EU-Ukraine Free Trade Area

11 February 2010
by Ina Dimireva -- last modified 11 February 2010

The EU-Ukraine Free Trade Area is part of the EU's wider policy of creating a stable and prosperous European neighborhood through closer economic ties.

EU-Ukraine Bilateral Trade

In 2008 Ukraine was the EU's 17th largest trading partner and 14th largest export market. The EU is Ukraine's largest trading partner, with 27.1% of the total exports and 33.7% of imports in 2008. EU-Ukraine trade reached 39.5bn EUR in 2008, having increased from 34.8bn EUR in 2007, and has been growing by two-digit rates steadily in the recent years. The main export categories from UA to EU are agricultural products, energy, chemicals, iron and steel. The main import categories from EU to UA include machinery, transport equipment, chemicals, textile and clothing, and agricultural products.

Ukrainian exports to the EU are to a very large extent liberalized thanks to Generalized System of Preferences (GSP) granted by the EU to Ukraine since 1993. In 2007, GSP utilisation rate reached a good level of 74% of the eligible products. With 2.2 mio EUR of GSP preferential imports to the EU, Ukraine ranks9th among the most effective users of the system. Preferential imports are diversified and include i.a. the following sectors: chemicals, plant oils, minerals, base metals, machinery and mechanical appliances. Furthermore there are sectors where the Most Favoured Nations (MFN) duty applied by the EU is already zero (around 42% of all agricultural products can be sold duty-free by the Ukrainian exporters on the EU market).

With regard to quantitative import restrictions - before Ukraine became a full-fledged member of WTO, steel and textiles were subject to such import limits in the EU. They were regulated by respective bilateral agreements. These agreements lapsed as of day of Ukraine's WTO accession on 16 May 2008 and now Ukraine enjoys unrestricted exports of steel and textiles to the EU.

EU-Ukraine Free Trade Area

On 18 February 2008 former EU Commissioner Peter Mandelson and former Ukrainian President Viktor Yushchenko launched negotiations for a free trade agreement between the EU and Ukraine. The launch of negotiations followed the finalization of Ukraine's WTO accession process on 5 February 2008 (Ukraine formally became WTO member on 16 May 2008), which was a prerequisite for the start of FTA negotiations. The FTA will be an integral part of the future Association Agreement (negotiations opened on 6 March 2007).

The EU-Ukraine FTA is supposed to become the first of a new type of “deep and comprehensive” trade agreements. The FTA will cover a wide array of trade-related issues (“comprehensive”) and it aims at eliminating 'behind the border' obstacles to trade through processes of regulatory approximation, thus partially opening/extending the EU internal market to Ukraine (“deep”). The FTA will give Ukraine "a stake in the EU internal market".

As of November 2009, 8 Rounds of the FTA negotiations with Ukraine took place and the 9th Round is scheduled for 7-11 December in Kyiv. Discussions have taken place in the following working groups: (1) Trade in goods , (2) Trade and Sustainable Development, (3) Rules of Origin, (4) Services, capital and establishment (5) Intellectual Property Rights (incl. Geographical Indications), (6) Customs and Trade Facilitation, (7) Public Procurement, (8) Competition (anti-trust and state aid), (9) SPS, (10) Trade related energy issues, (11) Tariff offer, (12) Dispute Settlement, (13) Transparency.

Source: EU Delegation to Ukraine