The Key Trade Policy Vectors of Ukraine

By Nataliia Isakhanova, Anna Gladshtein & Olesia Kryvetska

Posted: 16th February 2016 10:33

Trade policy of Ukraine is to be considered in the light of several serious and critical developments.  In particular effect of financial and economic crisis and to the utmost – illegal annexation of Crimea followed by a military conflict in the East of Ukraine that led to the loss of production capacity in the conflict area.  Moreover Ukraine is currently dealing with systemic trade barriers imposed by a major regional trading partner.

I. Multilateral and preferential trade regimes of Ukraine

Since accession to the World Trade Organization (WTO) in 2008 Ukraine participated in 16 WTO disputes.  In four disputes, Ukraine has participated as a complainant: Armenia – Measures Affecting the Importation and Internal Sale of Cigarettes and Alcoholic Beverages; Moldova — Environmental Charge, Australia – Tobacco Plain Packaging (Ukraine), Russia - Measures Affecting the Importation of Railway Rolling Stock, Railway Switches, other Railway Equipment, and Parts Thereof (currently in the stage of consultations).  The first two disputes were settled during the consultations stage.  In three disputes, Ukraine was involved as a respondent, namely Ukraine – Taxes on Distilled Spirits (Complainant - Moldova; Panel was not composed); Ukraine – Passenger Cars (Complainant - Japan; Panel Report is adopted) and Ukraine — Anti-Dumping Measures on Ammonium Nitrate (Complainant - the Russian Federation; the dispute remains in the stage of consultations).  Finally, in nine Ukraine has been participating as third party. 

Until quite recently, Ukraine acquired a reputation as a troublemaker in light of its tariff renegotiation request under Article XXVIII of the GATT 1994.  In September 2012, Ukraine applied to the WTO for revision of the bound tariffs stipulated in its Goods Schedule.  The request covered 371 tariff lines, including primarily agricultural products (227 tariff lines).  Having considered numerous concerns expressed by many WTO members and following negotiations on this matter, in June 2014 the Government of Ukraine made a decision to reduce the number of tariff lines in its request from 371 to 30. 

During 2015, we saw a notable change in Ukraine's line of conduct in the WTO.  First of all, Ukraine has withdrawn its claim against Australia in the dispute on tobacco plain packaging requirements.  Secondly, Ukraine cancelled safeguard measures in compliance with adopted Panel Report in Ukraine — Passenger Cars.  Moreover, Ukraine ratified the Trade Facilitation Agreement (the most comprehensive agreement dealing with facilitation of customs procedures) and acceded to the Government Procurement Agreement (plurilateral agreement opening window of opportunities for state enterprises) in November 2015.  Finally,the Ministry of Economic Development and Trade of Ukraine has started taking advantage of the WTO negotiating instruments and dispute settlement mechanism.  Notably, Ukraine has activated its presence as the third party to the disputes.  The state has fostered its position at the Technical Barriers to Trade (TBT) and Sanitary and Phytosanitary (SPS) Committees by raising concerns on systemic violations performed by the Government of the Russian Federation, and brought the first request for consultations over restrictions against Ukrainian imports of railway equipment by Russian Federation.

Such a policy vector was determined in the Activity Program of the Government of Ukraine adopted on 11 December 2014 and was specified in the respective Action plan.

Apart from liberalization at multilateral level in the framework of the WTO, Ukraine pursues liberalization at regional level.

In September 2014 European and Ukrainian Parliaments simultaneously ratified the Association Agreement, which provides for political association and economic integration between the EU and Ukraine and includes a ‘deep and comprehensive free trade agreement’ (DCFTA) as an integral part.  The Association Agreement is the first example of a new generation of agreements between the EU and Eastern Partnership countries focusing on core reforms, good governance, economic recovery and growth, and cooperation in a number of sectors. 

Provisional application of the DCFTA is expected to enter into force on 1 January 2016.  Though the Agreement was simultaneously ratified the EU and Ukrainian Parliaments, implementation of the Schedule of concessions set out in Annex I-A to the Association Agreement was postponed due to unprecedented security, political and economic challenges faced by Ukraine.  In order to support economy of Ukraine, it was decided to maintain autonomous trade preferences provided for under Regulation (EU) No 374/2014 of the European Parliament and the Council.  They involve the temporary reduction or elimination of customs duties in accordance with a schedule of concessions set out in the Association Agreement. 

Another notable example of Free Trade Agreements (FTAs) concluded by Ukraine is the agreement between Ukraine and the European Free Trade Association states (Iceland, Liechtenstein, Norway and Switzerland) dated 24 June 2010.  It is the first comprehensive and modern so-called WTO-plus FTA concluded by Ukraine.  Previously concluded FTAs are limited mostly to trade-in-goods issues.

Ukraine is a party to the Commonwealth of Independent States (CIS) FTA as of 1994. The CIS FTA had been signed by Armenia, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan and Ukraine. To date, only Tajikistan has not yet ratified the agreement.  The CIS FTA covers trade in goods only.  However, in late December 2015, Vladimir Putin issued a decree on termination of the free trade area between Russia and Ukraine starting from 1 January 2016.  Currently, imports of goods from Ukraine to Russia is subject to the following trade restrictive measures: (i) trade embargo on food and agricultural products originating from Ukraine; and (ii) MFN import duties for all products, previously covered by the free trade regime.  In its place, on 30 December 2015, the Cabinet of Ministers of Ukraine adopted countermeasures against Russian imports.  Notably, Ukraine introduced the MFN import regime for all Russian products and imposed import ban for certain products (such as meat, dairy products, tobacco products, baby food products, alcoholic beverages, confectionaries, some chemicals and railway equipment) originating from Russia.  Having come into force on 10 January 2016, the import ban imposed by Ukraine is valid until 5 August 2016.  Therefore, at present, the free trade area between Ukraine and Russia has ceased to exist.

Ukraine also has a free trade area with Macedonia and is a party to the GUAM FTA concluded in 2002 between Georgia, Ukraine, Azerbaijan and Moldova.  Also Ukraine already has bilateral FTA with Montenegro that covers trade in goods, services and dispute settlement. 

Moreover, in July 2015 Ukraine initialed the FTA with Canada.  The document covers trade in goods and other matters such as e-commerce, government procurement, competition, intellectual property, environment, employment and economic cooperation and technical assistance. 

Currently, Ukraine is negotiating FTAs with Israel and Turkey.

II. Domestic compliance and reforms

In August 2014, the National Reform Council was created.  The National Reform Council is the President’s advisory body that is responsible for strategic planning and securing coherent implementation of the reforms in Ukraine.

All the reforms the Council deals with rest upon the principles of transparency deregulation, combating corruption and Small and Medium Enterprises (SME) promotion.  In the context of Ukrainian trade policy, three sectors are of particular importance: public procurement, deregulation and export promotion.

1. Government procurement

The major achievements in this field include: (i) reform of the Governmental Procurement Act, (ii) Ukraine’s accession to the Government Procurement Agreement (GPA), and (iii) launch of an electronic public procurement system called “ProZorro”. 

Amendments to the Governmental Procurement Act has reasonably raised threshold values up to UAH 200 000 for goods and services, and UAH 1 500 000 for construction services.  Certain novelties were introduced regarding procedural rules on application formalities, pricing proposals, decision-making process.  Moreover, the Law provides for gradual transition of public procurements to e-format within 2016. 

2. Deregulation and entrepreneurship promotion

In this area the Council has reported on the following results:

3. Export promotion

Pushing forward Ukraine’s economic interest in the world serves as a key pillar of the Activity Program of the Government of Ukraine adopted on 11 December 2014.  The policy is predominantly conducted by the Deputy Minister of Trade and Economic Development - Trade Representative of Ukraine.  The post of the Trade Representative of Ukraine was created in August 2014.

The export promotion efforts are focused on the following areas: (i) market access under multilateral and preferential trade regimes as well as GSP, (ii) trade defense instruments, (iii) dispute settlement; (iv) informational support and capacity building, and (v) bilateral economic cooperation.

III. Implementation of the DCFTA with the EU

DCFTA implementation underlies Ukrainian trade policy and domestic reform process of Ukraine.  The core documents governing the process are the EU-Ukraine Association Agenda adopted in March 2015 and the Action Plan for implementation of the Association Agreement for the period of 2014-2017, adopted in December 2014.

However, the DCFTA implementation by Ukraine process brought about protests by the Russian Federation alleging that it would trigger increase in re-export of the EU products from the Ukrainian customs territory to Russia.  The issue is to put on the table of the EU-Ukraine-Russia trilateral consultation being held since July 2015 in Brussels. 

According to the Trade Representative of Ukraine, the country is looking forward to being a reliable partner at the WTO and is open for business and trade.

Nataliia Isakhanova (Partner)
 
Nataliia Isakhanova is a Partner of Sergii Koziakov & Partners with more than 20-year experience of legal practice specializing in International Trade Law, Corporate Law, Antitrust & Competition Law, Foreign Investments, Mergers and Acquisitions, Real Estate, Labor Law, Immigration Law..
 
Nataliia has extensive experience representing the interests of foreign investors in major investments projects in manufacturing, oil-and-gas industry, commercial, agricultural and telecommunication sectors in Ukraine and abroad. 
 
Nataliia has extensive experience in representing and advising General Motors Company, Opel Southeast Europe LLC, Chevrolet Central and Eastern Europe LLC, DELPHI France SAS, TP-LINK Technologies Co. Ltd,  Bunge,Lenovo Group, Hyundai Corporation, Samsung Electronics Co., Ltd, ECO Eastern Europe Real Estate AG, Mohamed Abdulmohsin Al Kharafi & Sons General Trading, General Contracting & Industrial Structures Co W. L. L.,  AE Nibulon Ltd (the largest Ukrainian agricultural exporter of grain), Scanroc (the largest Ukrainian producer of an energy-saving system for building’s thermal protection), Ukreximbank and many others.
 
Nataliia Isakhanova was an Adviser on Foreign Investments of the Government of the Autonomous Republic of Ajara (Georgia) from January 2009 to October, 2012.
 
Nataliia was repeatedly invited as an independent expert in Foreign Investments and the International Trade Law.  Nataliia Isakhanova developed the Concept of the Ukrainian Center for Foreign Investment Promotion and gave recommendations regarding Legislative Acts on establishment and activity of the Ukrainian for Foreign Investment Promotion as part of the grant of the Government of the Netherlands.  Upon the World Bank request, Nataliia Isakhanova participated in the working group composed of leading EU lawyers on preparation of the reports on conformity of Ukrainian legislation with the WTO standards and agreements under the WTO framework and developed recommendations on harmonization of Ukrainian legislation with the WTO standards and requirements.  Nataliia Isakhanova participated in the working group on preparation of the National Export Strategy for Ukraine. 
 
 Nataliia Isakhanova is recognized as a National expert in the sphere of Trade & Customs by Getting the Deal Through.
 
Nataliia Isakhanova authored numerous articles and publications on International Trade Law, Competition Law, Corporate Law and Labor Law. 
 
Nataliia Isakhanova holds Master`s Degree in International Law from Kyiv National Taras Shevchenko University, Institute of International Relations. 
 
Nataliia holds Ph.D. in International Law from Kyiv National Taras Shevchenko University, Institute of International Relations. 
 
Nataliia is fluent in English, Russian and Ukrainian and admitted to the Ukrainian Association of Lawyers and Ukrainian National Bar Association.
 
Nataliia can be contacted on +380 (44) 590 4828 or by email at office@kievbarrister.com
 
Anna Gladshtein  (Counsellor)
 
Anna Gladshtein is Counsellor with Sergii Koziakov & Partners Law Firm specializing in International Trade Law, Customs and Competition Law, Trade Aspects of Climate Change, International Commercial Arbitration and Public – Private Partnership.
 
Anna has extensive experience in representing and advising USA Poultry Egg & Export Council, Brazilian Chicken Producers and Exporters Association, Perdigao S.A., Sanderson Farms, Inc., Korea Electronics Association, Embassy of Republic of Korea, UNDP, Hyundai Corporation, Samsung Electronics Co., Ltd, Dongbu Metal, Co., Ltd, Alfred C.  Toepfer International (Ukraine), LLC, CJSC “Rise”, Euroglas Polska sp.  z.o.o., Nissan Motor Ukraine, etc. 
 
Anna permanently acts as legal advisor to the technical assistance projects involving reforms of legislation governing international trade matters.
 
Ms Gladshtein contributes to major business and legal publications on legislative developments in Ukraine, participates in conferences. 
 
Anna is Executive Coordinator of the English-language Master Programme “International Trade Regulation” at Institute of International Relations of National Taras Shevchenko University of Kyiv.  Anna lecturers and conducts tutorials in “International Trade Law”, “Current Trends in WTO Law” and “Legal Writing” within the Master Programme.  Anna also runs the subject Legal Debates Training in International Trade Regulation Programme. 
 
Anna Gladshtein coaches the Kyiv National Taras Shevchenko University team for participation in Elsa Moot Court Competition on WTO Law.  In 2010 – 2011 Anna Gladshtein co-coached the team of Kyiv National Taras Shevchenko University for participation in Willem C.  Vis International Commercial Arbitration Moot held in Vienna, Austria.  In 2011 Anna Gladshtein was invited as an Arbitrator in Eighteenth Annual Willem C.  Vis International Commercial Arbitration Moot held in Vienna, Austria.

Ms Gladshtein holds  Master`s Degree in International Law from Kyiv National Taras Shevchenko University.  Anna holds Certificate from International Fulbright Program “ADR Process: Skills Development and Implementation”.  Anna is recognized as a National expert in the sphere of Trade & Customs by Getting the Deal Through.
 
Anna is fluent in English, French, Ukrainian and Russian.  Anna is also admitted to Ukrainian Bar and Ukrainian Association of Lawyers.

Anna can be contacted on +380 (44) 590 4828 or by email at office@kievbarrister.com
 
Olesia Kryvetska (Associate)
 
Olesia Kryvetska is Associate with Sergii Koziakov & Partners specializing in International Economic Law, WTO Law and Law of Preferential Trade Agreements.
 
Olesia Kryvetska holds Master’s Degree from Kyiv National Taras Shevchenko University, Institute of International Relations, and from University of Barcelona, IELPO LL.M. Programme in International Economic Law and Policy.
 
Olesia Kryvetska participated in the ELSA Moot Court Competition on WTO Law, representing the Taras Shevchenko National University of Kyiv.  She was the winner of the Best Speaker Award in the preliminary rounds of the Regional Round held in Cluj-Napoca (Romania).  Olesia Kryvetska coaches Kyiv National Taras Shevchenko University team on ELSA Moot Court Competition on WTO.  Olesia Kryvetska is recognized as a National expert in the sphere of Trade & Customs by Getting the Deal Through.
 
Olesia Kryvetska advised on international trade Samsung Electronics Co., Ltd, Euroglas Polska sp.  z.o.o., etc.
 
Olesia Kryvetska is Member of Ukrainian Bar Association and fluent in Ukrainian, Russian, Spanish and English.
 
Olesia can be contacted on +380 44 590 48 28 or by email at office@kievbarrister.com

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