introduction of HACCP, additives, contaminants, official controls, labelling legislation and other standards. Veterinary import regulations should be based on EU and OIE standards and the border checks and veterinary inspections should be limited to a strict minimum.

The new cooperation framework with Ukraine should also help to integrate Ukrainian risk managers and risk communicators into the pan-European science based risk communication network. This would enhance the quality of risk assessments in Ukraine in order to be able to proactively identify emerging risks to food supply.

The negotiations should also lead to elimination of the pre-market conformity certification for foodstuffs imported to Ukraine from the EU. The mandatory certification of products is inconsistent with the commitments to which Ukraine subscribed in the WTO. It cannot be justified as an efficient food safety instrument, considering the fact that the conformity checks are based on obsolete technical and sanitary standards and do not take the manufacturing process into account. The recent internal initiatives in Ukraine to eliminate these burdensome and unnecessary measures should be supported in the process of the free trade negotiations.

Special attention should also be given to customs clearance procedures and customs valuation methods in Ukraine that lead to delays and high costs. They should be simplified and improved. The difficulties result from the regulations’ complexity and their uneven enforcement, including multitude of pre-customs permits, registrations, licenses, technical regulations and, related to this, corruption, delays and high compliance costs etc.

The agreement should also contain a reference to the WTO commitments, particularly with regard to transparency and notification requirements. Were Ukraine to respect these rules, it would significantly increase the predictability of trade conditions for EU food and drink exporters.

Considering the high number of regulatory barriers to trade with Ukraine, the agreement should contain an effective dispute settlement procedure with a flexible mediation mechanism. The SPS chapter should not be exempt from the dispute settlement provisions.

4. Protection of Geographical Indications

CIAA welcomes the information about the efforts to achieve a bilateral protection system for Geographical Indications and fully supports this process.

5. Rules of Origin

Acknowledging that the FTA can lead to a far-reaching liberalisation of the EU market for Ukrainian products, CIAA emphasises the need for an efficient set of rules of origin. They should guarantee that these bilateral trade preferences benefit Ukraine only.

(1) Based on Eurostat data
(2) More information on the EU-Ukraine trade profile in annex 2
(3) WTO Member’s tariff profile 2009
(4) WITS database

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