Roundtable on the Deep and Comprehensive Free Trade Area (DCFTA) between the EU and Ukraine

 

Access to the EU market

Ukraine already benefits from lower import duties into the EU while the EU already benefits from a decrease in Ukraine’s import duties under Ukraine’s WTO obligations. For example, Ukraine’s key export sector, trade in steel and metal products, there have been no quotas since May 2008 and the import duties in the EU are 0% or not less than 3% for certain types of products.

So from a Ukrainian business perspective, it’s mainly the removal or harmonization of non tariff barriers to trade which are of concern at present to business.

Trade in goods

Reach

From the perspective of industrial businesses exporting to the EU, compliance with EU standards for industrial products and the provisions of the REACH Directive present the biggest challenges for the import of Ukrainian goods to the EU. But, it is also clear that these compliance difficulties apply both to EU and foreign producers/importers.

From and industrial businesses perspective, it would be helpful if some mechanism for early warning and discussions with the Ukrainian side under the DCFTA on changes in rules and regulations related to the application of the REACH directive could be established.

Carbon Tax

The ongoing discussions in the EU on carbon tax can pose a threat to the import of Ukrainian industrial and energy consuming products.  At the present time, the form that a carbon tax might take is not clear.  What is clear is that pressure from member states and from the commission and parliament for its imposition is mounting.

The EU's use of trade defence instruments (TDIs) remains sensitive; nearly all types of tubes (seamless and welded) originating from Ukraine are subject to EU antidumping measures. However, to date, there have been no new investigations started by the EU for Ukraine’s steel products after Ukraine’s accession to the WTO.

It is also unclear how the decision making procedure on TDIs is to be taken under the new Lisbon Treaty. This should be clearly explained to the Ukrainian side and Ukrainian business. Undertakings agreed by the Ukrainian side following discussion will always be a better option than antidumping measures. 

 

The Visa Issue: Mobility of people

Doing business and providing services related to business requires Ukrainian engineers, management, and qualified specialists to go abroad, and in most cases to the EU.  While this is easy for me as an EU citizen, it is a time consuming and frustrating process for my Ukrainian colleagues. The same applies to training of personnel employed in the both in Ukrainian operating companies, and in our businesses in the EU member states. The current visa regime currently presents a challenge and a cost to Ukrainian business

While the DCFTA doesn’t directly cover visa issues, the impact of visa application procedures on business activities should be taken into consideration because it is vital to achieving economic integration. I would add that it has been good to see the positive developments in this area in the past few months and the recognition that visa free travel for Ukrainians is possible.  From and EU perspective the key concern remains the integrity and security of Ukrainian borders and this is an area which will require further work from Ukraine to ease European fears of easy access to the EU for illegal immigrants via the backdoor.

Regulatory policy

The sooner Ukrainian business knows and understands which EU directives, standards and regulations are to be adopted in Ukraine and when they are to become effective, including those relating to social and corporate policy, the better it will be. Early and effective communication of the planned changes in the regulatory environment will save compliance costs and ensure the effective implementation of these regulations in the shortest time and allow the economic benefits of the DCFTA to flow to business and society.

·          Regarding the issue of energy, it is particularly important that the trade in energy chapter of the DCFTA should allow Ukrainian companies to increase the export of electricity to the EU (this process should start already as soon as Ukraine joins the European Energy Community later this year). DTEK, SCM’s energy business, is a strong advocate of this process and of energy market reform in Ukraine.

 

·          With regard to public procurement, equal access for Ukrainian companies to the EU public procurement market and understanding of the rules is important. This is an area to which priority should be given. 

 

 Access to the Ukrainian market

We understand that after the DCFTA enters into force, the existing export duties on ferrous and non ferrous scrap should be repealed.  This should be taken into consideration by the domestic consumers in their short term and long term strategies and we have already taken this step at our mining and metals business Metinvest.

As I mentioned earlier, the Ukrainian market for industrial products and services has already been liberalized to a great extent under the Ukraine’s WTO obligations (with some exemptions, like automobiles and export duties on raw materials).

 

EU Integration and the Fostering domestic reforms in Ukraine.

SCM supports the DCFTA as a tool to stimulate and direct domestic Ukrainian reforms, in particular in respect of standardization and regulatory reform. This regulatory reform will help Ukrainian business to be able to cope with competition, to diversify product ranges and extend export markets (not only EU’s but also to the other countries which require convergence with the EU standards or which purchase industrial products under the EU supported programmes).

This regulatory reform in Ukraine and approximation with the EU will increase the ability of business to attract loans and credits from financial institutions and also to help SMEs to internationalize. This is very important for the investment climate in Ukraine and its regions and it will strengthen business infrastructure needed (services, production of spare parts for the industrial goods etc). 

 

Engaging Ukrainian Business

The EU and the Ukrainian government need to do more to engage a broader cross section of Ukrainian business in the debate and in the process so that the DCFTA, when agreed, has business support, its benefits are know and  steps will be taken to change business processes to meet European standards and regulations.  It is a sad reflection of the current level of engagement with business on the important issue that only SCM is represented here today.