Non-tariff barriers in Ukrainian export to the EU

The economic relations between the EU and Ukraine have intensified in recent years. Following the 2004 enlargement, Ukraine became the direct neighbour of the EU. At the same time, the country has been developing rapidly and both local production capacities and demand for foreign produce have been increasing. Ukraine also become more open to external partners. All this is reflected in the gradual effective trade integration with the EU; i.e. in growing bilateral trade flows. The overall EU tariffs for Ukrainian products are rather low and other tradition protection measures apply to selective sectors only. Moreover they are expected to disappear gradually within the next few years, following Ukraine WTO entry and expected establishment of the free trade area in manufacturing goods between the EU and Ukraine. However, there exist other so called 'non-tariff’ barriers to trade that protect and will protect the EU market. For a relatively poorer country these barriers may turn to be prohibitive. This is probably the cause that there is general perception about Ukrainian export to the EU still being below its potential. The goal of this report is to explore whether the non-tariff barriers impede Ukrainian export to the EU and to what extent. This report is published about the time when the free trade agreement between the EU and Ukraine is negotiated. The authors hope that the findings will turn useful for designing the extent of this agreement and contribute to the discussion about it by showing the extent of non-tariff barriers faced currently by Ukrainian exporters. The report starts from the overview of Ukraine trade policy (chapter 1), with the special emphasis put on economic relations between the EU and Ukraine. Evolution of bilateral trade flows is discussed next (chapter 2). This is supplemented with the brief discussion of recently conducted surveys on barriers hampering Ukrainian exports (chapter 3). The experience of some current EU members from Central and Eastern Europe, which together with gradual phasing out of tariff and traditional protection measures in the 1990s faced growing non-tariff barriers to trade with the EU, seems to be relevant for Ukraine. Chapter 4 reviews the exposure of CEECs exports to the EU’s non-tariff barriers, and describes how the countries were changing its trade-related legislation towards the EU laws in order to tackle these barriers. Chapter 4 also shows the extent of the EU’s technical barriers to trade in different sectors and how well CEE enterprises were prepared to meet them, once the EU commodity markets opened up completely for the new EU members in 2004. Results of the survey on non-tariff barriers to trade that are faced by Ukrainian exporters to the EU are presented in chapter 5. This is the main empirical contribution and the focus of this paper. The survey covered such areas as certification of origin, customs procedures and technical standards. Finally, chapter 6 concludes with policy recommendations. The authors are grateful for the assistance received from the State Committee of Ukraine for Technical Regulation and Consumer Policy and Association of Light Industry Producers of Ukraine. This publication was made possible due to the financial support provided by the 2006 Foreign Aid Programme of the Ministry of Foreign Affairs of Poland.