Ukraine-EU: Bilateral Trade Relations

Ukraine has decided on a European orientation in its economic and foreign policies which are expected to continue following the recent enlargements of the Union. The enlarged EU has already replaced Russia as Ukraine's foremost commercial partner and both the EU and Ukraine are interested in maintaining and strengthening solid, predictable, transparent and open trade relations.

The EU considers that a key element to integrate Ukraine into the European economic space is the successful completion of the ongoing domestic reforms. This will allow Ukraine to take full advantage of EU enlargement - as outlined in the Commission's Communication on the European Neighbourhood Policy. The EU also supports Ukraine's efforts to join the WTO as soon as possible on commercially viable terms. Furthermore, the EU and Ukraine have agreed to negotiate the establishment of a deep and comprehensive free trade area that will offer Ukraine a stake in the EU internal market.

Bilateral trade

In 2006, Ukraine's total trade with the 27 countries of the EU amounted to about 28 billion Eur (it represents 1.1% of total EU trade), a figure which has been growing steadily since the economic crisis in 1998. However, Ukraine's manufacturing and trade structures are unbalanced. Iron and steel, mineral products and chemicals accounted for 64% of the Ukrainian exports to the EU, whilst machinery and equipment, and chemicals appear prominently in EU exports to Ukraine (66%). EU-Ukraine trade in services is still very limited in value terms (1.5 billion Eur in 2003 according to Eurostat data), but it is also growing. According to the Statistics Committee of Ukraine, the EU25-Ukraine trade in services amounted to 2.4bn EUR in 2005 and 3.2 bn EUR in 2006.

EU imports from Ukraine are to a very large extent liberalised. The only exception is trade in certain steel sector products, the import of which is subject to quantitative restrictions in the EU (Ukraine, on its side, levies duties on metal scrap exports). The EU and Ukraine have negotiated an agreement on steel products that will remain in force until 31 December 2007. This Agreement shall be automatically renewed year by year provided that neither Party gives the other Party written notice of denunciation of the Agreement at least six months before it expires. With each early renewal, quantities in every product group shall be increased by 2.5%. In the event that Ukraine accedes to the World Trade Organisation (WTO) before the expiration of this Agreement, the Agreement shall be terminated and the quantitative limits shall be abolished as of the date of accession. This agreement provides for a quota of 1 320 000 tonnes in 2007.

Bilateral trade in textiles is subject to the Agreement on Trade in Textile Products, signed in May 1993. The agreement establishes a legal and administrative framework for trade in textiles and clothing, and fixes Ukrainian import tariffs at the same level as EC bound tariffs (with a clause of suspension of benefits in case of non-respect of commitments). The quantitative restrictions on imports of textiles and clothing from Ukraine have already been eliminated since early 2001. The last remaining restrictions to trade in textile and clothing products, i.e. import and export licensing requirements for all textiles and clothing products, were lifted in 2005. Since the textiles agreement was due to expire on 31 December 2006, the parties to the agreement took a decision to extend it until 31 Dec 2007, with the possibility for a tacit renewal until 31 Dec 2008. The agreement will lapse after Ukraine’s accession to WTO.

A significant proportion of Ukrainian goods entering the EU market benefit from the General System of Preferences (GSP).