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EU-Ukraine FTA Negotiations: Robust EU approach necessary

The EU has concluded negotiations on a Free Trade Agreement with Ukraine, but industry believes there are outstanding issues that require attention.

The EU has now concluded technical negotiations with the Ukraine for an FTA.

The negotiations have not been straightforward and conditions have changed or evolved even as agreement approached. Ukraine has insisted in introducing a safeguard clause that would be triggered when certain import/export limits are reached and insisted in excluding some automobile tariff lines from the FTA, but agreed finally to a relatively long 10 year tariff dismantling schedule. Further, Ukraine has launched a safeguard investigation against imports of some passenger cars, and there have been rumours that the authorities are planning to introduce provisional duties on automobiles in October 2011. These import tariffs could be between 8-10%.

On the news of the possibility for a provisional measure, sales of European cars in Ukraine spiked by 54% for August 2011 (compared to August 2010). This was in addition to a concurrent rise in the sales of domestic passenger cars. A crucial period is ahead for the case as the Ukrainian industry is exerting strong pressure to have provisional measures imposed, and the EU needs to have a clear and strong negotiating position. It is in Ukraine’s interest to integrate with the wider EU, and so concessions should be given with this reality in mind.

The EU Commissioner for Trade Karel De Gucht has, in the mean time, agreed to a Safeguard Clause of 15 years in length, despite the EU industry’s opposition to any form of quota system that would hamper EU exports during the implementation of an FTA. It puts EU exports in an unfavourable position in comparison with competitors, notably Russia, who exports goods that benefit from zero duties in Ukraine.

The industry welcomes FTAs, but notes that in order to work and to comply with the WTO, they must have dismantling periods of less than 10 years and must not be subject to additional provisional measures that would hamper EU trade. Given the contentious nature of the proposals, which directly affect the industry, abolishment of any additional tariff or non-tariff barriers has become a key aim for the industry. It continues to oppose any trade distorting safeguard clause that creates bad precedents for other FTA negotiations.

Last Updated 20/10/11

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