Ukraine Trade Barriers between Russia and Europe (Essay Sample)

UKRAINE TRADE BARRIERS BETWEEN RUSSIA AND EUROPE
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Ukraine trade barriers
Introduction
Ukraine occupies a second largest land mass in Europe. It is entailed with a wide, fertile agricultural land mass, as well as more industries in its eastern wing. In 1991, after the fall of Soviet Union, Ukraine attained its independence (BBC news, 2019). Since then it has staggered between building closer relationships with Russia and seeking an engagement with Western Europe. Although Ukraine and Russia have common origins in history, the country’s western side relate more with Europe, specifically Poland. In its cities and the industrialized eastern side a significant number of people uses the Russian language as its first language. These three countries relationships has its darker and lighter side, these essay will discuss the trade barriers between Ukraine, Europe and Russia.
Fig.1 Ukraine’s Country Profile
Analysis of Ukraine
Ukraine’s Economic Position
With a population of 42.3 million, Ukraine’s economic freedom stands at a score of 52.3, ranking it as the 147th freest economy (2019 index). The country has recorded improvements in freedom of business, fiscal health and property rights which has shadowed the decline in trade and labor freedom. In the 2019 index, Ukraine is ranked the last in Europe’s 44 countries, with an overall score being under the world and regional averages.
In the recent economic statistics, the country’s individual rate of income tax is 20%, while corporate tax stands at 18%. Generally the countries tax burden is 33.1% of the overall domestic income. Governments spending from 2016 to 2019 computed to 42.1% of its GDP with budget deficits averaging to 1.9% of the GDP and the public debt amounting to 75.6% of GDP. A combination of imports and export value equaled 102.2% of GDP according to the 2019 index. Averagely the tariff rate applied in Ukraine is at 2.5%. As of 2019, the country had a gross domestic product (GDP) of $ 368.8 billion a 2.5% growth from the previous year. Its annual income per capita stood at $ 8,713. Unemployment levels was 9.5% and an inflation in relation to consumer price index standing at 14.4%. The countries foreign direct investment in 2019 amounted to $2.2 billion.
Ukraine’s Economic Influences
Rule of Law
The rule of law in Ukraine gives protection to property rights. Record are done of liens and mortgages. In 2018, the Ukrainian government cut construction permit fees to an Affordable amount though contracts enforcement is still costly and time consuming (2019 Index). Political pressure in the country has influenced the judiciary thus penalties on corruption cases are not being effectively implemented. Corruption is still eating on its economy. The judicial effectiveness has risen though.
Efficiency in regulation
Over the years the process of starting up a business venture has been streamlined though compiling licensing requirements still takes time. Commercial transactions still experience regulatory uncertainty because of political instability. The county’s labor code has flexibility issues these has resulted into a reduction in labor and monetary freedom an immediate example being the governments defiance of international financial institutions to extend natural gas price controls in 2018 (2019 Index).. The economy has grown partly because of greater remittances inflows.
Open markets
The government has reduced overall tariff rates to 2.5% in the past years with a record of 143 non-tariff measures in 2018. Numerous structural shifts in the institutional sectors’ incomes has coupled up to gross savings and fixed capital level recovery thus leading to an increase in supply potential. According to 2019 index, Russia has affected the trade inflows in the country on the same note enterprises owned by the state have distorted the economy.
Trade barriers in Ukraine
The government of Ukraine has in the past years been working on ways of removing unnecessary trade barriers in the region. They have been putting measures to simplify the business environment and make it more transparent for local and International trade. (International trade administration, 2019). Some of the trade barriers in Ukraine are improper customs valuation, product certification procedures, complex certification and labeling requirements, import licenses, custom codes among others.
Custom codes
To be quickly cleared of customs, the customs codes have to be appropriately classified. Ukrainian’s import authorities have a ten digit code of Ukrainian goods classification on foreign economic activity that has to be considered in every good in the custom clearance process, making the procedure cumbersome.
Improper Customs Valuation
Custom valuation is an issue in Ukraine. Putting into perspective that tariff rates are computed on the basis of the custom value of goods, the process of valuation can be problematic at times (International trade administration, 2019). These results into unnecessary charges, for example from 2010 custom bodies started doing additional checks of flowers imported with no elaborate reasons in writing leading to a reduction in the volumes of flowers being imported.
Product certification and documentation procedures
A resolution of Ukraine’s cabinet ministers no 364, states that it is a requirement by importers to submit scanned documents as well as electronic messages coupled with electronic signatures (International trade administration, 2019). They are then subjected to further reviews and actions by an authorized officer who decides on the completion of relevant state controls. This slows the working bureaucracy of certification and documentation.
These barriers inclusive of phytosanitary certifications have made it hard for most European nations to trade with Ukraine
Trade barriers between Ukraine and Russia
Dissolution on Soviet Union
Soviet Union began to crumble when Gorbachev started loosening the government’s power. The loss of power formed a domino effect where alliances in Eastern Europe started to collapse, motivating countries like Lithuania and Estonia to have a declaration of independence (Norwich University, 2017). Later in November 1989, the Berlin wall fell leading to the reunification of east and West Germany within a year. Fall of Berlin war was a motivation for riots from citizens in Eastern Europe countries such as Bulgaria and Romania. The protests were majorly staged against their pro soviet governments, the riots fastened the crumble of communist regimes in the former soviet bloc. Soon other countries such as Ukraine and Russian federation went down the same path, forming the commonwealth of independent states.
In 1991 the powerful Soviet Union finally collapsed following declaration of independence by eight of the nine remaining republics. After a house arrest 1991, a free Gorbachev travelled to Minsk to meet Ukrainian and Belarus leaders, where an agreement was signed to break the two nations from USSR creating the common wealth of independent states (Voxeu.org. 2019). Part of the agreement read, “The soviet union as a subject of international and geopolitical reality no longer exists”. On Christmas day 1991, Gorbachev resigned from office, the powerful Soviet Union finally fell.
Between 1989 and 1991 the Soviet Union’s GDP fell by 20% preceding a period of total economic breakdown. The crumbling of Soviet Union had many to date effects on the regions foreign trade and the global economy
Crimea’s Conflicts
Crimea republic officially part of Ukraine, is on a peninsula that stretches from Ukraine’s south between Sea of Azov and Black Sea. Crimea has only been an independent state for less than four decades (Bebler, 2015). In 1793 Russian empire annexed Crimea making it Russia territory until 1954 when under Nikita Khrushchev it got transferred to Ukraine. Following Crimean war in the 19th century after Britain and France sent in troops in suspicion of Russian imperial ambitions, Tatars got deported. An occurrence that took place after Stalin accused them of collaboration with the German occupiers. They only returned after Soviet Union collapsed. After independence, in 1996 the constitution of Ukraine Stated that Crimea would poses an autonomous independence in return Crimean legislation should be in line with that of Ukraine (Bebler, 2015).
In 2014, Crimea became major focus of the East West crisis after Victor Yanukovych, Ukraine’s pro Moscow president, was ousted from power by violent riots in Kiev. Yanukovych had previously fled the country for fear of his life. An occurrence that created a power vacuum creating a perfect platform for Russia to annex Crimea (Кухар, 2019). After a shoddy referendum and military take over Crimea became part of Russia again. Currently Crimea republic is a de facto part of Russian federation. On 11th April 2014, republic of Crimea adopted a new constitution. A majority of the international community does not consider annexation of Crimea by Russian federation but rather considers it as part of Ukraine.
Trade Barriers
The vital element of relations between Russia and Ukraine is trade cooperation. Its significance credited to the fact that both countries are important trade partners to each other and that most of their conflicts have risen from their trading affairs (Dragneva and Wolczuk...