The recently signed Canada Ukraine Free Trade Agreement (CUFTA) is not a recipe for immediate prosperity, but it does represent a good opportunity to spark mutual interest in building beneficial trade ties between the Ukrainian and Canadian business communities. It will encourage members of both communities to explore opportunities in more detail, creating possibilities and starting new conversations on cooperation.
The Ukrainian League of Industrialists and Entrepreneurs (ULIE) is the largest umbrella business association in Ukraine, uniting a range of business organizations and economic entities across all sectors of the Ukrainian economy since 1992. Our association has always focused on supporting strategic solutions to strengthen Ukraine’s position in an increasingly globalized world. ULIE’s current priorities include support for Euro-integration and legislative reform to bring Ukraine into line with contemporary international business practices. Naturally, we view the CUFTA breakthrough as a significant milestone that opens up new prospects for Ukraine’s economic development.
Building on sound but modest foundations
We do not have to build the relationship from scratch. Some Ukrainian goods have already established a presence in Canada. ULIE members including Chumak, Rosava and Zlatomed already have a history of exporting to the Canadian market. Ukrainian sunflower oil is also a popular item in Walmart supermarkets in both Canada and the US. These successful relationships demonstrate the possibilities for Ukrainian producers able to meet the quality and legislative standards required to enter the Canadian market. Nevertheless, there is huge room for growth. Ukrainian exports to Canada in 2015 stood at minimal levels. Diligence and professionalism are required to improve this situation and increase volumes.
Ukrainian producers need to appreciate that CUFTA is not a magic pill with immediate effects. We are not about to witness sudden sharp increases in exports. Current low levels of bilateral trade are not only the result of previously existing regulatory hurdles. The present modest trade turnover reflects a business environment where neither country previously viewed the other as a strategically important market. Despite the strong ancestral bond connecting Ukraine and Canada, there had been little effort to prioritize greater trade. In this context, the advent of the CUFTA is a prominent signal of the newfound political will to build business bridges. It has the potential to focus attention on bilateral trade and encourage Canadian companies to consider investing in Ukraine.
The most direct advantage of the free trade deal is obviously the removal of import tariffs. Approximately 98% of regulatory obstacles and existing tariffs will be cancelled as the terms of CUFTA are implemented, enabling producers to become far more competitive while creating attractive opportunities for players in both countries. The key task facing Ukrainian producers today is adapting their products to the requirements and standards of the Canadian market. Once they have a product that meets the regulatory requirements of the Canadian market and is capable of generating Canadian consumer interest, negotiations can begin with potential partners.
Mutually beneficial commercial cooperation
There is much more to CUFTA than simply the removal of trade barriers and tariffs. The agreement contains clauses that will contribute to greater industrial cooperation in areas such metallurgy, chemical production, oil and gas processing, and aircraft engineering. This is a particularly promising avenue for potential cooperation, opening the door for the mutually beneficial marriage of high-tech Canadian expertize and the cost-efficient production capacity of Ukrainian enterprises. By pooling the technological and production advantages offered by both countries, it should prove possible to produce competitive commodities for sale on global markets.
Bringing business communities together
As we look at the potential advantages of CUFTA, it is important not to underestimate the significant role it can play in fostering increased collaboration between Ukrainian and Canadian industrial associations. ULIE has already signed a cooperation agreement with Canadian Manufacturers and Exporters (CME) – Canada’s largest trade and industry association. We held our first joint event in Toronto on 21 July, featuring the participation of member companies from both associations. This kind of cooperation helps to build direct contacts between members of the two business communities and reflects the new momentum in Canada-Ukraine business ties as a direct result of the free trade agreement.
CUFTA will also help Ukraine’s small and medium-sized enterprises (SMEs) to meet Canadian standards and increase their access to both Canadian and global markets. By creating trade and investment opportunities for more Ukrainian SMEs, CUFTA contributes to increasing their growth and viability, which in turn generates sustainable economic growth for the entire Ukrainian economy. In order to support this process, ULIE has established relations with the Canadian Independent Business Association. This is another example of how CUFTA is succeeding in starting conversations within the business community and opening doors for greater bilateral cooperation.
As person-to-person and association-to-association links continue to grow, new synergies will arise and partnerships will inevitably develop. Given the favourable climate created by the terms of the free trade agreement, one area of particular interest is the development of industrial parks in Ukraine bringing together the respective cost efficiency, geographical and technological advantages that both countries bring to the table. Ukraine’s location makes it the ideal candidate to become a logistical hub on the frontiers of the European Union, the Middle East and Asia. Canadian companies, with their global reach, strong reputation and cutting-edge business practices, would be ideal partners in a venture of this nature. It is up to Ukraine to demonstrate that it can be a reliable and transparent partner in such a long-term undertaking. The conversation has begun – we must make sure it does not fizzle out.
About the author: Denys Krasnikov is the Vice President of the Ukrainian League of Industrialists and Entrepreneurs (ULIE) and serves as Coordinator of ULIE’s Export Promotion Centre