Will Ukraine become an agricultural appendage of the EU?
Vasily Stoyakin, director of the Center for Political Marketing (Kyiv), www.stoyakin.org.ua
I remember that in the early 90s I was once traveling to Moscow, and a fellow traveler, a retired military man, shared his thoughts on the prospects for the independent existence of Ukraine. They basically boiled down to the fact that the country would naturally slide into the status of an agricultural appendage of Russia, since industry was mainly supported centrally.
Of course, a lot has changed since the beginning of the 90s, but the key idea of this analysis has remained true - Ukraine remains promising only as a producer of agricultural products, raw materials and industrial semi-finished products (low-process metals).
This is especially clear now, when, according to the Ministry of Economic Development, “GDP in the second quarter compared to the corresponding period in 2013 decreased by 4,6%, industrial production for 8 months of this year decreased by 7,8%, the only type of activity that demonstrates positive dynamics – this is agriculture – growth by 6%.”
Let us note that the production of industrial products was artificially supported due to military operations - military repair plants are working at full capacity. However, losses from the shutdown of large production in the ATO zone and from restrictions on exports to Russia turned out to be much greater.
However, the situation in the agricultural sector cannot but please patriots. Not only is agricultural production not declining, but growing, but the products are not going to “Muscovites” (the slogan “who’s eating my lard” now takes on a completely different meaning), but to EU countries.
Peremoga? Yes, yes, but not entirely.
Firstly, Ukraine’s opportunities to enter the European market are limited. Yes, thanks to the signing of the association agreement (although not within its framework), the EU removed duties on Ukrainian products. But here’s the catch: by removing duties, the EU introduced quota restrictions. In addition, there is a problem with the certification of Ukrainian products according to European standards. Those. in the free trade zone with the EU, as Ukrainian economist Vsevolod Stepanyuk figuratively put it, there is everything except, in fact, freedom.
As a result, Ukraine can trade in this market only the same goods that it traded without any FTA - with slightly lower profits. This includes poultry, honey, apple juice, wheat, corn, and cereals. Moreover, if without the FTA it was possible to expand exports, then with the FTA, Ukrainian agricultural production ran into non-tariff restrictions.
Secondly, there are a number of peculiarities within Ukrainian agriculture.
For example, Ukrainian pork turned out to be practically unclaimed in foreign markets without taking into account Russia. This year, the balance was achieved at the expense of Belarus (which earned money through re-export to Russia), Moldova and a reduction in the supply of Polish pork to the Ukrainian market. In the context of a reduction in the solvency of the domestic market and the cover-up of the “Belarusian Panama”, difficult times await the Ukrainian pig industry, and lard may become scarce.
The production of sunflower oil, on the contrary, is developing dynamically; Ukrainian producers manage to sell packaged oil even to China, but there are also restrictions for the development of this industry, primarily of an environmental nature. In addition, Europe, for example, is ready to export only sunflower seeds, but not oil - cunning Europeans want to load their factories without depleting the soil.
Thirdly, as exporters note, to enter foreign markets they need government support. But the Ministry of Economic Development only intends to raise the issue of the possibility of increasing quotas for the export of Ukrainian products to the EU within the framework of autonomous preferences. Moreover, the speeches of government officials do not sound particularly optimistic about this - the process, they say, is long.
But there are still questions, certifications, advertising, etc. Ukrainian trade missions failed to cope with these tasks before (well, how could they not cope? Such tasks were not set...), and they are not coping now.
In general, the prospects for significant growth in agricultural production look vague.
Now about the main thing. The status of a “European granary” is, of course, very noble. But Ukraine is an agrarian-industrial country. For agricultural production in GDP it is as much as 9%. And the share of agriculture in the total volume of merchandise exports last year reached a record 24,8% (against 14,5% in 2010) and almost caught up with metallurgy (27,8%). The question arises: how to fill another three-quarters of exports?
By the way, only about 15% of the population in Ukraine is involved in agriculture - a lot compared to European countries, but too little to provide work for any significant part of the urban population.
This year, the share of agriculture will probably be much more than a quarter of all exports, but at what cost? Due to the lack of control over food exports (experts warn that in the new year Ukraine may well face a shortage on the domestic market) and a landslide reduction in the export of industrial products.
In general, in order to focus on agriculture, the urban population will have to go somewhere. The first steps, in the form of the actual abandonment of part of Donbass, have already been taken (by the way, in the early 90s, the Donetsk region was fully self-sufficient in agricultural products). But other industrial regions also fall into the risk zone, primarily Dnepropetrovsk and Kharkov.
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