KROK Economics and LawUniversity
International RelationsFaculty
International Economicsand Business Department
Research Paper:
„TheDevelopment of foreign trade of Ukraine ”
2nd year student
of “International Economics KROK
Exclusive” Programme:
Anna Posikera
KYIV- 2011Scientificadvisor:
PLAN
INTRODUCTION
CHAPTER I. THEORETICAL ASPECTS OFFOREIGN TRADE ORGANIZATION
1.1 Principles of foreign economicactivity
1.2 Concepts and theories ofinternational trade
1.3 Regulation of foreign trade
CHAPTER II. MODERN TRENDS OFFOREIGN TRADE DEVELOPMENT OF UKRAINE
2.1 Evaluation of export potential
2.2 Export and import flows ofcommodities
2.3 Export and import flows ofservices
2.4 Problems of foreign trade ofUkraine
CHAPTER III. DEVELOPMENTPERSPECTIVES OF UKRAINE’S FOREIGN TRADE
3.1 Strategy of foreign trade ofUkraine
CONCLUSION
REFERENCES
INTRODUCTION
The promotion ofindependence of Ukraine started its actual output on the world stage as asubject of international economic relations. Changes in the geopoliticalsituation of Ukraine, were made after independence, and situational features ofthe current state of transformation processes in the economy substantiallyincreased role of foreign economic relations in development. Reinforcing thisfactor is dictated objectively undertaken by market transformations, which forma qualitatively new framework for further economic and social development. Onlypart of Ukraine in world economic space and of how this process will take placedepends on further economic and social development of States as the worldeconomy organic subsystem.
The mosteffective and efficient strategy of Ukraine's integration into the globaleconomy is to combine economic restructuring with its focus on strong growth inexports and its differentiation potential. This can be achieved by improvingthe overall investment climate and attracting investments in related sectors,establishing a mechanism to stimulate exports and the formation of viablecompetitive export industries.
As a subject ofinternational economic relations, Ukraine has consciously to log in economiclinks to the most effective use all their capabilities and improvecompetitiveness.
The mainobjective of the course work — to explore the features of Ukraine's foreigntrade. Subject of research areeconomic relations with the formation of modern international economicrelations.
The researchobject is a foreign trade of Ukraine.
The urgency ofthe work is that at this time in our country, the real prospects for a trulyopen economy, its effective integration into the world economy. Active use ofexternal factors contribute to overcoming the negative processes in the economyand further development of market relations. Theoretical and methodologicalbasis of course work are the main provisions and conclusions expressed in thefundamental scientific works of domestic and foreign economists in the theoryof international trade.
The workconsists of three parts, which consistently explored issues of moderninternational economic relations and Ukraine's place in this system.
Inthe first chapter I will tell you about “THEORETICAL ASPECTS OF FOREIGN TRADEORGANIZATION”. After that I will move on to “ MODERN TRENDS OF FOREIGN TRADEDEVELOPMENT OF UKRAINE”. And then I will give you some background about“DEVELOPMENT PERSPECTIVES OF UKRAINE’S FOREIGN TRADE”.
Toconclude I would like to say that today the issue of foreign trade of Ukraine is very important and needs specialattention, that is why I chose the topic for mycourse work, named „TheDevelopment of foreign trade of Ukraine ”
CHAPTERI. THEORETICAL ASPECTS OF FOREIGN TRADE ORGANIZATION 1.1Principles of foreign economic activity
export import foreign trade
Ukraine'seconomic entities and foreign economic entities in carrying out foreign tradeactivities are guided by relevant principles.
1.The principle of sovereignty of the people of Ukraine in the implementation ofexternal low economy activity that is:
— Exclusive right of the people in Ukraine alone and independently carry outforeign economic activities in Ukraine, following the laws in force in Ukraine;
— Ukraine obligation to comply strictly with all agreements and obligations ofUkraine in international economic relations.
2.The principle of freedom of foreign trade enterprises to production, that is:
— Theright to foreign economic entities to voluntarily engage in foreign economicrelations;
— Theright of foreign economic activity to make it in any form not expresslyprohibited by applicable laws of Ukraine;
— Theobligation to adhere to the foreign trade activity of the established laws ofUkraine;
— Exclusive right of ownership of foreign economic activity in all the resultsobtained by them foreign economic activity.
3.Principle of legal equality and nondiscrimination, which is:
— Equality before the law in all subjects of foreign economic activity,regardless of ownership, including the state in foreign trade activity;
— Prohibition of any, except those provided for in this Law, the state actionresulting in restrictions on rights and discrimination of foreign economicactivity and foreign business entities by ownership, location and othercharacteristics;
— Restrictive inadmissibility of activity on the part of any of its subjects,except as provided by law.
4.Rule of law, that is:
— Inthe regulation of foreign economic activity only by the laws of Ukraine;
— Prohibition of the use regulations and administrative acts of local bodies inany way to create conditions for foreign economic entities, which are lessfavorable than those specified by laws of Ukraine.
5.The principle of protecting the interests of foreign economic activity, whichis that Ukraine, as:
— Ensure equal protection of the interests of foreign economic entities andforeign business entities in its territory under the laws of Ukraine;
— Provides equal protection to all foreign economic entities of Ukraine outsideof Ukraine in accordance with international law;
6.The principle of equivalence of exchange, the inadmissibility of dumping in theimport and export goods.1.2 Concepts and theories of international trade
Foreignpolicy of any state concentrates on such questions: what goods to export andimport that with which further improve information: what products to export andimport that with which countries to trade and to what extent, if you want thestate to intervene in free flow of goods, and if so, to what extent?
Today,developed two types of trade theory, which in many ways answer these questions.According to the theories of the first type of state is be involved in trade.These theories and study explain which products and to what extent the countryand who will traded without any governmentrestrictions. These theories include: the theory of absolute advantage,comparative advantage, country size, proportion of production, product lifecycle, similarity of countries' international competitiveness of nations«and so on. The second type of theories involves government interventionin the free flow of goods between countries to change the volume, compositionand direction of trade. The theories this type include: the theory ofmercantilism neomerkantylizmu, depending and others. The purpose of theories ofinternational trade was and is to help companies and governments in choice ofspecialization and the most expedient option strategies to promote deliberateuse of national resources.
Mercantilism.The first theory of international trade — the theory of mercantilism – wasdeveloped by European scientists Manom Thomas (1571-1641), Charles Deyviantom(1656-1714), Jean Baptiste Colbert (1619-1683), Sir William Petty (1623 — 1687). Prove the role of the product and the need national economic output toforeign markets. Mercantilism — an economic doctrine and economic policy, whichrepresents commercial bourgeoisie in feudal times and formation of capitalism.According to the theory of mercantilism wealth of the country measured bynumber gold and silver in their possession. Mercantilists believed that theeconomic system consists of three sectors: industrial, agricultural and foreigncolonies. For effective functioning of the economic system most relevant totheir opinion, were the traders, their work was seen as a major factorproduction. Thus, the source of wealth is the sphere of circulation, not fieldproduction of monetary wealth ototozhnyuvalosya capital.
Becausein the world, according to supporters of this theory, there is limited ofwealth (gold and silver), the country can increase its wealth and poverty atthe expense of others, is due redistribution.
Oneof the main prerequisites merkantylistskoyi theory was that economic systemfunctioned under conditions of underemployment due to what additional inflow of gold fromabroad could in conjunction with,surplus labor to increase production. Ifemployment population was complete, the flow of gold from abroad would causethe inflation and not found effective use.
Mercantilistsmerit is that they were first offered a coherent theoryof international trade, showed its importance for economic growthcountries, have developed a model of its development, first described that inthe modern economy is called the balance of payments.
Theoryof absolute advantage
Thefounder of classical school of economic thought was Adam Smith (1723-1790). Hedeclared that the basis of wealth nations and peoples is an international division of labor and an appropriatespecialization of different countries in producing those goods for which theyhave absolute advantage.
Thetheory of absolute advantage is based on two assumptions:
1) the only factor ofproduction is labor
2)full employment, that all available labor used in producing goods
3)global economy has two countries, so international trade involved only twocountries that produce and sell with each other only two goods
4)production costs — permanent and their reduction increases demand for goods
5)the price of one good expressed in amount of labor required to produce other
6)transportation costs of transportation of goods from one country to another iszero
7)foreign trade is free from restrictions and regulations.
Theadvantage of the theory of absolute advantage is that it is based on labor theory of value and confirms theadvantages of division of labor not only nationally but also internationally.
Thedisadvantage of this theory to explain international trade is that it does notanswer the question why countries trade among themselves even the absence ofabsolute advantage in producing certain goods, is when one country has absoluteadvantage in producing all goods.
Thetheory of comparative advantage
Thetheory of absolute advantage A. Smith, David Ricardo developed (1772-1823), proving that absolute advantage isonly a partial case of general rules.
Advantagesof the theory of comparative advantage:
1) firstdescribed the balance of aggregate demand and aggregate supply. Although It was envisaged that the cost ofgoods determined by the amount of work, necessary for its production, thetheory of comparative advantage showed that the cost really depends on theratio of aggregate demand and offers the goods on the domestic and foreignmarkets.
2)proved existence of gains from specialization and trade for all membercountries, not just one country due to the fact that others suffer losses.
3)Allows you to conduct scientifically based foreign policy.
Shortcomingsof the theory of comparative advantage resulting from these assumptions, thewhich it is based.
Therefore,applying it to analyze foreigneconomic relations should take into account that it:
1) Notakes into account transport costs.
2)Ignores the impact of foreign trade on income distribution within countries,fluctuations in prices and wages, inflation and international capital flows.
3)Based on the assumption existenceof only one factor of production — labor.
4)Ignore existence of such important conditions of international trade, thedifferences in the provision of inputs.
5)Based on the premise full employment, which means that one industry workersfreed can immediately find jobs in other, more productive. In other words, anassumption about fixed costs and therefore ignored law costs are rising.
6) Donot explain trade between approximately equal in economic development, none ofwhich has relative advantage over another.
Currenttheories of international trade
Currenttheories of international trade can be grouped in two main areas: Keynesianism (neokeynsianstvo)and Monetarism (neoclassicism).
Keynesianism- macroeconomic theory, which emerged as a response economic theory on theGreat Depression in the United States. Of this work was work „General Theory ofEmployment percent and Money by John Maynard Keynes.
Theessence of Keynesianism. The market is characterized by balance, which providesfull employment. The reason is — a tendency to keep some profits which leads to the fact that thetotal demand less than the total supply.
Keynesproposed the following output. If the mass consumer is not able revive the total demand in the scaleof national economy, it should make state. If the state will do (and pay) great entrepreneurs order thatwill cause additional hiring labor. Getting salaries cost, past unemployed willincrease their spending on consumer goods and this will increase overalleconomic demand, and this in turn will increase total supply of goods andservices and economic recovery.
Monetarism- macroeconomic theory, one of the main areas neo-conservative economicthought. It appeared in 1950 as a series empirical research in the field ofcurrency circulation.
Keyprovisions
1.Regulating role of state in the economy should be limited to control over monetary circulation.
2.Market economy — self-regulatory system. All the negative signs related to stay overweight state inthe economy.
3.Money supply to affect the consumers' firms. Increase money supply leads to thegrowth of production, and after full loading of opportunities — to inflationand prices.
4.Inflation must be overcome by any means, including a by reducing socialprograms.
5.When choosing a money growth rate should rule “Mechanical» moneysupply growth, which would reflect two factors: level of expected inflation andthe growth rate of public product.
Accordingto the views of monetarist money is the main area which sets the movement andproduction development. The demand for money is constant tend to increase andto ensure consistency between the demand for money and their proposal toconduct a course for gradual increase money in circulation. State regulationshould be limited to control over money turnover.
1.3Regulation of foreign trade
Foreigntrade policy subdivided into following basic groups: tariff (custom duties) andnon-tariff (quantitative restrictions, other non-tariff methods, trading — political methods of stimulation of export, trading contracts and agreements).
Tariff regulation
Custom duties are a list of the customs duties with which the goods areassessed at their import and export. The customs duties represent some kind ofthe tax raised at crossing by the goods of customs border the one who thesegoods import or take out. The customs duties raise goods cost as the exporter(importer) it is compelled to compensate the expenses on payment of the duty atthe expense of increase in the price at the goods. High import duties makeforeign goods noncompetitive in home market and used for protection of nationalmanufacturers of the similar goods.
Duties:ad value — raised in percentage of goods cost; specific — raised in the form ofa certain sum of money from weight, volume or goods piece; mixed, asimultaneous application ad value and specific duties.
Accordingto this law the Custom duties of_Ukraine are systematized according to the Ukrainianclassification of the goods of foreign trade activities — the list of rates ofthe import customs duties raised from the goods which are imported on customsterritory of Ukraine.
TheUkrainian classification of the goods of foreign trade activities (nationalvariant of the qualifier of the Commodity nomenclature of foreign tradeactivities) which is based on Harmonized system of the description and coding ofthe goods of 2007 is put in a basis of the commodity classification scheme ofCustom duties of Ukraine (the commodity nomenclature).
Theduty which is subject to payment, pays off customs body under the rates of thetariff operating at date of giving of the customs declaration.
Thecustom duties rates of Ukraine are divided as follows:
Preferentialrates, including clearings of duty payment, are applied to the goods occurringfrom the countries, entering together with Ukraine in the customs unions orforming special zones or to which the special mode according to theinternational contracts is given, and also an origin from a number ofdeveloping countries;
Preferentialrates are applied to the goods occurring from the countries, using on Ukraineby a most favored nation treatment;
Fullrates are applied to other goods.
Non-tariff regulation
Quantitativerestrictions, other non-tariff methods, trading-political methods ofstimulation of export, trading contracts and other non-tariff methods ofregulation of foreign trade activities. Quantitative restrictions include quotaand licensing.
Quotas are limiting volumes of the certain goods which are authorised forimporting to (export) on territory of the country during certain term. Quotasare individual, limiting import (export) in one concrete country; group,establishing volume of import (export) in certain group of the countries, andalso global when import (export) is limited without instructions of thecountries on which this restriction extends.
Licences are permissions to import (export) of the goods during any time, givenout by competent bodies (Ministry of Economy).
Licencesare general which represent permissions to import (export) operations with thecertain goods during all period of validity of a mode of licensing. Besides,licences are individual, resolving to one subject of enterprise activityrealisation of one import (export) operation on the licensed goods. Licencesestablish volumes of the imported (taken out) goods in quantitative expressionwhen it is authorised to import to (take out) certain quantity of the goods, orcost expression when under the licence it is possible to import to (take out)the goods for the certain sum.
Quotasand licenses limit independence of businessmen concerning a choice of themarket and trade volume, however, these kinds of the external economicregulation have gained now the greatest distribution.
Exceptquantitative, non-tariff methods of the foreign trade regulation complicationof customs procedures, increase in quantity of the necessary documentation,increase of requirements concern quality of packing and marks, an establishmentphytosanitary, veterinary and other kinds of the sanitary and ecologicalcontrol. Various taxes to import and export concern not tariff methods over theduty, the currency restrictions connected with reception of the permission touse of currency for import purchase, etc.
Thestate can take measures also on unfair competition suppression at foreign tradeactivities realisation, in particular, dumping that sales of the goods underthe prices below international commodity market. The establishment of the factsof a dumping in Ukraine, for example, is done by the claim to the Ministry ofEconomy of Ukraine or the State committee on the prices. In case of anestablishment of the fact of a dumping to the Ukrainian or foreign businessmenthe antidumping duty can be applied.
Exceptantidumping duties can be applied as well countervailing duties which areraised in case of an establishment of that fact, that the exporter by goodsmanufacture used the state grants that has allowed it to underestimate theprice for the goods.
Measuresof stimulation of export have for an object encouragement of the nationalenterprises-exporters. These measures include subsidizing (grants),preferential crediting, the state insurance of export (when the exporter has anopportunity to sell the goods and the risk of non-payment by the importer ofthe put sum incurs the state), carrying out of a special currency policy (maintenanceof the underestimated rate of national currency), tax privileges to exporters(clearing of a part of profit taxes or the income of payment of the tax to theadded cost), information, consulting service, a professional training forforeign trade, diplomatic support of exporters. These measures are appliedusually in a complex, therefore it is necessary for exporter to be guided instimulation system to take advantage of possible privileges.
The inclusion of Ukraine inworld economic relations requires a major adaptationof its structure, the entire economic mechanism toextremely severe requirements,which dictate theworld economy and its economic institutions. Slowing the pace of reforms and policy uncertaintyputs Ukraine inthe face of losing the chanceof joining the world community. The important factor forreform in Ukraine is restructuring theeconomy.
CHAPTERII. MODERN TRENDS OF FOREIGN TRADE DEVELOPMENT OF UKRAINE 2.1Evaluation of export potential
Export isconsidered as took out outside the country of commodities for realization of themat the oversea market or as an amount and cost of the commodities taken out abroad.However, if to consider an export as substantial factor of influence on the economicgrowth, on integration of country in a world economy, then it gets trait of potentialthat means the hidden ability to provide achievement of the set purpose and decisionof certain problem of community development. Such dualistic look at essence of exporthas an important value for deepening of methodological basis of directionslay-out of its development, increase of possibilities of positive influence on theeconomy of country. Samuelson and Northous determined an export as commoditiesand services which are produced inside a country and are for sale abroad. An exportconsists of export of goods and services.
Beginning from2000 Ukraine is having an economic growth accompanied by unstable traces of themovement of the GDP, products of agriculture, investments, comsumersexpenditure and the foreign trade indicators .
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The data in Table1 show that the rate of the change in the exports correspond to the increase ofthe GDP value, while the decrease of the rates of its augmentation in 2005 arevery much associated with an abrupt decrease in the exports deliveries underconditions of a rising political non-stability in the country. The estimation ofthe investment of the foreign trade into the process of the economic growing isvery contradictive, since between 2005 and 2007 the economy’s losses due to thenegative balance amounted to $ 18.5 milliard, and according to a forecast for2008 that value is expected to be at the level of $ 12.5 milliard .
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A weak link inUkraine’s foreign trade is the exports structure, in which 3/4 is the rawmaterials and the primary processing products. Because of delay in the restructuringof the economy, the most important exporting opportunities are still concentratedin traditional industrial and raw materials branches. The largest commoditygroups in the structure of the exports of the industrial products there are thebasic metals (42.8 %), minerals (10 %), chemicals (almost 9%) and other rawmaterials products (12%) (Table 2). The structural dynamics of Ukraine’sindustrial exported products shows that the movement of its separate positionscontradicts the world trends. For instance, in the exports structure there is risingof the share of the basic metals, while this in the world has a decreasingdynamics. On the contrary, the share of machines, apparatus, transportationmeans goes down, despite its intensive rising in the global trade.
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The competitiveadvantages of the national producers are accounted for by the availability ofspecific natural resources, in particular, of the iron-ore raw materials, a developedtransport infrastructure, favouring geographical location, low costs of the labourforce, low level of the expenditures on the upgrading and renovation of thefixed production funds. Wearing of the fixed funds in Ukraine’s industry isover 50 %, while in the basic export-oriented branch — metallurgy — it amountsto 65 %. Moreover, in this branch almost a half of steel is melted by using theMartin process, while in the world that process is used for production of only2.5 % of steel. It is metallurgy that the problems of Ukraine’s economy and itsexports are associated with. The study shows that the external demand for the productsof this industry in fact defines the prospects for the economic growth on the whole,as metallurgy makes a significant share of the commodity exports. Calculationsdemonstrate that during 1997 — 2005 the GDP and exports dynamics determined thevariation of the multiplication coefficient by approximately 1 %, that is 1 %of the decrease or increase in the exports of the metallurgical products wasassociated with about 1% of a decrease or an increment of the GDP .
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Аn analysis ofthe states of the global markets made it possible to identify the set of theproducts the demands for which have been rising incessantly for more thandecades. The market dynamics of these goods remains even at the present time, whichis proved by the indicators of their dynamics and the share in the globalexports (Table 3). The global exports of the above given goods rises in averageannually by almost 13 %, while their total share in 2006 amounted to 22 % of thetotal volume of the exports. According to some data, this share in the exportsof some countries, for example, the Republic of Korea, Taiwan, is till larger. Dueto our calculations, these goods made only 3.7 % in the structure of Ukraine’sexports, though their share rose by almost twice as compared to the level in2002. The share of the exports of machines for automatic data processing, as wellas that for the office equipment components, transistors and semiconductors is veryinsignificant. It is these kinds of products that are most characterised by thehighest rate of the growth (15—16 % annually) and by their importanceconcerning their share (4.0—3.4 %) in the structure of the global exports,which is typical for the modern informational economy.
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The performedanalysis shows that Ukraine has non-prospective positions on the global market,for the raw materials oriented exports and an insignificant share of the goodsbeing on growing demands results in losing profits and worsening of the conditionsfor trading. The structure of the commodities exports of the electronicindustry products include computers, office equipment, television-sets,radio-sets, transistors and semiconductors, which in 2006 amounted to 3.4 % andexceeded the cost value of their exporting by 3,3 times as compared to that in2002 (Table 5). From these tables it is evidently that the increase of exportof these highly technological wares is accompanied growth of negative balance throughexceeding of volume of import of the resulted positions of analogical foreign wares,that in a transformation period it is possible to consider positive. However,the absence of structural reforms of the Ukrainian economy can result inirretrievable lag from main direction in the globalizing world: wider use of hightechnologies able to produce scientific products with high maintenance ofsurplus value. Creation of the technical base for forming of high technologies inall industries of national economy requires the use of effective measures of structuraland scientific and technical policy of countries, the result of which adjustingof domestic production of microelectronic components and electronic wares,which are characterized high maintenance of value-added and became the sourceof the economy growing of Korea, Japan and other countries. Except for industrialsector Ukraine has ponder able agrarian sector. Its potential of which, unlike thetraditional participants of world markets of agrarian products (The USA, EU,Canada), yet is not outspent. According to the estimation of specialists, thereis involved only third of productive forces of nature and company in Ukraine. Agrarianproducts of Ukraine are competitive on world markets and entering to WTO, in ourview, will not entail substantial problems in this sector. At the favourablestate of affairs the volume of export of basic types of agrarian products in2006 was increased against 2005 in a value term on 315 million dollars and arrivedat almost 2,5 milliards of dollars even at diminishing of his volumes in naturalindexes (table. 5). However braked development of agrarian sector is through thelacks of pricing on an agricultural produce. Foreign firms which comes to thenational market on the Uruguayan agreement buy in an agricultural produce onlow regional prices, and difference between them and allows to appropriate not onlyexport but also natural (absolute), rent world prices.
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From above-explainedit is possible to come to the conclusion, that Ukraine was not yet able tooccupy the own reliable niches of supply of the prepared commodities in theworld market, but not raw material and low- technological products.Overwhelming part it most point-of-sale partners on the indexes ofGDPandexport on one person are at considerably higher level .
For development ofexport potential of Ukraine it is necessary in the nearest prospect: — to promotethe competitiveness of the Ukrainian producers on the basis of activation ofstructural reformation of economy, foremost export-oriented sector; to carryout the high-quality changes of specialization of Ukraine in the world divisionof labor on the basis of development and realization of complex exportstrategy, oriented to the increase of part in the export of the innovative and traditionalUkrainian products with the high level of valueadded, increase of grant ofhighly technological services: — reorient the imported strategy in direction ofproviding of complex decision of problems of modernization of national industryand active policy of import substitution (limitation of import of the imported commoditiesis during intensification of analogical production in Ukraine); — to solve theproblem of disparate of purchase and imported prices on the products ofagrarian sector.2.2 Export and import flows of commodities
Ukraine foreign trade operations carried out with partnersfrom 200 countries.
The volume ofexport deliveries to CIS countries amounted to — 35.1% of total exports, Asia — 27,8%, Europe — 25,8% (including the EU — 24,2%), Africa — 6,8 %, USA — 4,3%,Australia and Oceania — 0,1%.
The largestvolumes of export deliveries to the Russian Federation — 24.9% of total exportsfrom Ukraine, Turkey — 6.6%, Italy — 4,6%, Belarus — 3,5%, Poland — 3,2 %,Germany — 3,1%, India — 2,9%.
The export ofgoods also in all major partner countries: Italy — by 89,7%, Poland — by 71.8%,Russian Federation — on 68,2%, Turkey — by 56.8%, Belarus-40, 7%, Germany — by37,8%, India — 25,6%.
In total exportsof goods in January-May 2010, compared to January-May 2009 increased share of ferrousmetals — from 27,5% to 30,9%, energy materials, petroleum refining and products- from 4,3% to 7,3%, mechanical machines — from 6,2% to 6,5%, railway ortramway locomotives, Putnam equipment — from 2,1% to 4,1%, fats and oils ofanimal or vegetable origin — of 4 9% to 5,1%, ores, slag and ash — from 3% to4,2%.
Volume ofexports of finished products made from imported raw materials, was $ 1.4545billion, which is 77,5% more than in January-May 2009.
Ukrainianexports of more than 50 percent of gross national productof Ukraine.
Todaythe main export industries are metallurgy (metal products), agriculture(wheat), machine building and chemical industries, whose share is over 80percent of Ukrainian exports. The feature of the development of domesticexport-oriented industries is their raw nature and high level of dependence onfluctuations in world markets.
Main exports ofUkrainian goods to the Economic Unions:
§ theAsia-Pacific Economic Cooperation (APEC): ferrous and nonferrous metals andarticles thereof;
§ CIS:machinery, ferrous and nonferrous metals and products, prepared foods;
§ no-countryCentral European Free Trade Area (TSEFTA): mineral products, ferrous andnonferrous metals and articles thereof;
§ EU: ferrousand nonferrous metals and articles thereof, mineral products, vegetableproducts;
§ of thecountry's manufacturers and exporters of petroleum (OPEC): ferrous andnonferrous metals and products, herbal products.The main product groups Export Imports Ferrous metals and articles there of 40.2 5,0 Mineral products 10.1 30,0 Agricultural products 8,6 3,3 Chemical industry products 10.9 14,2 Machinery, equipment and tools 8.7 17.5 Non-ferrous metals 2,9 2,8 Textiles and textile products 2.4 3,0 Wood Products Industry 3,2 3,2 Processed food 3,6 3,7 Means of transport 5,4 11,4
The volume ofexports from Ukraine increased in 2010 comparing with 2009 by 29,6% andamounted to 51 billion 430.5 million U.S. dollars. At the same time importsgrew by 33,7% and reached 60 billion 739.9 million dollars.
The largestshare (85%) in exports were transport services — 3 billion, including pipelinetransport services (52%), sea transport (13%), rail (10%), air transport (6%).
2.3Export and import flows of services
In January-Marchexports of services exceeded imports by 1 430.7 million. Told the StateStatistics Committee, submit the «Ukrainian News».
According toGoskomstat, service exports in January-March 2010 was 2 557.4 million, anincrease of 19,6% compared with January-March 2009.
Imports ofservices amounted to 1 126.7 million, decreased by 0,2% compared withJanuary-March 2009. Theincrease in services exports was primarily due to growth in services exportspipelines — in 2,3 times to 959.2 million dollars, travel — by 16.4% to 50.3million dollars and transportation services — 33 9% to 1 884.3 million.
Imports ofservices decreased mainly due to imports of financial services — by 22,7% to228.1 million dollars, various business, professional and technical services — by 11,6% to 188.1 million dollars of services — by 39.4% to 27.7 million, andinsurance services — by 46% to 13,2 million dollars.InJanuary-March 2010, service exports to CIS countries increased by 82,1%compared with January-March 2009 to 1 370.0 million.
Imports ofservices from the CIS in January-March 2010 increased by 13,2% compared withJanuary-March 2009 to 179.7 million dollars.
It was reportedthat in 2009 exports of services exceeded imports by 4352 million.Exportsof services in 2009 amounted to 9 520.8 million, decreased by 18,9% comparedwith 2008. Imports ofservices amounted to 5 168.8 million, decreased by 20,1% compared with 2008.In2009, service exports to CIS countries decreased by 10.3% compared with 2008 to3 808.7 million.Countries Member million. U.S. $% of the total volume of foot Total 3486,8 100 Russia 2049 58,8 United Kingdom 123,2 3,5 United States 122,7 3,5 Germany 105,0 3,0 Belgium 70,5 2,0 Cyprus 68,4 2,0 Switzerland 47,8 1,4 Other 900,1 25,8 2.4 Problems of foreign trade of Ukraine
Inrecent years, Ukraine has passed most of the hurdles of postcommunist economictransformation. Macroeconomic stabilization was accomplished long long. Pricesand trade are liberalized. Privatization has proceeded so that about two-thirdsof GDP arises in the private sector. For the last three years, Ukraine has hada sound average economic growth of over 6 percent a year, and it is likely tostay around 6-8 percent a year for the foreseeable future.
Afast economic restructuring is taking place. Industries in which Ukraineappears to have comparative advantages have grown particularly fast: steel,food processing, agriculture, and light industry. Within each sub-industry adesirable consolidation of 3-5 leaders is apparent. Although a few oligarchicgroups hold out, they are becoming more normal conglomerates, and a sizeablenumber of new large and medium-size corporations have emerged. While corruptionand repression remain problems, business surveys undertaken by the EuropeanBank for the Reconstruction and Development (EBRD) and the World Bank in 1999and 2002 suggest great improvements. Ukraine's transition to a market economyhas succeeded.
Inthis situation, foreign trade attracts new attention for many reasons. First,with an official GDP at current exchange rates of about $40 billion, theUkrainian economy is rather limited, and access to export markets is criticalfor future economic growth. In recent years, Ukrainian exports have expandedfast by slightly over 10 percent a year and are driving economic growth, butclearly much more can and should be accomplished. The old adage «traderather than aid» describes what Ukraine needs now.
Second,the Ukrainian economy is very open with exports corresponding to about half ofGDP, and exports have increased at over ten percent a year for the last threeyears. Exports comprise the growth engine in the Ukrainian economy.
Third,while the domestic market in Ukraine appears to work reasonably well, regionaldistortions in foreign trade are all too apparent. The most recent statisticsfor 2002 demonstrate that as little as 19 percent of Ukraine's exports went tothe European Union (EU). According to the gravity model, which assesses howmuch countries should trade with one another, given the size of their economiesand the distance between them, it should have been about 60 percent. Meanwhile,the share of Ukrainian exports going to Russia has fallen steadily to only 17percent last year. Instead, Ukraine is increasingly exporting to all kinds ofnew distant Third World markets in Asia and the Far East, notably China, andthe Middle East, which are more open. It is more important that exports growthan where they go, but this is not a normal development. With little doubt,this represents trade distortion, and Ukraine would benefit if it were able toexport more to big markets in its neighborhood. Although Ukraine is a very openeconomy, agriculture is considered to be 93 percent self-sufficient, suggestingsubstantial sectoral distortions as well.
Fourth,Ukraine suffers from a predominance of so-called sensitive products in itsexports, that is, goods that are particularly exposed to protectionist measuresby other countries. They account for about three-quarters of Ukraine's totalexports. Steel comprises 40 percent of Ukraine's exports, while each of thethree sensitive commodity groups, agricultural goods, chemicals and textiles,account for over 10 percent. According to the WTO, Ukraine came in the 10thplace in the world in terms of suffering from actual antidumping measures fromJanuary 1995 to June 2002, with no less than 37 antidumping measures concludedby various countries.
Fifth,Ukraine is now facing critical changes in its foreign trade agreements. Itsnegotiations about accession to the World Trade Organization (WTO) areapproaching their final stage. The EU is suggesting that its Partnership andCooperation Agreement (PCA) with Ukraine should be replaced with an agreementon a Common European Economic Area (EEA). The Presidents of Russia, Ukraine,Kazakhstan and Belarus just signed a declaration of their intention tonegotiate a free trade zone. Thus, Ukraine is facing monumental decisions onits foreign trade relations in all directions.
Yet,sixth, although Ukraine is facing so many important problems and decisions inforeign trade, trade issues have been all but ignored in the country untilrecently. The preoccupation with getting the domestic market economic reformshas been so great. In the mid-1990s, Ukrainians had a tendency to blame theoutside world for their hardships. Now, on the contrary, Ukrainians tend toblame themselves for whatever problems they encounter. While an admirablyhumble attitude, it does not necessarily reflect the truth.
Thereare always many barriers to trade. First, everybody mentions the problem forexporters to obtain a value-added tax refund. Another query is what theUkrainian economy looks like at enterprise level, but it appears a rathernormal market economy. Then, the three big trade issues come, trade relationswith the EU, trade with Russia and WTO accession. The EU should be Ukraine'smain export market, but its imports from Ukraine remain surprisingly low, whileUkrainian exports to Russia are swiftly dwindling. WTO accession appears to bethe key to Ukraine's trade policy. Agricultural concerns are a topic on theirown, but they appear to be less severe than widely presumed.
Ukraine has great export potential. Withan area of 0.4% of the total global land and thepopulation at 0,8%of global, Ukrainemakes 5% of worldmineral and foodprocessing. The main strategic goal for Ukraine — thetransition to economicdevelopment, export oriented and,therefore, the production ofgoods able to compete in the global market.
Afast economic restructuring is taking place. Industries in which Ukraineappears to have comparative advantages have grown particularly fast: steel,food processing, agriculture, and light industry. Within each sub-industry adesirable consolidation of 3-5 leaders is apparent. Although a few oligarchicgroups hold out, they are becoming more normal conglomerates, and a sizeablenumber of new large and medium-size corporations have emerged. While corruptionand repression remain problems, business surveys undertaken by the EuropeanBank for the Reconstruction and Development (EBRD) and the World Bank in 1999and 2002 suggest great improvements. Ukraine's transition to a market economyhas succeeded.
CHAPTER III. DEVELOPMENT PERSPECTIVES OF UKRAINE’SFOREIGN TRADE
3.1 Strategy of foreign trade of Ukraine
Since1996, Ukraine has repeatedly stated that it wants to become a member of theEuropean Union at the highest official level. The EU has howevercold-shouldered them, although Article 49 of the Treaty of the European Unionstipulates that any European state may apply to become a member of the EuropeanUnion. Many European politicians and EU commissioners have publicly ruled outUkrainian membership of the EU, but formally the question remains open. A broadUkrainian opinion favors the country's «European choice,» though itsimplications are usually left open.
Theinstitutional cooperation between the European Union and Ukraine has beenrudimentary. The EU offered Partnership and Cooperation Agreements (PCA) to theCIS countries, which were little but a codification of WTO principles fornon-WTO members. They do not offer any trade concessions beyond what the EUaccords to its WTO partners, while the EU has concluded free trade agreementwith many other countries. Ukraine has been treated as one CIS country amongmany. The Ukrainian PCA was concluded in 1994, but it did not come into forceuntil 1997. It is valid for ten years and can be prolonged. Although it iscomprehensive, covering political dialogue, trade in goods and services, economic,environmental, scientific, cultural and legal matters, it contains little ofsubstance. The EU's only subsequent trade policy advance to Ukraine is itsconclusion of a textile agreement that eliminated its import quota system.
Thecontrast between the development of exports to the EU from the tenpost-communist EU candidate members in Central-Eastern Europe (CEE) and the CIScountries is huge. Barely half of the exports from the former went to the EU in1989, rising to 67 percent in 2000. By contrast, 33 percent of Soviet exportswent to the EU in 1989, but by 2000 that share had fallen slightly to 31percent, according to IMF statistics. With exports to the EU of only 16 percentof its total exports in 2000, Ukraine was especially disadvantaged in spite ofits vicinity to the EU. Given economic geography — Ukraine's location,transportation routes and the relative size of adjacent economies — the EUshould be Ukraine's all-dominant export market buying 60 percent of itsexports. Through regression analysis, Peter Christoffersen and Peter Doyle haveestablished that the growth of potential export markets has been one of themost important determinants of growth in the transition countries.
Onereason for the disparity in EU trade between the CEE and the CIS countries hasbeen slower economic reforms in the CIS countries, but another reason has beendiverse EU trade regulations. The EU has developed an elaborate hierarchy oftrade treaties, ranging from simple trading partner to full member-state. As countrieson the way to be full members, the CEE countries are close to the top of thishierarchy, while the CIS countries are at the bottom. The EU offered favorableEurope Agreements to the CEE early on, which committed all parties to eliminatetariff and non-tariff barriers on industrial products by the end of a ten-yearperiod, which ended in 2001 or 2002. They were asymmetric to the benefit ofCEE. Agricultural products are subject to preferential treatment under tariffquotas. On January 1, 1998, the EU lifted quantitative restrictions on importsof textiles and clothes from CEE.
TheCEE countries are considered market economies by the EU (and the US), whichmeans that an antidumping investigation is based on their own prices. The CIScountries, on the contrary, have been labeled «economies intransition» by the EU, which signifies that they are treated asstate-trading countries and an antidumping investigation is based on ahypothetical country's (much higher) prices. Recently, Russia and Kazakhstanhave been recognized as market economies of the EU and the US, and Ukraineshould be able to make that grade very soon. The last EU objection is that thestate plays too great a role in the Ukrainian economy, while the US last yearrejected Ukraine as a market economy because of tax benefits for the steelindustry, which have since been abolished.
Unlikethe Central European economies, the major CIS countries are not members of theWTO. To date, four small CIS countries have become members of the WTO, theKyrgyz Republic, Georgia, Moldova and Armenia, while all the others are atvarious stages of their accession.
Altogether,there is a world of difference in EU treatment of the CEE and CIS countries,respectively. CEE is about to become EU members, while the CIS countries haveno associate status, no customs union or free trade arrangement. Largely, theyare not even members of the WTO or recognized as market economies by the EU.Their trade status is reminiscent of «open season,» and the US offerssimilar treatment.
Thesedifferences in status are reflected quite consistently in trade treatment andtheir total effect is significant. Even before their entry into the EU, the CEEcountries get 80 percent of lines duty free to compare with, while 54 percentof lines for the CIS countries as GSP beneficiaries. GSP (Generalized System ofPreferences) are trade benefits designed for developing countries, but they arenot very beneficial for the CIS countries. For very sensitive goods — textiles,metals and many agricultural goods, most-favored nation (MFN) duty rates arereduced by only 15 percent, and for sensitive goods — chemicals, manyagricultural goods, footwear, plastics, rubber, leather goods, wood, woodproducts, paper, glass copper, etc. — MFN tariffs are reduced by 30 percent.Only non-sensitive goods, which are not very significant in Ukraine's export,are duty-free. Moreover, the GSP regime suffers from many weaknesses. Thesupposed beneficiaries do not conclude any contract and therefore have norecourse to any dispute settlement conflict. The rules of origin are onerous,while special simplified agreements have been reached with CEE. GSP tariffreductions are less than those the EU accession countries get. Besides, Ukraineis so developed that it can easily be deprived of GSP because of too higheconomic development. Strikingly, nobody even talks about GSP in Ukraine.
PatrickMesserlin assessed EU Protection by industry in 1999. He put the level ofoverall protection for the whole of the EU economy at almost 12 percent. EUprotection however varies by commodity, with rates of overall protectionexhibiting wide differences by sector. Messerlin studied ordinary customstariffs, major border non-tariff barriers (quantitative restrictions andantidumping measures), while he has ignored all the non-border barriers, thatis, an array of norms and standards.
Thesimple average of all existing EU tariffs on goods was 7 percent in 1999. Theyare not very high, but protection is much higher for goods that Ukraine wouldlike to export. Besides, if other costs in the CIS countries are similar to CEEcountries, even small barriers can rule out imports from the CIS countries. TheCIS countries generally have a cost advantage compared to the CEE countriesthrough lower wages, but this is counteracted by higher transportation andother costs.
EUtrade policy is more restrictive than simple average tariffs indicate,especially for the sensitive products, agriculture, steel, textiles, clothesand chemicals. Non-tariff barriers include variable levies in agriculture,voluntary export restraints in industrial sectors (notably in textiles andclothing), quotas on imports from centrally planned economies (to which the EUcounts Ukraine) and antidumping measures. The peaks of overall protection arevery high. The maximum tariffs exceed prohibitive 200 percent for certainagricultural goods. Also these EU measures are persistently milder for CEEcountries than CIS countries. For instance, the number of antidumping casesthat the EU instigated against the CEE countries from 1990-99 was 42,admittedly almost equal to the 41 initiated against the CIS countries, but theduties imposed against the CIS countries were about twice as high as thoselevied on the CEE countries .
EUagriculture is particularly well protected. The simple average tariff isestimated at 17.3 percent (WTO 2000, p. xix), but the actual protection isoften prohibitive for the CIS countries because of variable levies andtechnical standards. In addition, the EU is reluctant to give any preferencesfor farm goods from temperate countries and food products, that Ukraineproduces and would like to export (Messerlin 2001, p. 28). EU minimal marketaccess commitments in cereals under the Uruguay round prompted bilateralagreements on a duty-free quota of 300,000 tons of wheat essentially from theCEE, while the major grain producers in the CIS, not being members of the WTO,were left without access. The CEE countries are allowed to export meat, fruitand vegetables to the EU, and the EU has reciprocal protection throughbilateral agreements with Bulgaria, Hungary and Romania, the main wineproducers in CEE (WTO 2000, pp. 87, 91). As a result, EU imports ofagricultural goods from the twelve CIS countries decline from1.5 billion euroin 1995 to 1.3 billion euro in 1998, while EU imports from the 13 EU candidatemembers were three times larger and rose somewhat, according to the EU TradeDirectorate.
The maincomponents of foreigneconomic strategy of Ukraine — isa powerful exportsector, the national currency; attractingforeign investment throughthe establishment of joint business, liberalization of imports, a foreign business;buildingan extensive system of foreign trade management, flexible tax, price,deposit, credit, financial and monetary policies,the gradual integration of the economy in theEuropean and world businessassociations and organizations; staffing department.
CONCLUSION
Ukraineindependently form a system and structure of state regulation of foreigneconomic activity on its territory. State regulation of foreign economicactivity should protect the economic interests of Ukraine and the legitimateinterests of foreign economic activity, creating equal opportunities forforeign economic entities with the aim of developing all types of business,regardless of ownership, use, income and investment, competition andElimination of monopolies.
One form ofstate regulation of foreign economic activity is to establish the regime forcurrency transactions in Ukraine. Another form is a customs regulation offoreign economic activity. Licensingand quotas for exports and imports as a form of state regulation of foreigneconomic activity of Ukraine establishes itself in the cases stipulated by theLaw of Ukraine «On Foreign Economic Activities».
Raw-materialorientation of Ukrainian exports shows atrophy of the processing industry.Domestic manufacturers have limited opportunities to purchase the necessary rawmaterials and manufacture relevant products due to low pay. Lacking in domesticmarket demand, raw material goes abroad for the manufacture of its productsthat are returned to the markets of Ukraine, displacing domestic producers.
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