Evaluation of the results and analysis of the impact of the DCFTA with the EU on agricultural trade in Ukraine

Abstract

Purpose. The purpose of the article is to evaluate the impact of the EU-Ukraine Deep and Comprehensive Free Trade Area (DCFTA) on bilateral trade in agri-food products and domestic food market of Ukraine during the first five years after the entry into force of this DCFTA. Methodology / approach. Analysis of the impact of DCFTA with EU on the agricultural trade is based on the cost-benefit approach. The results of the implementation of the DCFTA agreement are evaluated in terms of benefits and losses for the main stakeholders (players) in agricultural trade – Ukrainian agricultural exporters, domestic agri-food producers, consumers, and the government sector. Based on the methods of analyzing the structure of the sectoral market, a list of criteria for evaluating the results of the implementation of the Agreement was determined. A comparison method was used to evaluate the impact of the EU-Ukraine Association Agreement (hereinafter Agreement or AA) on agricultural trade and the domestic market of agri-food products of Ukraine. To study the DCFTA’s impact, the five-year period (2009–2013) before its implementation was compared with the five-year period after the entry into force of the DCFTA bilaterally (2016–2020). Since Ukraine lost control over part of its territories after the start of the Agreement’s implementation, relative indicators were used to assess the impact of the EU-Ukraine DCFTA on the domestic market of agri-food products. The research was conducted based on the data of the State Statistics Committee of Ukraine, UN Comtrade Trade Statistics Database, Eurostat Database. Results. The analysis demonstrates the undoubted benefits of DCFTA for Ukrainian exporters of agricultural goods: (1) after the implementation of the DCFTA, there was an increase in both Ukraine’s agricultural exports to the EU and imports of agricultural products from the EU to Ukraine, and the resulting positive balance in agricultural trade in 2020 was 5.5 times higher than in 2009. (2) the average growth rate of Ukraine’s agricultural exports to the EU during the first 5 years of the Agreement (10.3 %) exceeded the average growth rate of agricultural imports from the EU to Ukraine (7.2 %). (3) during 2016–2020, Ukraine’s exports of agricultural goods to the EU grew faster than agricultural exports to the rest of the World, which indicates the high effectiveness of bilateral liberalization of foreign trade regimes. (4) the DCFTA with the EU has not yet resulted in significantly reduce of the share of agricultural raw materials (or low value-added primary goods) in Ukraine’s exports to the EU. (5) the potential for exports of Ukrainian agricultural products to the EU, including those produced by small and medium-sized agrobusinesses, has not been fully realized due to the low levels of tariff rate quotas, high level of EU import duty rates applied to quantities imported from Ukraine outside tariff quotas and long duration and high costs of the certification procedures for the export to the EU. (6) during the first 5 years of DCFTA implementation, there was no significant expansion of imports of agri-food products to the domestic market of Ukraine. This happened not so much because of the high competitiveness of domestic producers, but because of the low purchasing power of the population. (7) the implementation of the Agreement did not have a significant downward impact on domestic prices for agri-food products in Ukraine. (8) the lowering of the tariff protection of the domestic market did not significantly influenced the domestic production of agri-food products which remained stable, except for the production of grape wines, which decreased during 2016–2020. (9) due to the implementation of the Agreement, the EU has increased its share in the import of agri-food products to Ukraine. However, for some commodity groups there was both absolute and relative decrease in imports. This happened due to competition from other importers, as well as due to import substitution processes. Originality / scientific novelty. The originality of the study is the specification (adaptation) of cost-benefit analysis methods to identify the DCFTA impact on the main stakeholders in agricultural trade of Ukraine with European Union – exporters, domestic producers, consumers, government sector. Practical value / implications. The practical use of the study consists of identification of the positive and negative consequences of the DCFTA for Ukraine’s agricultural trade stakeholders, as well as factors of these consequences, that allows developing practical agricultural trade policy recommendations, including periodic time-to-time review of trade provisions of the Agreement.