EU deal yet to bear fruit for Ukrainian exporters

REUTERS
GORODOK
Published 08.04.2016 22:07
Updated 08.04.2016 22:08
A dockyard worker watches as barley is mechanically poured into a 40,000 ton ship at a Ukrainian agricultural exporter's shipment terminal in the Black Sea port of Nikolayev, now known as Mykolaiv, Ukraine.
A dockyard worker watches as barley is mechanically poured into a 40,000 ton ship at a Ukrainian agricultural exporter's shipment terminal in the Black Sea port of Nikolayev, now known as Mykolaiv, Ukraine.

While Ukrainian officials hope to find a remedy from the Association Agreement with the EU to recover export losses due to the ongoing conflict with Russia, it fails to convince many Ukrainian exporters

Ukraine's Association Agreement with the European Union was meant to lure the bread basket of the former Soviet Union away from its longstanding ties with Russia by offering better access to the EU market. But debate about it was the spark that lit the Maidan street protests in 2013 and a pro-Russian insurgency that led to more than 9,000 deaths. The disruption sent exports to Russia into freefall and depressed sales to the European Union.

Now many exporters are worried that the deal, in place provisionally since January, does not offer enough to compensate for the collapse in trade with Russia to just $4.83 billion last year from $15.06 billion in 2013.

"Our company does not feel any change," said Taras Barshchovsky, the founder of T.B. Fruit, the parent company of Galicia-Trade, which makes juices from apples, carrots, cherries and other fruits.

Under the deal tariffs were lifted on most products traded between Ukraine and the EU. Quotas for textiles were lifted and will be phased out over 5 years for mineral products, chemicals, plastics and wood. In agriculture, by far the largest sector of the economy with a 12 percent contribution to gross domestic product, and also an area where Ukraine can successfully compete with European producers, many quotas were unchanged including for maize, alcohol and fruit juice.

Barshchovsky said the low quotas were a problem for his company and showed the deal had limited benefits for Ukraine. "In my opinion, they're pulling the wool over our eyes," he said.

The EU rejects any idea the deal is unfair and Ukraine's exports to the EU rose 3.3 percent in January, the first month of the deal, to 1.02 billion euros compared to a year earlier, according to data from EU's statistics agency Eurostat. And Ukrainian attitudes towards the EU remain broadly positive. A survey in November showed 58 percent of Ukrainians supported the EU deal, versus 15 percent who wanted a customs deal with Russia.

There is, however, growing disillusion with how Ukraine has turned out despite promises of the Western-backed leaders who came to power after Maidan. Corruption is still endemic, the separatist war in Ukraine's Russian-speaking east is raging, and a political crisis has delayed talks for new overseas aid.

At the same time, Ukraine's chief backers, the United States, the EU and the International Monetary Fund, are getting increasingly frustrated with the slow pace of change, and the IMF has threatened to end a multi-billion dollar aid package. The Association Agreement itself may be under threat after Dutch voters rejected it in a referendum on Wednesday, although Ukrainian President Petro Poroshenko said the result won't push his country from an EU path.

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