Weak Link: Ukraine’s Incorporation into Global Value Chains


Supply chains amount to around 80% of world trade. According to the World Bank and World Economic Forum, reduction of transactions high cost, needless bureaucracy and eased export-import operations will encourage growth of global GDP and boost world trade by 3-5%.   World Trade Organization reports positive correlation between participation in global value chains and rates of economic growth, both, for the most developed countries and for developing ones as well. For instance, 30 developing countries, the most integrated into global value chains over the past two decades (1990-2010), reported average economic growth at the level of 3,3%. On the other hand, 30 countries the least integrated into these processes, reported annual economic growth of 0,7%. In this respect, the new multilateral WTO Trade Facilitation Agreement (TFA), signed in 2014, will considerably prompt development of world trade. The agreement is aimed at streamlining export-import operations in the shortest period of time. With TFA trade costs are expected to drop by 14% for lower income economies and by over 13% - for the counties with rather high income level. Moreover, this has been WTO’s first multilateral agreement since the organization was established in 1995. Clearly, eased trade procedures are essential for all WTO member states. But in practice, trade procedures in each separate country have their own peculiarities and, thus, require a specific list of documents and procedures to carry out export-import operations. Furthermore, verified information about these requirements is not always available and clearly laid out. Ukraine is a country that would benefit the most from TFA. National business faces an overly complex, bureaucratized, confusing and corrupt procedure of export-import operations. Being a trade outsider, Ukraine, still drags behind on the way of TFA implementations. Out of 44 required procedures we’ve implemented only one – progress was reached in the project “Single window – local decision” in the field of operation of the South Customs and seaports of Odessa region. Moreover, almost all items of TFA were counted into the Customs and Tax Codes of Ukraine. However, progress has been reached only due to efforts of working groups of Ukrainian and international experts, long before the WTO agreement was signed. Clearly, these developments are beneficial for business considering the need of compilation and large-scale implementation of TFA in Ukraine. The agreement will be obligatory for all WTO countries after internal ratification by 2/3 of all member states of the organization. Furthermore, implementation of the agreement presupposes three formats: (A) – all TFA items will be implemented right after it comes into force; (B) – implementation of separate TFA items during transition periods; (C) – implementation of TFA items during transition periods engaging international technical assistance. Earlier, the government made notification about category (A). Thus, since TFA comes into force, eased export-import operations will be implemented at the national level and presuppose less complicated border crossing procedures and less complex customs control at all crossing points (marine, railway, road, air and etc.). Moreover, the Cabinet of Ministers must provide standardization and harmonization of trade procedures and information flow, necessary for turnover between a seller and a purchaser, with other WTO member states, which involves automation of trade procedures. However, Ukraine has a number of burning issues concerning eased export-import procedures. Existing developments are not enough to implement all commitments of the agreement. Meanwhile, non-compliance of a WTO member state with organization commitments may result in disputes and trade sanctions. Although, WTO member states that have notified about category (A) will be provided with a 2-year grace period, within which commitment disputes against this country are prohibited. Thus, the government should take a more active stance regarding eased trade procedures. In particular, it is necessary to create a national committee, involving representatives of state authorities, science and business. Obviously, one of the most important and complex tasks of the committee, as required by TFA, is going to be implementation of the national strategy on the ease of trade procedures in accordance with the agreement. The document must contain clearly defined measures and time frames of their implementation. Therefore, in order to successfully implement TFA, it is necessary to do the following: 1. Improve inter-ministerial cooperation, increase efficiency and transparency of export-import operations administration; 2. Adjust state-private partnership, which will help develop practical solutions regarding legal, regulatory, institutional and procedural foundations for export-import operations; 3. Adjust the mechanism of collection and exchange of data about subjects and objects of foreign economic activity and trade at national and international levels; 4. Automatize separate processes of export-import operations, which involve data bases of subjects of foreign economic activity and data personalization. This will enable obtaining authorization and preliminary decisions after appropriate registration; 5. Provide transparency of export-import operations, formalize stages of export, import and transit procedures. I believe, that implementation of the suggested measures will prove more efficient provided close cooperation with relevant international organizations and international technical aid. Implementation of TFA at the national level will help extend geography and nomenclature of Ukraine’s international trade and expand it by 10% irrespective of conjuncture of global markets. The successful outcome depends on elimination of bureaucracy and corruption in export-import operations, shorter time and fewer expenses for their realization. In this respect, initiative to launch Export-Credit Agency comes in terms with stimulation of foreign economic activity. In particular, its implementation and development should come hand in hand with eased trade procedures. At the same time, it’s necessary to maintain balance between the speed of export-import operations and security of foreign trade.


Ihor Guzhva


Dzerkalo Tyzhnia


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