From the USSR to the EU. Ukraine on the path to a raw appendage of Europe

Из СССР в ЕС. Украина на пути к сырьевому придатку Европы

© RIA Novosti, Alexei vitvitskiyAnother consequence of European integration: when Ukraine signed the economic part of the Association Agreement with the European Union, the country assumed the obligation to adapt existing national standards to the standards adopted by the EU. However, this small paragraph is threatening the global interests of Ukraine.Compliance with European standards is a necessary condition for the placement of Ukrainian products in the domestic markets of the EU. Therefore, Ukraine needs to completely revise the Standards, converted to DSTU (Reigning standard of Ukraine. — Ed.) and to harmonize them with European standards EN — standards Ukraine should be fully adapted to the European Union Directives.

When it finally happens, the receiving of the mark “CE marking” will be possible directly in Ukraine and on the basis of reports of tests performed the same in Ukraine. However, the process will take years, given that the standards of a few thousand.

According to the Ministry of economic development and trade, in 2016, has been considerably transformed the system of technical regulation and standardization. Is liquidated by Soviet Standards, Ukraine has developed and adopted 5105 national standards.
The vast majority of the technical standards of the Soviet Union, developed before 1992, no longer in force in Ukraine since 1 January 2019. Just cancelled 12090 Standards. In 2019 it is planned to make about 3 thousand national standards harmonized with EU norms.

Time to lose

Europe has built a system of technical regulations and standards for many years. Therefore, Ukraine was given time to prepare for the implementation of the European standards. And the country needs to do more:

first, to adopt technical regulations that implement in its legislation the Directive and EU regulations for the respective types of products;

secondly, to adopt as national standards existing in the EU, under these directives and regulations;

thirdly, prepare the infrastructure of testing laboratories and certification bodies to operate in accordance with European requirements.

When Ukraine completes these steps, she will sign as a separate Protocol to the Association Agreement, the so-called Agreement on conformity assessment and acceptance of industrial products (ACAA). The Agreement of ASIA gradually, as Ukraine’s implementation of the above actions will apply to different types of products. This will be preparation for the use in Ukraine of European standards and regulations.

Commencement of ASA in respect of the relevant product would mean free access of Ukrainian goods to the markets of member States of the EU plus Norway, Iceland, Switzerland and Turkey.

Who benefits?
Prior to the introduction of European standards, all imported from the EU products had to pass inspection for compliance with national Ukrainian standards. Because of this, the manufacturer or importer bear additional expenses, which were laid in the price of products. And not all European producers were willing to spend time and money for the opportunity to enter the Ukrainian market.

After the disappearance of the existing barriers in Ukraine expected gushed imported products. Negative foreign trade balance of Ukraine in 2018 amounted to $5.83 billion, which is 2.3 times less than in 2017. In foreign trade goods, according to the state statistics service, the deficit last year grew by 54.5% to $9.8 billion

At the beginning of 2019, according to Rospotrebsoyuz, through the process of approximation of legislation and standards to the practices of the European Union 306 of Ukrainian enterprises eligible to export to EU countries, including 126 food producers (meat, poultry, fish, honey, eggs, dairy products).

The volume of Ukrainian exports to the EU in the period from November 2017 to October 2018 declined compared to the same period of 2016-2017 years — from 5.39 billion euros by of 5.12 billion Euro, with absolute decline in the volume of agricultural supplies to the EU in the amount of 226 million euros (-4,9%).

With specific regard to dairy products, last year the palm of the export of Ukrainian dairy products received Morocco — there went 10% of all dairy products in monetary terms, or $27.1 million In second place — Kazakhstan (8.9 percent of total exports, or $23.6 million), the third of Moldova of 5.7%, or $15 million.

Survive largest

The Association Agreement with the EU it is not only the harmonization of existing legislation and the adoption of missing regulations.

One of the points of the Agreement is the harmonization of technical regulations of production in Ukraine to European standards. This means that within ten years, the country is obliged to abandon the old, preserved since the Soviet era, production methods.

Similarly, as newer, but do not meet the standards. However, the transition may not be painless: it is necessary to buy only that equipment which already meets European standards, and it is usually expensive imported equipment. You also want to hire a European company, which the machine will install, train staff. And all this for big money.
Thus, the transition to the new rules of production requires substantial investments in upgrading capacity.

This task will easily be able to handle a large company-producers of power make the opportunity to modernize production without any problems. But small-scale producers, particularly food products, which is the most loaded with different technical standards, will suffer much more if they as a whole will be able to compete.

The technical requirements of the European Union may cause difficulties primarily from small producers who are not able to find investments for renovations. In addition, the introduction of European standards will hurt businesses that over the years of independence are unable to find a niche in Western markets and focused on the work with CIS countries.

In addition, the European market is Mature and highly diversified. For successful work of Ukrainian producers need to find its niche and work in conditions of severe competition. And the signing by Ukraine of the Agreement on free trade zone with the EU does not mean that Europeans tend to buy the Ukrainian goods.

Can suffer from the introduction of EU standards and consumers. Products that do not meet European norms will be driven out of the market. As a rule, these goods are included in the low price segment and consumed by the poor. Manufacturers that have implemented European standards, will almost certainly raise prices to offset the cost of improving product quality.

A raw materials appendage

As Prime Minister, Mykola Azarov, warned that transition to EU standards will cost 160 billion euros. And these necessary investments in the modernization of the Ukrainian goods to be competitive on the EU market.

“We also open our borders to highly competitive European industry. And it will be our barriers and will go to our market. Will stand our companies in this situation? Or we will remain a raw materials appendage? Here the problem is actually where”, — said Azarov in November 2013, when the Association Agreement with the EU has not yet been signed.
According to economic analyst Alexander Ryabokon, to estimate the cost of transition of Ukrainian economy to the European system of standardization and technical regulation is difficult for a number of reasons.

“Probably, as a sample, you should focus on the stated back in 2013 former Prime Minister Azarov number of necessary investments in $165 billion in 10 years, because no other generalized numbers over time were not presented and argued,” — said in exclusive comments to Alexander Ryabokon.

He recalled that after the abolition of 2016 about 13 thousand Soviet guests by mid-2019 was developed and adopted a little over 5 thousand national standards, harmonized with EU standards.

“Ukraine is still on the way to the conclusion of a Treaty with the EU on conformity assessment and acceptance of industrial products (of ASA). However, many of the “eliminated” state Standards will be used by the companies until at least 2022, but in the “optional order”.

In order to obtain supporting documents that the products of an enterprise corresponds to the European standards need to be large and capital-intensive work. And the more complex, technologically advanced and knowledge-intensive production is, the more complex and financially burdensome is the process of certification.

So, for example, the Ukrainian aircraft on European routes, locomotives on the lines Doychebank or turbine at the European power plants, we will see very soon”, — predicts analyst.

He noted that problems arise even for products with relatively small redistribution of complexity.

As an example the expert cites the dairy sector, where from mid-2018 and is expected to start in 2020 in fact, there are two standards for raw milk. According to the new GOST standards for milk varieties “extra”, “higher” and “first”, and for milk in class II (taken from population) to 1 January 2020 there is the old standard.The Ukrainian enterprises of the dairy industry to export its products to EU countries, it is necessary to take only the raw material of varieties “extra” to the European regulations. In the end, effective suppliers of raw milk may be the only large agricultural holdings or farm with a herd of 1,000 cows, are willing to invest hundreds of thousands or even several millions of dollars to automate the process of content certified milking and refrigeration equipment, laboratory control, logistics, etc

But to organize such a farm from scratch (on a number of criteria reminiscent of the Soviet kolkhoz), will be needed in the Ukrainian realities from 6 to 9 million dollars.

“In the end, the basis of this and other examples, we can understand the complexity and capital-intensive process of transition of Ukrainian enterprises on the production and exports of products, harmonized with EU standards, even in those industries where relatively simple technological processes. So in this context, a further attraction of the Ukrainian economy and export increase of raw materials seems quite logical”, — concluded Oleksandr Ryabokon.Fedor Quiet

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