Government regulations of foreign economic activity in Ukraine: current situation and ways for improvement

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Government regulations of foreign economic activity in Ukraine: current situation and ways for improvement

D.O. Kyryliuk, O.F. Kyryliuk

In the context of the development of globalization processes and threatening challenges of the environment, international trade relations play an important role for the Ukrainian economy as an effective factor in increasing competitiveness in the world food markets, increasing the scale of production and compensating for the internal commodity deficit. At present times, it is increasing the urgency of the revival of national production, increase in the production of modern competitive products, output of domestic production on the world market, as well as the creation of favorable conditions for local producers and their protection against fierce foreign competition. An important place in this belongs to the government effective foreign trade policy - one of the important mechanisms for promoting the development of its own production, supporting import substitution, protecting consumers' interests by better meeting their needs and promoting healthy competition in the market. Regulation of foreign economic activity is an integral part of the country's economic security as a whole, which increases the relevance of research into the role of the state in this process.

Analysis of recent researches and publications. The multidimensionality of the effectiveness of government regulation in the field of foreign trade has been reflected in many scientific works of foreign and domestic scientists. The methodological foundation for this integrated study was the work of researches of different directions and schools of classical and modern economic theory. The research of theoretical and applied problems of the formation of strategies of government regulation of foreign economic activity in agriculture is devoted to the works of Ukrainian scientists O. Vlasyuk, V. Galushko, V. Heyts, A. Dibrova, L. Dibrova, S. Kvasha, G. Sytnyk and othes. Currently, the importance of studying the mechanisms of government management of foreign economic processes in agriculture is increasing in the context of the development of integration processes in Ukraine.

The purpose of research is to analyze theoretical and methodological approaches to the regulation of foreign economic activity and to substantiate the effective mechanism of custom-tariff regulation in the agriculture, which will help to increase the volumes and improve the structure of export-import commodity flows.

Methods. The theoretical and methodological baey of the research is the works of domestic and foreign scientists on the formation of the principles of foreign economic activity and its government regulation in Ukraine. In the research, a systematic approach is used, which takes into account the sum of dialectical, abstract-logical, monographic, economic-static and other methods of general scientific knowledge of the development of social phenomena and processes.

Research results. In modern world integration processes became widespread and one of the most important factors which identifies development of the world economy. Practical inclusion of the country into the world's trade is due to economic cooperation, the key role played by foreign economic activity. At the same time, during the last decades, the processes of integration and globalization have contributed to the growth of the scale of international trade and economic relations and objectively led to the formation of appropriate systems for regulating the exchange of goods and services.Within these systems, the use of separate instruments and methods of regulating international trade is gradually restricted, which limits the ability of countries to protect the national economic interests in foreign markets and necessitates the transformation of their regulatory policy.

One of the mechanisms that provides for the possibility of taking into account the impact of globalization and the protection of national economic interests is the regulatory policy in the field of foreign trade. For Ukraine, which has a high level of external openness and feels the restrictive influence of institutional and structural factors inherited from the command and administrative system, effective government regulation of foreign economic activity can be the most important factor in increasing international competitiveness.

System of government regulation of foreign economic activity includes: legal and regualtory base of such regulation, presence of a certain institutional and organizational structure of regulation of foreign economic activity (relevant state bodies, strictly entrusted to them competence and hierarchical subordination and control); government programming of foreign economy; registration of participants of foreign economic activity; quotation and licensing of foreign trade operations; certification of expert evaluation of quantity, quality and price of exported goods; customs-tariff regulation; foreign currency and monetary regulation of foreign economic activity.

Government foreign trade policy is carried out on the basis of a combination of economic (customs-tariff) and administrative (non-tariff) methods of regulation of foreign economic activity. Activities of the system of government regulation of foreign economic activity in Ukraine, including customs regulation as an integral part of this system, are aimed at achieving certain goals: the use of foreign economic activity as a set of ways to implement foreign economic relations to accelerate the formation of a market economy in the country; protection of the interests of domestic producers and consumers, as well as national economic interests in general, through the skillful combination of protectionist and free trade customs policies; creation of the necessary conditions for the release of Ukrainian goods to the world market.

In recent years, Ukraine has declared itself as a country that can act as a powerful player in the international agricultural market. The intensified integration way of Ukraine into the world's space is a priority task for the country. Despite the lagging behind of many countries in terms of material and technical provision of agriculture, Ukraine has managed to maintain a fairly high competitive position in the global food market. The basis of this is the availability of a large land potential and cheap labor force [9, c. 118].

This is confirmed by the fact that agricultural market is used as a service for all phases of the reproductive cycle, ensuring the combination of interests of market players through the supply and demand mechanism [7].However, not always and not everywhere, this mechanism balances those socio-economic relations that arise. Ukraine has high gross agricultural production and export indices despite the low productivity of agriculture. Since independence, Ukraine is in the first twenty country-producers of wheat, milk, corn [7].

The research has established that the foreign economic activity of Ukrainian agriculture by the level of development lags far behind the developed countries in the world and the EU. The main problems are insufficient competitiveness of products and their non-compliance with international standards of quality and safety; a low level of investment and a growing dependence on government funding; the dominance in the structure of exports of products with a low level of processing [5, p. 44]. A positive trend in agricultural export is geographical diversification: the volumes of foreign trade of Ukraine to many countries is increasing.

Thus, there is a steady tendency to increase the share of export flows of Ukraine to Asian countries to 37.9%, main products are grain (wheat, barley, corn) - $2 445.2 mil; oil (sunflower, soybean, rapeseed or mustard) - $2 270.1 mil; oil seeds (rape seeds, soybeans) - $480.1 mil; eggs - $127.7 mil; meat and offal (mainly poultry meat) - $79.7 mil; products of the flour-grinding industry (wheat flour) - $50 mil; vegetables, plants and root crops (mainly beans dried beans) - $35.9 mil [8].

The aforementioned range of Ukrainian agricultural export to Asian countries may be explained by increase in food consumption by the population as a result of increased incomes. The access of the Ukrainian exporter to the EU markets is rather complicated and its share on the EU market is now only 29.5%. Primarily, problems hinder exports to the EU: partial VAT refunds, customs procedures, inefficient and volatile legislation, complicated permits procedures, technical barriers, agricultural product standardization, special tariffs and quotas [6]. Ukrainian exports of agricultural products are mainly consists from raw materials. The presence of a small share of finished products of national production on international markets shows the low competitiveness of Ukrainian goods, the quality of which does not meet the price and international standards [10].

In 2016, total exports of goods and services amounted to 49.3% of gross domestic product, or $45.1 billion, including 80.7% of goods exports, the rest was export of services (19.3%). It is established that the structure of Ukrainian export is predominantly raw materials - almost 70% of all goods exports ($ 25.3 billion) are agricultural products, metal and chemical industries products, and timber. The share of agriculture in 2016 amounted to 42% of exports, which is more than twice the share of these products in exports in 2008. Balance of external trade balance of agriculture is positive, which contributes to attracting into the economy of Ukraine foreign exchange earnings (Table 1).

1. Dynamics of Ukrainian agricultural foreign trade (2011-2016, billion US dollars)

The conducted researches of dynamics of commodity structure of export of agricultural products allowed to determine the realized export potential and perspective export-oriented groups of goods (Table 2).

2. Dynamics of Ukrainian Foreign Trade of Animal and Plant products (2014-2016, USA billion dollars)

It was established that the largest share of agricultural export during the three years constituted crop production - 52% in the total structure of exports worth over $8.7 bil, 23% - exports of fats and oils of vegetable and animal origin worth around $3.8 bil. Exports of live animals and products of animal origin are the smallest category of 6% and worth only $1 bil, which is explained by the demand for products on the domestic market and the difficulty of entering the foreign markets.

The negative impact on Ukrainian exports and the gross domestic product of the Russian Federation's suspension of the Free Trade Agreement with Ukraine from January 1, 2016, which resulted in the introduction of import duty rates at the level of the most favored nation regime instead of the prevailing "zero" import duty rates. In addition, Russian Federation has banned the import of some Ukrainian agricultural products (meat and meat products, fish, milk and milk products, vegetables, fruits and nuts, some other food products) and restricted transit traffic from Ukraine through Russia to the third countries: Kazakhstan and Kyrgyzstan. Such restrictive measures have led to a significant reduction in the export supply of Ukrainian goods not only to the CIS countries (Central Asia), but also to other Asian countries. Export losses are only partially offset by a reorientation to other areas.

Due to the climatic conditions favorable for agriculture and the available raw material base, Ukraine became the world leader in growing cherries and sunflower seeds, ranks third in the cultivation of currants, the fourth in gooseberries and potatoes. Ukraine is among the top ten producers of walnuts, mustard, corn, carrots, cucumbers and cornichons, rye, cabbage, raspberries, sugar beet, barley, apricot, peas, rape, cherries, flaxseed, soybeans, garlic and wheat. However, far from all the goods produced in Ukraine are exported, most of them are used for domestic consumption [1]. The main export categories of Ukraine are sunflower oil, corn, barley, egg powder, soy, natural honey, wheat and rye [2]. According to the analysis, it is established that Ukraine does not sufficiently use the potential of foreign trade with countries such as Canada, China, France, Germany, Ireland, Japan, Sweden, Switzerland, the United Kingdom, the United States, resulting in a shortage of foreign currency.

The signing of the Association Agreement between Ukraine and the EU actually consolidated the course on European integration and became a roadmap for the preparation and implementation of practical steps. Just after the signing of the Agreement, importance of new challenges for the national economy, and especially in agriculture, has increased; there are increasing risks and threats that could slow down the process of harmonizing the domestic regulatory system with the EU's basic model and converging their normative bases. In addition to the free trade regime, positive achievements include the use of the Generalized System of Preferences by the EU over two years in relation to Ukrainian goods. For a range of goods, taking into account the transition periods for the reduction of customs duties within the framework of the DCFTA, it will be advantageous for some time to export goods under the GSP, since the GSP rate will be lower than the lowered in accordance with the Ukraine-EU Agreement. Such tariff lines in 2016 were 547, in 2017 - 424. The main export markets for domestic agricultural products are Spain, the Netherlands, Italy, Poland and France. To these countries that Ukraine sends more than 66% of all EU export. The main export items in recent years were corn ($ 1.6 bil), canola ($ 0.9 bil), cornflour and cake ($ 0.5 bil) and sunflower oil ($ 0.4 bil). Out of the total range of Ukrainian agricultural exported products, the largest share belongs to groups of cereals, plant seeds, animal and vegetable oils, and some food industry waste, to which belong to the above mentioned goods.

Sunflower oil exports are one of the largest items of domestic exports - more than 90% of domestic production (within the range of 3.2-3.6 million tons per year). At the same time, exports to the EU are one-sixth of the export supply. The largest consumers are the Netherlands and Spain, with their aggregate share prevailing 50% of the pan-European volume. The fourth in the rating of Ukrainian goods export to the EU is cake (shrot), the export of which in 2016 amounted to about 2.2 million tons. Active importers are France, Poland and Netherlands.

Over the past few years, Ukraine has rapidly expanded supplies of honey to the EU. In 2009 the export of Ukrainian honey to European markets amounted to only 4.98 thousand tons, then in 2016 - 36.8 thousand tons worth almost 65 million euro [3]. Main consumers of Ukrainian honey in EU are Poland, Germany, France, Belgium, Hungary. Main Ukrainian competitors on EU market are China, Argentina, Mexico, New Zeeland. Ukrainian hones is quite popular in EU and Ukraine used its quotas very fast in context of trade preferences.

As for the export of animal products to the European Union, it is mainly poultry. After a long preparation, four Ukrainian poultry farms received permission to export their products to European markets from July 24, 2013, and by the end of the year were exported 412.6 tons. Within the framework of autonomous trade preferences from the EU side, Ukraine was able to export duty-free 36 thousand tons of poultry meat for the period from April 23, 2014 to November 1, 2014. However, on September 29, the EU Council approved the extension of preferences in trade with Ukraine until December 31, 2015. In September, one Ukrainian enterprise was added to the list of exporters to EU. Late September - early October 2014, EU commission checked Ukrainian milk product for giving export permission of this products to EU. Inspectors have checked 31 milk processing plants which express their wish to supply products to EU market, its suppliers, laboratories which checked product quality and also government structures.

Introduction of quota in bilateral trade between Ukraine and the EU means that Ukrainian producers are able to import certain volumes of these goods without charging import duties. In this case, it is not about limiting the volume of imports, but only that imports of these goods over a certain amount will fall under the general regime of imports, that is, will be taxed under the same conditions that apply to Ukraine today. In 2016, the quota for Ukrainian poultry meat was 16 thousand tons, in 2017 it increased to 16.8 thousand tons. The volume of trade preferences is constantly increasing, in particular, on lamb, wheat, barley, flour, honey, eggs and dairy products. The gradual increase of tariff quotas for five years is enshrined in the Association Agreement between Ukraine and the EU.

Research of the development of international trade in agricultural products points to the importance of government support to agriculture, its promotion and export potential development. Conducted research allows to identify the main areas of improvement of government regulation of foreign economic activity in agriculture (Fig. 1).

Fig. I.Directions of improvement of government regulation of foreign economic activity in agriculture

Thus, the main areas of improvement of government regulation of foreign economic activity in Ukrainian agriculture are administrative and technical regulation, regulation of markets with their respective components.

Conclusions and perspectives. According to the results of this research, it was established that the agricultural sector of Ukraine in a market situation is in a special position and needs government support.

In order to accelerate the development of the European vector of export of Ukrainian agricultural products, to increase the export-import activity in agriculture at the national and regional levels, it is necessary to implement certain measures: to ensure the priority development of production, having comparative competitive advantages in the world system and modern own production potential; to improve tariff and non-tariff regulation of export-import operations, aimed at protecting the domestic market and domestic producers of agricultural and food products; to introduce quotas for the purchase of certain types of raw materials and food, in accordance with international rules and legislation; to stimulate integration and cooperative ties with foreign partners on the basis of interstate agreements on economic, scientific and technical cooperation, as well as direct links between domestic and foreign enterprises; to promote at the state level the creation of joint ventures, the development of trade and economic relations; expand export of agricultural products and develop export infrastructure.

integration economic cooperation trade

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Abstract

In the article it's made an evaluation of current situation of government regulation of foreign economic activity in Ukraine. It's defined that integration processes in the world became one of the most important factor, which identifies development of world economy. Practical including country into world trade is due to economic cooperation, the key role played by foreign economic activity. In Ukraine foreign economic activity is based on combining of economics (custom-tariff) and administrative (non-tariff) methods of regulations of foreign economic activity. It's found out that Ukrainian agriculture are developed lower that in developed countries in the world and in the EU. Main problems lie in the lack of competitiveness of products and their non-compliance with international standards of quality and safety, dominating the structure of exports of products with a low level of processing. It is analyzed dynamics of foreign economic trade in agriculture, defined that the biggest share in agricultural export structure is plant products, main export categories are sunflower oil, corn, barley, soybean, honey, wheat and rye. In the export structure of animal products, main share belongs to poultry products. It is explained main spheres and ways for improvement of government regulations of foreign economic activity in agriculture.

Key words: foreign economic activity, government regulations, export, tariff and non-tariff ways of custom regulation of foreign economics activity.