KROK Economics and Law
University
International Relations
Faculty
International Economics
and Business Department
Research Paper:

„The
Development of foreign trade of Ukraine ”
2nd year student
					







of “International Economics KROK 
Exclusive” Programme:
Anna Posikera
KYIV
— 2011Scientific
advisor:
PLAN
INTRODUCTION 
CHAPTER I. THEORETICAL ASPECTS OF
FOREIGN TRADE ORGANIZATION 
1.1 Principles of foreign economic
activity 
1.2 Concepts and theories of
international trade 
1.3 Regulation of foreign trade
CHAPTER II. MODERN TRENDS OF
FOREIGN TRADE DEVELOPMENT OF UKRAINE 
2.1 Evaluation of export potential
2.2 Export and import flows of
commodities 
2.3 Export and import flows of
services 
2.4 Problems of foreign trade of
Ukraine 
CHAPTER III. DEVELOPMENT
PERSPECTIVES OF UKRAINE’S FOREIGN TRADE
3.1 Strategy of foreign trade of
Ukraine 
CONCLUSION
REFERENCES


INTRODUCTION
The promotion of
independence of Ukraine started its actual output on the world stage as a
subject of international economic relations. Changes in the geopolitical
situation of Ukraine, were made after independence, and situational features of
the current state of transformation processes in the economy substantially
increased role of foreign economic relations in development. Reinforcing this
factor is dictated objectively undertaken by market transformations, which form
a qualitatively new framework for further economic and social development. Only
part of Ukraine in world economic space and of how this process will take place
depends on further economic and social development of States as the world
economy organic subsystem.
The most
effective and efficient strategy of Ukraine’s integration into the global
economy is to combine economic restructuring with its focus on strong growth in
exports and its differentiation potential. This can be achieved by improving
the overall investment climate and attracting investments in related sectors,
establishing a mechanism to stimulate exports and the formation of viable
competitive export industries.
As a subject of
international economic relations, Ukraine has consciously to log in economic
links to the most effective use all their capabilities and improve
competitiveness.
The main
objective of the course work — to explore the features of Ukraine’s foreign
trade. Subject of research are
economic relations with the formation of modern international economic
relations.
The research
object is a foreign trade of Ukraine.
The urgency of
the work is that at this time in our country, the real prospects for a truly
open economy, its effective integration into the world economy. Active use of
external factors contribute to overcoming the negative processes in the economy
and further development of market relations. Theoretical and methodological
basis of course work are the main provisions and conclusions expressed in the
fundamental scientific works of domestic and foreign economists in the theory
of international trade.
The work
consists of three parts, which consistently explored issues of modern
international economic relations and Ukraine’s place in this system.
In
the first chapter I will tell you about “THEORETICAL ASPECTS OF FOREIGN TRADE
ORGANIZATION”. After that I will move on to “ MODERN TRENDS OF FOREIGN TRADE
DEVELOPMENT OF UKRAINE”. And then I will give you some background about
“DEVELOPMENT PERSPECTIVES OF UKRAINE’S FOREIGN TRADE”.
To
conclude I would like to say that today the issue of foreign trade of Ukraine is very important and needs special
attention, that is why I chose the topic for my
course work, named „The
Development of foreign trade of Ukraine ”
CHAPTER
I. THEORETICAL ASPECTS OF FOREIGN TRADE ORGANIZATION
 

1.1
Principles of foreign economic activity

export import foreign trade
Ukraine’s
economic entities and foreign economic entities in carrying out foreign trade
activities are guided by relevant principles.
1.
The principle of sovereignty of the people of Ukraine in the implementation of
external low economy activity that is:
—
Exclusive right of the people in Ukraine alone and independently carry out
foreign economic activities in Ukraine, following the laws in force in Ukraine;
—
Ukraine obligation to comply strictly with all agreements and obligations of
Ukraine in international economic relations.
2.
The principle of freedom of foreign trade enterprises to production, that is:
— The
right to foreign economic entities to voluntarily engage in foreign economic
relations;
— The
right of foreign economic activity to make it in any form not expressly
prohibited by applicable laws of Ukraine;
— The
obligation to adhere to the foreign trade activity of the established laws of
Ukraine;
—
Exclusive right of ownership of foreign economic activity in all the results
obtained 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 action
resulting in restrictions on rights and discrimination of foreign economic
activity and foreign business entities by ownership, location and other
characteristics;
—
Restrictive inadmissibility of activity on the part of any of its subjects,
except as provided by law.
4.
Rule of law, that is:
— In
the regulation of foreign economic activity only by the laws of Ukraine;
—
Prohibition of the use regulations and administrative acts of local bodies in
any way to create conditions for foreign economic entities, which are less
favorable than those specified by laws of Ukraine.
5.
The principle of protecting the interests of foreign economic activity, which
is that Ukraine, as:
—
Ensure equal protection of the interests of foreign economic entities and
foreign business entities in its territory under the laws of Ukraine;
—
Provides equal protection to all foreign economic entities of Ukraine outside
of Ukraine in accordance with international law;
6.
The principle of equivalence of exchange, the inadmissibility of dumping in the
import and export goods.
1.2 Concepts and theories of international trade
Foreign
policy of any state concentrates on such questions: what goods to export and
import that with which further improve information: what products to export and
import that with which countries to trade and to what extent, if you want the
state 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 country
and who will traded without any government
restrictions. These theories include: the theory of absolute advantage,
comparative advantage, country size, proportion of production, product life
cycle, similarity of countries’ international competitiveness of nations
«and so on. The second type of theories involves government intervention
in the free flow of goods between countries to change the volume, composition
and direction of trade. The theories this type include: the theory of
mercantilism neomerkantylizmu, depending and others. The purpose of theories of
international trade was and is to help companies and governments in choice of
specialization and the most expedient option strategies to promote deliberate
use of national resources.
Mercantilism.
The first theory of international trade — the theory of mercantilism – was
developed 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 to
foreign markets. Mercantilism — an economic doctrine and economic policy, which
represents commercial bourgeoisie in feudal times and formation of capitalism.
According to the theory of mercantilism wealth of the country measured by
number gold and silver in their possession. Mercantilists believed that the
economic system consists of three sectors: industrial, agricultural and foreign
colonies. For effective functioning of the economic system most relevant to
their opinion, were the traders, their work was seen as a major factor
production. Thus, the source of wealth is the sphere of circulation, not field
production of monetary wealth ototozhnyuvalosya capital.
Because
in the world, according to supporters of this theory, there is limited of
wealth (gold and silver), the country can increase its wealth and poverty at
the expense of others, is due redistribution.
One
of the main prerequisites merkantylistskoyi theory was that economic system
functioned under conditions of underemployment due to what additional inflow of gold from
abroad could in conjunction with,surplus labor to increase production. If
employment population was complete, the flow of gold from abroad would cause
the inflation and not found effective use.
Mercantilists
merit is that they were first offered a coherent theory
of international trade, showed its importance for economic growth
countries, have developed a model of its development, first described that in
the modern economy is called the balance of payments.
Theory
of absolute advantage
The
founder of classical school of economic thought was Adam Smith (1723-1790). He
declared that the basis of wealth nations and peoples is an international division of labor and an appropriate
specialization of different countries in producing those goods for which they
have absolute advantage.
The
theory of absolute advantage is based on two assumptions:
 1) the only factor of
production is labor
2)
full employment, that all available labor used in producing goods
3)
global economy has two countries, so international trade involved only two
countries 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 is
zero
7)
foreign trade is free from restrictions and regulations.
The
advantage of the theory of absolute advantage is that it is based on labor theory of value and confirms the
advantages of division of labor not only nationally but also internationally.
The
disadvantage of this theory to explain international trade is that it does not
answer the question why countries trade among themselves even the absence of
absolute advantage in producing certain goods, is when one country has absolute
advantage in producing all goods.
The
theory of comparative advantage
The
theory of absolute advantage A. Smith, David Ricardo developed (1772-1823), proving that absolute advantage is
only a partial case of general rules.
Advantages
of the theory of comparative advantage:
1) first
described the balance of aggregate demand and aggregate supply. Although It was envisaged that the cost of
goods determined by the amount of work, necessary for its production, the
theory of comparative advantage showed that the cost really depends on the
ratio of aggregate demand and offers the goods on the domestic and foreign
markets.
2)
proved existence of gains from specialization and trade for all member
countries, not just one country due to the fact that others suffer losses.
3)
Allows you to conduct scientifically based foreign policy.
Shortcomings
of the theory of comparative advantage resulting from these assumptions, the
which it is based.
Therefore,
applying it to analyze foreign
economic relations should take into account that it:
1) No
takes 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 existence
of only one factor of production — labor.
4)
Ignore existence of such important conditions of international trade, the
differences in the provision of inputs.
5)
Based on the premise full employment, which means that one industry workers
freed can immediately find jobs in other, more productive. In other words, an
assumption about fixed costs and therefore ignored law costs are rising.
6) Do
not explain trade between approximately equal in economic development, none of
which has relative advantage over another.
Current
theories of international trade
Current
theories 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 the
Great Depression in the United States. Of this work was work «General Theory of
Employment percent and Money by John Maynard Keynes.
The
essence of Keynesianism. The market is characterized by balance, which provides
full employment. The reason is — a tendency to keep some profits which leads to the fact that the
total demand less than the total supply.
Keynes
proposed the following output. If the mass consumer is not able revive the total demand in the scale
of national economy, it should make state. If the state will do (and pay) great entrepreneurs order that
will cause additional hiring labor. Getting salaries cost, past unemployed will
increase their spending on consumer goods and this will increase overall
economic demand, and this in turn will increase total supply of goods and
services and economic recovery.
Monetarism
— macroeconomic theory, one of the main areas neo-conservative economic
thought. It appeared in 1950 as a series empirical research in the field of
currency circulation.
Key
provisions
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 in
the economy.
3.
Money supply to affect the consumers’ firms. Increase money supply leads to the
growth of production, and after full loading of opportunities — to inflation
and prices.
4.
Inflation must be overcome by any means, including a by reducing social
programs.
5.
When choosing a money growth rate should rule «Mechanical» money
supply growth, which would reflect two factors: level of expected inflation and
the growth rate of public product.
According
to the views of monetarist money is the main area which sets the movement and
production development. The demand for money is constant tend to increase and
to ensure consistency between the demand for money and their proposal to
conduct a course for gradual increase money in circulation. State regulation
should be limited to control over money turnover.
1.3
Regulation of foreign trade
Foreign
trade policy subdivided into following basic groups: tariff (custom duties) and
non-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 are
assessed at their import and export. The customs duties represent some kind of
the tax raised at crossing by the goods of customs border the one who these
goods 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 at
the expense of increase in the price at the goods. High import duties make
foreign goods noncompetitive in home market and used for protection of national
manufacturers of the similar goods.
Duties:
ad value — raised in percentage of goods cost; specific — raised in the form of
a certain sum of money from weight, volume or goods piece; mixed, a
simultaneous application ad value and specific duties.
According
to this law the Custom duties of
_Ukraine are systematized according to the Ukrainian
classification of the goods of foreign trade activities — the list of rates of
the import customs duties raised from the goods which are imported on customs
territory of Ukraine.
The
Ukrainian classification of the goods of foreign trade activities (national
variant of the qualifier of the Commodity nomenclature of foreign trade
activities) which is based on Harmonized system of the description and coding of
the goods of 2007 is put in a basis of the commodity classification scheme of
Custom duties of Ukraine (the commodity nomenclature).
The
duty which is subject to payment, pays off customs body under the rates of the
tariff operating at date of giving of the customs declaration.
The
custom duties rates of Ukraine are divided as follows:
Preferential
rates, including clearings of duty payment, are applied to the goods occurring
from the countries, entering together with Ukraine in the customs unions or
forming special zones or to which the special mode according to the
international contracts is given, and also an origin from a number of
developing countries;
Preferential
rates are applied to the goods occurring from the countries, using on Ukraine
by a most favored nation treatment;
Full
rates are applied to other goods.
Non-tariff regulation
Quantitative
restrictions, other non-tariff methods, trading-political methods of
stimulation of export, trading contracts and other non-tariff methods of
regulation of foreign trade activities. Quantitative restrictions include quota
and licensing.
Quotas are limiting volumes of the certain goods which are authorised for
importing to (export) on territory of the country during certain term. Quotas
are individual, limiting import (export) in one concrete country; group,
establishing volume of import (export) in certain group of the countries, and
also global when import (export) is limited without instructions of the
countries on which this restriction extends.
Licences are permissions to import (export) of the goods during any time, given
out by competent bodies (Ministry of Economy).
Licences
are general which represent permissions to import (export) operations with the
certain goods during all period of validity of a mode of licensing. Besides,
licences are individual, resolving to one subject of enterprise activity
realisation of one import (export) operation on the licensed goods. Licences
establish volumes of the imported (taken out) goods in quantitative expression
when it is authorised to import to (take out) certain quantity of the goods, or
cost expression when under the licence it is possible to import to (take out)
the goods for the certain sum.
Quotas
and licenses limit independence of businessmen concerning a choice of the
market and trade volume, however, these kinds of the external economic
regulation have gained now the greatest distribution.
Except
quantitative, non-tariff methods of the foreign trade regulation complication
of customs procedures, increase in quantity of the necessary documentation,
increase of requirements concern quality of packing and marks, an establishment
phytosanitary, veterinary and other kinds of the sanitary and ecological
control. Various taxes to import and export concern not tariff methods over the
duty, the currency restrictions connected with reception of the permission to
use of currency for import purchase, etc.
The
state can take measures also on unfair competition suppression at foreign trade
activities realisation, in particular, dumping that sales of the goods under
the prices below international commodity market. The establishment of the facts
of a dumping in Ukraine, for example, is done by the claim to the Ministry of
Economy of Ukraine or the State committee on the prices. In case of an
establishment of the fact of a dumping to the Ukrainian or foreign businessmen
the antidumping duty can be applied.
Except
antidumping duties can be applied as well countervailing duties which are
raised in case of an establishment of that fact, that the exporter by goods
manufacture used the state grants that has allowed it to underestimate the
price for the goods.
Measures
of stimulation of export have for an object encouragement of the national
enterprises-exporters. These measures include subsidizing (grants),
preferential crediting, the state insurance of export (when the exporter has an
opportunity to sell the goods and the risk of non-payment by the importer of
the put sum incurs the state), carrying out of a special currency policy (maintenance
of 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 the
added cost), information, consulting service, a professional training for
foreign trade, diplomatic support of exporters. These measures are applied
usually in a complex, therefore it is necessary for exporter to be guided in
stimulation system to take advantage of possible privileges.
The inclusion of Ukraine in
world economic relations requires a major adaptation
of its structure, the entire economic mechanism to
extremely severe requirements,
which dictate the
world economy and its economic institutions. Slowing the pace of reforms and policy uncertainty
puts Ukraine in
the face of losing the chance
of joining the world community. The important factor for
reform in Ukraine is restructuring the
economy.
CHAPTER
II. MODERN TRENDS OF FOREIGN TRADE DEVELOPMENT OF UKRAINE
 

2.1
Evaluation of export potential

Export is
considered as took out outside the country of commodities for realization of them
at 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 economic
growth, on integration of country in a world economy, then it gets trait of potential
that means the hidden ability to provide achievement of the set purpose and decision
of certain problem of community development. Such dualistic look at essence of export
has an important value for deepening of methodological basis of directions
lay-out of its development, increase of possibilities of positive influence on the
economy of country. Samuelson and Northous determined an export as commodities
and services which are produced inside a country and are for sale abroad. An export
consists of export of goods and services.
Beginning from
2000 Ukraine is having an economic growth accompanied by unstable traces of the
movement of the GDP, products of agriculture, investments, comsumers
expenditure and the foreign trade indicators .
  
The data in Table
1 show that the rate of the change in the exports correspond to the increase of
the GDP value, while the decrease of the rates of its augmentation in 2005 are
very much associated with an abrupt decrease in the exports deliveries under
conditions of a rising political non-stability in the country. The estimation of
the investment of the foreign trade into the process of the economic growing is
very contradictive, since between 2005 and 2007 the economy’s losses due to the
negative balance amounted to $ 18.5 milliard, and according to a forecast for
2008 that value is expected to be at the level of $ 12.5 milliard .
  
A weak link in
Ukraine’s foreign trade is the exports structure, in which 3/4 is the raw
materials and the primary processing products. Because of delay in the restructuring
of the economy, the most important exporting opportunities are still concentrated
in traditional industrial and raw materials branches. The largest commodity
groups in the structure of the exports of the industrial products there are the
basic metals (42.8 %), minerals (10 %), chemicals (almost 9%) and other raw
materials products (12%) (Table 2). The structural dynamics of Ukraine’s
industrial exported products shows that the movement of its separate positions
contradicts the world trends. For instance, in the exports structure there is rising
of the share of the basic metals, while this in the world has a decreasing
dynamics. On the contrary, the share of machines, apparatus, transportation
means goes down, despite its intensive rising in the global trade.
  
  
The competitive
advantages of the national producers are accounted for by the availability of
specific natural resources, in particular, of the iron-ore raw materials, a developed
transport infrastructure, favouring geographical location, low costs of the labour
force, low level of the expenditures on the upgrading and renovation of the
fixed production funds. Wearing of the fixed funds in Ukraine’s industry is
over 50 %, while in the basic export-oriented branch — metallurgy — it amounts
to 65 %. Moreover, in this branch almost a half of steel is melted by using the
Martin process, while in the world that process is used for production of only
2.5 % of steel. It is metallurgy that the problems of Ukraine’s economy and its
exports are associated with. The study shows that the external demand for the products
of this industry in fact defines the prospects for the economic growth on the whole,
as metallurgy makes a significant share of the commodity exports. Calculations
demonstrate that during 1997 — 2005 the GDP and exports dynamics determined the
variation of the multiplication coefficient by approximately 1 %, that is 1 %
of the decrease or increase in the exports of the metallurgical products was
associated with about 1% of a decrease or an increment of the GDP .
  
Аn analysis of
the states of the global markets made it possible to identify the set of the
products the demands for which have been rising incessantly for more than
decades. The market dynamics of these goods remains even at the present time, which
is proved by the indicators of their dynamics and the share in the global
exports (Table 3). The global exports of the above given goods rises in average
annually by almost 13 %, while their total share in 2006 amounted to 22 % of the
total volume of the exports. According to some data, this share in the exports
of some countries, for example, the Republic of Korea, Taiwan, is till larger. Due
to our calculations, these goods made only 3.7 % in the structure of Ukraine’s
exports, though their share rose by almost twice as compared to the level in
2002. The share of the exports of machines for automatic data processing, as well
as that for the office equipment components, transistors and semiconductors is very
insignificant. It is these kinds of products that are most characterised by the
highest rate of the growth (15—16 % annually) and by their importance
concerning their share (4.0—3.4 %) in the structure of the global exports,
which is typical for the modern informational economy.
  
  
  
The performed
analysis shows that Ukraine has non-prospective positions on the global market,
for the raw materials oriented exports and an insignificant share of the goods
being on growing demands results in losing profits and worsening of the conditions
for trading. The structure of the commodities exports of the electronic
industry products include computers, office equipment, television-sets,
radio-sets, transistors and semiconductors, which in 2006 amounted to 3.4 % and
exceeded the cost value of their exporting by 3,3 times as compared to that in
2002 (Table 5). From these tables it is evidently that the increase of export
of these highly technological wares is accompanied growth of negative balance through
exceeding 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 in
irretrievable lag from main direction in the globalizing world: wider use of high
technologies able to produce scientific products with high maintenance of
surplus value. Creation of the technical base for forming of high technologies in
all industries of national economy requires the use of effective measures of structural
and scientific and technical policy of countries, the result of which adjusting
of domestic production of microelectronic components and electronic wares,
which are characterized high maintenance of value-added and became the source
of the economy growing of Korea, Japan and other countries. Except for industrial
sector Ukraine has ponder able agrarian sector. Its potential of which, unlike the
traditional participants of world markets of agrarian products (The USA, EU,
Canada), yet is not outspent. According to the estimation of specialists, there
is involved only third of productive forces of nature and company in Ukraine. Agrarian
products of Ukraine are competitive on world markets and entering to WTO, in our
view, will not entail substantial problems in this sector. At the favourable
state of affairs the volume of export of basic types of agrarian products in
2006 was increased against 2005 in a value term on 315 million dollars and arrived
at almost 2,5 milliards of dollars even at diminishing of his volumes in natural
indexes (table. 5). However braked development of agrarian sector is through the
lacks of pricing on an agricultural produce. Foreign firms which comes to the
national market on the Uruguayan agreement buy in an agricultural produce on
low regional prices, and difference between them and allows to appropriate not only
export but also natural (absolute), rent world prices.
  
  
From above-explained
it is possible to come to the conclusion, that Ukraine was not yet able to
occupy the own reliable niches of supply of the prepared commodities in the
world market, but not raw material and low- technological products.
Overwhelming part it most point-of-sale partners on the indexes of
GDP
and
export on one person are at considerably higher level .
For development of
export potential of Ukraine it is necessary in the nearest prospect: — to promote
the competitiveness of the Ukrainian producers on the basis of activation of
structural reformation of economy, foremost export-oriented sector; to carry
out the high-quality changes of specialization of Ukraine in the world division
of labor on the basis of development and realization of complex export
strategy, oriented to the increase of part in the export of the innovative and traditional
Ukrainian products with the high level of valueadded, increase of grant of
highly technological services: — reorient the imported strategy in direction of
providing of complex decision of problems of modernization of national industry
and active policy of import substitution (limitation of import of the imported commodities
is during intensification of analogical production in Ukraine); — to solve the
problem of disparate of purchase and imported prices on the products of
agrarian sector.
2.2 Export and import flows of commodities
Ukraine foreign trade operations carried out with partners
from 200 countries.
The volume of
export 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 largest
volumes of export deliveries to the Russian Federation — 24.9% of total exports
from Ukraine, Turkey — 6.6%, Italy — 4,6%, Belarus — 3,5%, Poland — 3,2 %,
Germany — 3,1%, India — 2,9%.
The export of
goods 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 — by
37,8%, India — 25,6%.
In total exports
of goods in January-May 2010, compared to January-May 2009 increased share of ferrous
metals — 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 or
tramway locomotives, Putnam equipment — from 2,1% to 4,1%, fats and oils of
animal or vegetable origin — of 4 9% to 5,1%, ores, slag and ash — from 3% to
4,2%.
Volume of
exports of finished products made from imported raw materials, was $ 1.4545
billion, which is 77,5% more than in January-May 2009.
Ukrainian
exports of more than 50 percent of gross national product
of Ukraine.
 Today
the main export industries are metallurgy (metal products), agriculture
(wheat), machine building and chemical industries, whose share is over 80
percent of Ukrainian exports. The feature of the development of domestic
export-oriented industries is their raw nature and high level of dependence on
fluctuations in world markets.
Main exports of
Ukrainian goods to the Economic Unions:
§ the
Asia-Pacific Economic Cooperation (APEC): ferrous and nonferrous metals and
articles thereof;
§ CIS:
machinery, ferrous and nonferrous metals and products, prepared foods;
§ no-country
Central European Free Trade Area (TSEFTA): mineral products, ferrous and
nonferrous metals and articles thereof;
§ EU: ferrous
and nonferrous metals and articles thereof, mineral products, vegetable
products;
§ of the
country’s manufacturers and exporters of petroleum (OPEC): ferrous and
nonferrous 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 of
exports from Ukraine increased in 2010 comparing with 2009 by 29,6% and
amounted to 51 billion 430.5 million U.S. dollars. At the same time imports
grew by 33,7% and reached 60 billion 739.9 million dollars.
The largest
share (85%) in exports were transport services — 3 billion, including pipeline
transport services (52%), sea transport (13%), rail (10%), air transport (6%).
2.3
Export and import flows of services
In January-March
exports of services exceeded imports by 1 430.7 million. Told the State
Statistics Committee, submit the «Ukrainian News».
According to
Goskomstat, service exports in January-March 2010 was 2 557.4 million, an
increase of 19,6% compared with January-March 2009.
Imports of
services amounted to 1 126.7 million, decreased by 0,2% compared with
January-March 2009. The
increase in services exports was primarily due to growth in services exports
pipelines — in 2,3 times to 959.2 million dollars, travel — by 16.4% to 50.3
million dollars and transportation services — 33 9% to 1 884.3 million.
Imports of
services decreased mainly due to imports of financial services — by 22,7% to
228.1 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, and
insurance services — by 46% to 13,2 million dollars.
In
January-March 2010, service exports to CIS countries increased by 82,1%
compared with January-March 2009 to 1 370.0 million.
Imports of
services from the CIS in January-March 2010 increased by 13,2% compared with
January-March 2009 to 179.7 million dollars.
It was reported
that in 2009 exports of services exceeded imports by 4352 million.
Exports
of services in 2009 amounted to 9 520.8 million, decreased by 18,9% compared
with 2008. Imports of
services amounted to 5 168.8 million, decreased by 20,1% compared with 2008.In
2009, service exports to CIS countries decreased by 10.3% compared with 2008 to
3 808.7 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
In
recent years, Ukraine has passed most of the hurdles of postcommunist economic
transformation. Macroeconomic stabilization was accomplished long long. Prices
and trade are liberalized. Privatization has proceeded so that about two-thirds
of GDP arises in the private sector. For the last three years, Ukraine has had
a sound average economic growth of over 6 percent a year, and it is likely to
stay around 6-8 percent a year for the foreseeable future.
A
fast economic restructuring is taking place. Industries in which Ukraine
appears to have comparative advantages have grown particularly fast: steel,
food processing, agriculture, and light industry. Within each sub-industry a
desirable consolidation of 3-5 leaders is apparent. Although a few oligarchic
groups hold out, they are becoming more normal conglomerates, and a sizeable
number of new large and medium-size corporations have emerged. While corruption
and repression remain problems, business surveys undertaken by the European
Bank for the Reconstruction and Development (EBRD) and the World Bank in 1999
and 2002 suggest great improvements. Ukraine’s transition to a market economy
has succeeded.
In
this situation, foreign trade attracts new attention for many reasons. First,
with an official GDP at current exchange rates of about $40 billion, the
Ukrainian economy is rather limited, and access to export markets is critical
for future economic growth. In recent years, Ukrainian exports have expanded
fast by slightly over 10 percent a year and are driving economic growth, but
clearly much more can and should be accomplished. The old adage «trade
rather than aid» describes what Ukraine needs now.
Second,
the Ukrainian economy is very open with exports corresponding to about half of
GDP, and exports have increased at over ten percent a year for the last three
years. Exports comprise the growth engine in the Ukrainian economy.
Third,
while the domestic market in Ukraine appears to work reasonably well, regional
distortions in foreign trade are all too apparent. The most recent statistics
for 2002 demonstrate that as little as 19 percent of Ukraine’s exports went to
the European Union (EU). According to the gravity model, which assesses how
much countries should trade with one another, given the size of their economies
and 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 17
percent last year. Instead, Ukraine is increasingly exporting to all kinds of
new distant Third World markets in Asia and the Far East, notably China, and
the Middle East, which are more open. It is more important that exports grow
than 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 to
export more to big markets in its neighborhood. Although Ukraine is a very open
economy, agriculture is considered to be 93 percent self-sufficient, suggesting
substantial sectoral distortions as well.
Fourth,
Ukraine suffers from a predominance of so-called sensitive products in its
exports, that is, goods that are particularly exposed to protectionist measures
by other countries. They account for about three-quarters of Ukraine’s total
exports. Steel comprises 40 percent of Ukraine’s exports, while each of the
three sensitive commodity groups, agricultural goods, chemicals and textiles,
account for over 10 percent. According to the WTO, Ukraine came in the 10th
place in the world in terms of suffering from actual antidumping measures from
January 1995 to June 2002, with no less than 37 antidumping measures concluded
by various countries.
Fifth,
Ukraine is now facing critical changes in its foreign trade agreements. Its
negotiations about accession to the World Trade Organization (WTO) are
approaching their final stage. The EU is suggesting that its Partnership and
Cooperation Agreement (PCA) with Ukraine should be replaced with an agreement
on a Common European Economic Area (EEA). The Presidents of Russia, Ukraine,
Kazakhstan and Belarus just signed a declaration of their intention to
negotiate a free trade zone. Thus, Ukraine is facing monumental decisions on
its foreign trade relations in all directions.
Yet,
sixth, although Ukraine is facing so many important problems and decisions in
foreign trade, trade issues have been all but ignored in the country until
recently. The preoccupation with getting the domestic market economic reforms
has been so great. In the mid — 1990s, Ukrainians had a tendency to blame the
outside world for their hardships. Now, on the contrary, Ukrainians tend to
blame themselves for whatever problems they encounter. While an admirably
humble attitude, it does not necessarily reflect the truth.
There
are always many barriers to trade. First, everybody mentions the problem for
exporters to obtain a value-added tax refund. Another query is what the
Ukrainian economy looks like at enterprise level, but it appears a rather
normal market economy. Then, the three big trade issues come, trade relations
with the EU, trade with Russia and WTO accession. The EU should be Ukraine’s
main export market, but its imports from Ukraine remain surprisingly low, while
Ukrainian exports to Russia are swiftly dwindling. WTO accession appears to be
the key to Ukraine’s trade policy. Agricultural concerns are a topic on their
own, but they appear to be less severe than widely presumed.
Ukraine has great export potential. With
an area of ​​0.4% of the total global land and the
population at 0,8%
of global, Ukraine
makes 5% of world
mineral and food
processing. The main strategic goal for Ukraine — the
transition to economic
development, export oriented and,
therefore, the production of
goods able to compete in the global market.
A
fast economic restructuring is taking place. Industries in which Ukraine
appears to have comparative advantages have grown particularly fast: steel,
food processing, agriculture, and light industry. Within each sub-industry a
desirable consolidation of 3-5 leaders is apparent. Although a few oligarchic
groups hold out, they are becoming more normal conglomerates, and a sizeable
number of new large and medium-size corporations have emerged. While corruption
and repression remain problems, business surveys undertaken by the European
Bank for the Reconstruction and Development (EBRD) and the World Bank in 1999
and 2002 suggest great improvements. Ukraine’s transition to a market economy
has succeeded.


CHAPTER III. DEVELOPMENT PERSPECTIVES OF UKRAINE’S
FOREIGN TRADE
3.1 Strategy of foreign trade of Ukraine
Since
1996, Ukraine has repeatedly stated that it wants to become a member of the
European Union at the highest official level. The EU has however
cold-shouldered them, although Article 49 of the Treaty of the European Union
stipulates that any European state may apply to become a member of the European
Union. Many European politicians and EU commissioners have publicly ruled out
Ukrainian membership of the EU, but formally the question remains open. A broad
Ukrainian opinion favors the country’s «European choice,» though its
implications are usually left open.
The
institutional cooperation between the European Union and Ukraine has been
rudimentary. The EU offered Partnership and Cooperation Agreements (PCA) to the
CIS countries, which were little but a codification of WTO principles for
non-WTO members. They do not offer any trade concessions beyond what the EU
accords to its WTO partners, while the EU has concluded free trade agreement
with many other countries. Ukraine has been treated as one CIS country among
many. The Ukrainian PCA was concluded in 1994, but it did not come into force
until 1997. It is valid for ten years and can be prolonged. Although it is
comprehensive, covering political dialogue, trade in goods and services, economic,
environmental, scientific, cultural and legal matters, it contains little of
substance. The EU’s only subsequent trade policy advance to Ukraine is its
conclusion of a textile agreement that eliminated its import quota system.
The
contrast between the development of exports to the EU from the ten
post-communist EU candidate members in Central-Eastern Europe (CEE) and the CIS
countries is huge. Barely half of the exports from the former went to the EU in
1989, rising to 67 percent in 2000. By contrast, 33 percent of Soviet exports
went to the EU in 1989, but by 2000 that share had fallen slightly to 31
percent, according to IMF statistics. With exports to the EU of only 16 percent
of its total exports in 2000, Ukraine was especially disadvantaged in spite of
its vicinity to the EU. Given economic geography — Ukraine’s location,
transportation routes and the relative size of adjacent economies — the EU
should be Ukraine’s all-dominant export market buying 60 percent of its
exports. Through regression analysis, Peter Christoffersen and Peter Doyle have
established that the growth of potential export markets has been one of the
most important determinants of growth in the transition countries.
One
reason for the disparity in EU trade between the CEE and the CIS countries has
been slower economic reforms in the CIS countries, but another reason has been
diverse EU trade regulations. The EU has developed an elaborate hierarchy of
trade treaties, ranging from simple trading partner to full member-state. As countries
on the way to be full members, the CEE countries are close to the top of this
hierarchy, while the CIS countries are at the bottom. The EU offered favorable
Europe Agreements to the CEE early on, which committed all parties to eliminate
tariff and non-tariff barriers on industrial products by the end of a ten-year
period, which ended in 2001 or 2002. They were asymmetric to the benefit of
CEE. Agricultural products are subject to preferential treatment under tariff
quotas. On January 1, 1998, the EU lifted quantitative restrictions on imports
of textiles and clothes from CEE.
The
CEE countries are considered market economies by the EU (and the US), which
means that an antidumping investigation is based on their own prices. The CIS
countries, on the contrary, have been labeled «economies in
transition» by the EU, which signifies that they are treated as
state-trading countries and an antidumping investigation is based on a
hypothetical country’s (much higher) prices. Recently, Russia and Kazakhstan
have been recognized as market economies of the EU and the US, and Ukraine
should be able to make that grade very soon. The last EU objection is that the
state plays too great a role in the Ukrainian economy, while the US last year
rejected Ukraine as a market economy because of tax benefits for the steel
industry, which have since been abolished.
Unlike
the Central European economies, the major CIS countries are not members of the
WTO. To date, four small CIS countries have become members of the WTO, the
Kyrgyz Republic, Georgia, Moldova and Armenia, while all the others are at
various 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 have
no associate status, no customs union or free trade arrangement. Largely, they
are 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 offers
similar treatment.
These
differences in status are reflected quite consistently in trade treatment and
their total effect is significant. Even before their entry into the EU, the CEE
countries get 80 percent of lines duty free to compare with, while 54 percent
of lines for the CIS countries as GSP beneficiaries. GSP (Generalized System of
Preferences) are trade benefits designed for developing countries, but they are
not very beneficial for the CIS countries. For very sensitive goods — textiles,
metals and many agricultural goods, most-favored nation (MFN) duty rates are
reduced by only 15 percent, and for sensitive goods — chemicals, many
agricultural goods, footwear, plastics, rubber, leather goods, wood, wood
products, 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. The
supposed beneficiaries do not conclude any contract and therefore have no
recourse to any dispute settlement conflict. The rules of origin are onerous,
while special simplified agreements have been reached with CEE. GSP tariff
reductions are less than those the EU accession countries get. Besides, Ukraine
is so developed that it can easily be deprived of GSP because of too high
economic development. Strikingly, nobody even talks about GSP in Ukraine.
Patrick
Messerlin assessed EU Protection by industry in 1999. He put the level of
overall protection for the whole of the EU economy at almost 12 percent. EU
protection however varies by commodity, with rates of overall protection
exhibiting wide differences by sector. Messerlin studied ordinary customs
tariffs, major border non-tariff barriers (quantitative restrictions and
antidumping measures), while he has ignored all the non-border barriers, that
is, an array of norms and standards.
The
simple average of all existing EU tariffs on goods was 7 percent in 1999. They
are not very high, but protection is much higher for goods that Ukraine would
like to export. Besides, if other costs in the CIS countries are similar to CEE
countries, even small barriers can rule out imports from the CIS countries. The
CIS countries generally have a cost advantage compared to the CEE countries
through lower wages, but this is counteracted by higher transportation and
other costs.
EU
trade policy is more restrictive than simple average tariffs indicate,
especially for the sensitive products, agriculture, steel, textiles, clothes
and chemicals. Non-tariff barriers include variable levies in agriculture,
voluntary export restraints in industrial sectors (notably in textiles and
clothing), quotas on imports from centrally planned economies (to which the EU
counts Ukraine) and antidumping measures. The peaks of overall protection are
very high. The maximum tariffs exceed prohibitive 200 percent for certain
agricultural goods. Also these EU measures are persistently milder for CEE
countries than CIS countries. For instance, the number of antidumping cases
that the EU instigated against the CEE countries from 1990-99 was 42,
admittedly almost equal to the 41 initiated against the CIS countries, but the
duties imposed against the CIS countries were about twice as high as those
levied on the CEE countries .
EU
agriculture is particularly well protected. The simple average tariff is
estimated at 17.3 percent (WTO 2000, p. xix), but the actual protection is
often prohibitive for the CIS countries because of variable levies and
technical standards. In addition, the EU is reluctant to give any preferences
for farm goods from temperate countries and food products, that Ukraine
produces and would like to export (Messerlin 2001, p. 28). EU minimal market
access commitments in cereals under the Uruguay round prompted bilateral
agreements on a duty-free quota of 300,000 tons of wheat essentially from the
CEE, 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, fruit
and vegetables to the EU, and the EU has reciprocal protection through
bilateral agreements with Bulgaria, Hungary and Romania, the main wine
producers in CEE (WTO 2000, pp. 87, 91). As a result, EU imports of
agricultural goods from the twelve CIS countries decline from1.5 billion euro
in 1995 to 1.3 billion euro in 1998, while EU imports from the 13 EU candidate
members were three times larger and rose somewhat, according to the EU Trade
Directorate.
The main
components of foreign
economic strategy of Ukraine — is
a powerful export
sector, the national currency; attracting
foreign investment through
the establishment of joint business, liberalization of imports, a foreign business;
building
an extensive system of foreign trade management, flexible tax, price,
deposit, credit, financial and monetary policies,
the gradual integration of the economy in the
European and world business
associations and organizations; staffing department.
CONCLUSION
Ukraine
independently form a system and structure of state regulation of foreign
economic activity on its territory. State regulation of foreign economic
activity should protect the economic interests of Ukraine and the legitimate
interests of foreign economic activity, creating equal opportunities for
foreign economic entities with the aim of developing all types of business,
regardless of ownership, use, income and investment, competition and
Elimination of monopolies.
One form of
state regulation of foreign economic activity is to establish the regime for
currency transactions in Ukraine. Another form is a customs regulation of
foreign economic activity. Licensing
and quotas for exports and imports as a form of state regulation of foreign
economic activity of Ukraine establishes itself in the cases stipulated by the
Law of Ukraine «On Foreign Economic Activities».
 Raw-material
orientation of Ukrainian exports shows atrophy of the processing industry.
Domestic manufacturers have limited opportunities to purchase the necessary raw
materials and manufacture relevant products due to low pay. Lacking in domestic
market demand, raw material goes abroad for the manufacture of its products
that are returned to the markets of Ukraine, displacing domestic producers.


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