Ukraine. A year of life in the free trade area with the EU: trading pattern

29.03.2017

In the previous article we briefly described the development of trading relationship between Ukraine and the EU through the lens of switching main trade flows from the CIS to the EU and taking into account the free trade area effective in 2016. Now we would like to dwell on the commodity composition of this trade. 

ukraine trade with euIf only broken down into two groups of goods – agricultural and non-agricultural ones (AMA/NAMA according to the WTO classification), the Ukraine-EU trade looks as presented in the diagrams. Agricultural product exports to the EU decreased just €65 Ml between 2012 and 2016.

Simultaneously, the agricultural share in total exports grew from 28.2% to 31.1%.

Despite a decline in the value of non-agricultural imports (see the diagram), their share in total imports did not change: it equaled 90.84% in the pre-revolutionary year and 90.67% in 2016. This stability stemmed from the fact that Ukrainian agricultural and non-agricultural imports annually dropped on average 8.4% and 8.8%, respectively, in 2012 - 2016.

As expected, an upward trend was revealed in agricultural and food exports (the “0” and “4” groups) to the EU when reviewing the trading pattern (according to the UN Standard International Trade Classification – SITC). Along with beverages and tobacco, their export share increased 7.1% in 2013-2016.

Also, a slight but steady upturn was observed in exports of high added-value products: “Machinery and transport equipment” and “Miscellaneous manufactured articles.” The combined value of these groups’ exports rose from € 1.96 Bl in 2013 to € 2.38 Bl in 2016 and their export share grew by 4.1 p.p. 

When assessing the rise in manufactured product exports to the EU, it should be taken into account that industrial manufacturer prices also surged in Ukraine. So, domestic prices for manufactured articles upped by 17.1% in 2014, 36% in 2015 and 20.5% in 2016.

Overall, the share of industrial products of the 3 and 5-8 groups, including mineral fuels, lubricants, chemical products, metal products etc., in total exports decreased 1.2% in 2013-2016.

Imports from the EU fell by 31% in 2013-2016 contrary to total exports to the EU, which did not actually change in that period (see the table). Remarkably, the share of industrial products of the 3 and 5-8 groups, despite a drop in their imports’ value, did not actually change: they accounted for 87.7% of total imports in 2013 and for 87.6% in 2016.

At the same time, the share of high-tech imports (group 7) expanded from 34.0% in 2013 to 36.4% in 2016. It is interesting to point out that the volume of beverage and tobacco imports restored last year (in value terms). They totaled € 233 Ml, i.e. roughly as much as in 2013 (€ 235 Ml).

The year 2016 was not an outstanding year with respect to the Ukraine-EU trade pattern, neither in terms of its key development trends.

At the same time, the following needs to be noted with regard to the 2015/2016 period:

  1. While total Ukrainian exports to the EU gained 2%, those of the 6-8 group industrial products grew at an outstripping rate. Specifically, exports of “manufactured goods classified chiefly by material” rose by 3.7%, “machinery and transport equipment” by 12.8% and “miscellaneous manufactured articles” by 23.6%;
  2. Exports of “animal or vegetable fats and oils, processed; waxes of animal or vegetable origin” to the EU gained a record 66.5%;
  3. With a 17.6% increase in total imports from the EU, “food and live animals” group imports grew to a lesser extent, just by 9.5%. At the same time, imports of technological manufactured goods expanded faster: “machinery and transport equipment” by 41.3% and “miscellaneous manufactured articles” by 18.1%;

The free trade regime reinforced structural trends that grew in the Ukraine-EU trade over the last four years. Their general direction was the following: raw materials in exchange for machines. The analysis of 2016 trade flows provides some insight into the possibility of creating prerequisites for this in the foreseeable future.

 

UkrAgroConsult

 

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