Agricultural markets under the influence of expected change in the trade regimes

T. Ostashko

Economy and Forecasting, 2013, issue 3, 105-115

Abstract: The article presents the analysis of agricultural trade regimes under alternative options of economic integration of Ukraine - FTA between the EU and Ukraine and Ukraine's accession to the Customs Union of Russia, Kazakhstan and Belarus. The author identifies the advantages for the development of exports and the threat to domestic producers under the conditions of different options for regional integration. It is shown that the conditions of agricultural trade with the EU are asymmetric because of (1) a significantly lower level of tariff protection of the domestic market of Ukraine, (2) a large number of specific and combined customs duty rates in EU, while in Ukraine the vast majority of import tariff rates are ad valorem; (3) the use of export subsidies by the EU (Ukraine has no right to use export subsidies), (4) the use of special safeguard measures t by the EU, not allowed for Ukraine , (5) the use of input prices in the EU; (4) using tariff quotas for 15% of tariff lines of agricultural products in the EU, while Ukraine has a tariff quota only for sugar cane. The analysis of the Association Agreement between the EU and Ukraine showed that the FTA only partially eliminates asymmetrical trade regimes between the parties through (1) granting the free access to EU market for certain Ukrainian products within the tariff quotas, (2) the refusal of EU to use export subsidies in bilateral trade with Ukraine. The author formulates disadvantages and risks for Ukrainian agricultural trade under FTA with EU: (1) small values of tariff import quotas granted by EU and limited list of tariff lines, (2) the inability of the majority of domestic producers to meet the technical, sanitary, phytosanitary requirements for export under tariff quotas allocated for Ukraine (3) losses of domestic producers of meat and meat products, fruits and vegetables as a result of increased imports from the EU. It is shown that trade in agricultural products with Customs Union of Russian Federation, Belarus and Kazakhstan develops slowly and the top export goods are at risk due to: (1) problems of technical regulations, (2) implementing programs to support the production of these goods in CU countries, (3) competition from third countries on CU markets. The author estimates total losses of exporters from the restrictions on agricultural trade on CU market providing that the Association Agreement between the EU and Ukraine was signed.

Date: 2013
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