In Kyiv, Canadian Prime Minister Justin Trudeau described the free trade deal signed by Ukrane and Canada as a milestone. And, after ratification, the agreement is indeed expected to help Ukrainian producers launch into Northern American markets.
Yet, at the moment, the trade figures do not encourage optimism.
Canadian imports to Ukraine reached $206 million last year, led by minerals, machinery and chemicals. Ukraine’s exports to Canada, however, stood at just $30 million in 2015. Ukraine sells metal and machine products as well as agricultural commodities and food products.
This is a drop in the ocean for a Canadian market with 35 million consumers who import almost $420 billion from world markets every year.
At the first glance, the trade deal is more beneficial for Ukraine.
Ukrainian exporters of agricultural and industrial products receive duty-free access to 98 percent of the Canadian market when the agreement goes into effect. Quotas will stay in place for poultry, dairy products, eggs, cheese and sugar. There is also a seven-year transition period for car imports.
Ukraine will open only 72 percent of its market. Import duties will be removed for fish, cereals, chocolate, peanuts, oil seeds, juices, beer and wine. Duties for live sheep and poultry will be lifted in three years. Pork, milk, eggs and honey will be imported with zero tariffs in seven years.
The Ukrainian Economy Ministry is expecting to see improvement within three years. Parliament Speaker Andriy Parubiy said that Kyiv will ratify the deal as fast as possible while, in Canada, ratification may take a year.
Potential for growth
Emma Turos, managing director at Canada-Ukraine Chamber of Commerce, hopes the deal will help trade to catch up to political cooperation and historic links between Ukraine and Canada, where 1.3 million citizens have Ukrainian ancestry.
Existing trade turnover is expected to go up 3.5 percent. Turos said that Ukraine will boost exports of textiles, information technology services and start cooperation in armament, aerospace and even cinema production.
“Today we had negotiations concerning cinema production,” Turos said. “We can offer our facilities for the Canadian industry.”
The signing was followed by new contracts in the aviation industry.
On July 11, one of world’s leading rail technology giants, Bombardier Transportation, signed a letter of intent with Ukrainian Railways to start negotiations on joint production of electric locomotives in Ukraine.
On July 12, Pratt & Whitney Canada signed a memorandum to start providing Antonov’s AN-132 aircraft production program with a new version of the PW150A turboprop engine.
Another Canadian company, Esterline CMC Electronics, signed a contract with Antonov to supply its high-performance avionics systems for the AN-124 transport aircraft.
In 2015, Ukraine’s exports dropped by 29.3 percent to $38.1 billion while imports slid 31 percent, to $37.5
billion.
Investment
Ukrainian experts, however, are less optimistic about the trade prospects as the more than 7,000 kilometers distance between the countries makes shipments long and costly.
The emphasis is on investment opportunities.
“The agreement may have an effect of a multiplier, when a small benefit from canceling the tariffs will translate into interesting business projects which will create jobs, manufacturing in Ukraine,” Taras Kachka, deputy executive director at International Renaissance Foundation, told the Kyiv Post.
Jaroslav Kinach, former head of the European Bank for Reconstruction and Development in Ukraine, is now the CEO at Canadian Corporation Iskander Energy and an adviser at Black Iron Inc., another Canadian venture in Ukraine. He said that the trade pact will help him attract investment in companies he is working with in Ukraine.
”This will encourage other companies that are involved in our business to think about opening their own business activities in Ukraine,” he told the Kyiv Post.
He said that Ukraine is exporting raw commodities like Canada did earlier. So, the experience should help to create more value-added production.
“I am hoping that the know-how and technology that Canadians have developed over the last 50 years could be exported to Ukraine,” Kinach said.
Ukrainian businesspeople who are working with Canada at the moment also hope the deal will lift bureaucratic obstacles for importing equipment.
“Instead of running with papers and resolving problems for half a year, we can all get back to investment, projects and exploration and then produce more oil and gas,” said Zenon Potoczny, Shelton Petroleum CEO and President of Canada-Ukraine Chamber of Commerce.
Eventually, the deal is a good sign for Canadians to start taking Ukraine more seriously.
“We have been talking to the companies in Canada who are looking for doing business here, I think that it’s an incentive for them to look much closer,” Potoczny said. n
