International trade and investments in

Ukraine in the context of the

Association Agreement between

Ukraine and the EU

Igor Burakovskyy Head of the Institute of Economic Research and Policy Consulting

Round table: "Ukraine-WTO-EU structural changes and standards"

Simferopol, October 3, 2013

Інститут економічних досліджень і політичних консультацій www.ier.com.ua

Trade: tendencies 1. TBT today - complications, large scale of distribution, new

formats (voluntary standards, etc.) In the regulatory sphere today there is particularly urgent need for the development and implementation of globally consistent rules and standards for the qualitatively new products, services and technologies that become the subject of international exchange

2. New Regionalism: a new generation of agreements cover a wide range of issues concerning both goods and services trade - free trade in goods (industrial, agricultural, etc.), “full" free trade in services and other trade-related areas - the arrangements for the movement of capital (investments) and the opening of government procurement markets, issues of competition and intellectual property rights, effective dispute settlement mechanism, etc.

3. The temptation of protectionism: the crisis and post-crisis recovery.

4. The emergence of new heavyweights: China and India. 5. Resources: more than product.

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Trade: tendencies Regulatory diplomacy

EU as an example:

1. Agreements on conformity assessment and acceptance of industrial products. These agreements provide in their content certain benefits of participation in the EU internal market to third countries bordering with the EU, in sectors for which their national technical rules and standards are aligned with European ones.

2. Mutual Recognition Agreements. These agreements are intended to ensure mutual recognition by trade partners of test results and certificates required for certain industrial products. The agreements envisage for the provision of specially authorized conformity assessment bodies (CABs) in one country the right for certification of products for access to the market of another country, in accordance with the technical requirements of the country.

3. Regulatory dialogues.

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Economic impact of AA for business: general considerations • The Association Agreement (AA) is the natural continuation

of the process of many reforms that are already taking place in the country

• Arrangements and appropriate consequences for business are multidimensional : - Part of the agreements are not sector-specific (horizontal issues) - Some agreements are directly related to specific sectors

• A key component of the agreement – is regulatory harmonization, the depth of which will determine the effect of the agreement implementation for business and the economy as a whole

• Calculations show that the economic benefits of reducing non-tariff barriers several times exceeds the gains from liberalization of import duties only.

Government and Association Agreement

• As for the state, the signing of the Association Agreement (CA) will have a number of consequences both of fiscal and institutional character.

• A key component of the Association Agreement - is the approximation of legislation and administrative procedures of Ukraine to the relevant rules and procedures of the EU. This task is entrusted to the government sector, and its implementation will determine the impact and long-term effects of AA for the country as a whole.

• The agreement includes a list of more than 350 directives and other EU regulations, with which the legislation of Ukraine must be gradually harmonized.

• The EU is ready to provide technical and financial assistance in the implementation of the Association Agreement.

Інститут економічних досліджень і політичних консультацій

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Time schedule of legislation harmonization

Інститут економічних досліджень і політичних консультацій

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3 11

65

101

76

42

22

12 19

2

13

1 0

20

40

60

80

100

120 number

Harmonisation spheres

Інститут економічних досліджень і політичних консультацій www.ier.com.ua

Інститут економічних досліджень і політичних консультацій

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Territory and investor: some theory

Rating by investor of a given territory - in

fact it is his waiting to be able to carry out industrial and commercial activity, which is characterized by an acceptable level of risk and return.

The ability of the regions to generate and

attract investments – is a set of characteristics of territorial units (regions) that new and already working investors take into account in making investment decisions on this particular area.

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But ….

The decisions to develop and

implement specific investment projects have their own specifics, which are determined by: First, the strategy (target) of the company (investor); Second, the specifics of the industry (sector) of investment; Third, the size of the investor’s company.

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Factors of attractiveness

Hard factors – properties (parameters) of business

environment, that can not change in the short/medium term

Soft factors -

factors that shape and influence the perception (comprehension, understanding), effectiveness of the process, legislation, the possibilities of local authorities, etc.

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The role of the factors in making investment decisions

• If there is a mature and predictable institutional environment, that guarantees the investor the expected result, the hard parameters come out on the first place.

• In the absence of a developed and predictable institutional environment, soft factors have a greater influence on investment decisions.

•Інститут економічних досліджень і політичних консультацій www.ier.com.ua

Thank you! Institute of

Economic Research and Policy Consulting

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