Теги: вільна торгівля
Canadian Ambassador: IT-services is the future of Ukraine’s export to Canada

Free-trade area (FTA) regime between Ukraine and Canada was established August 1, 2017. This is the 16th free trade regime coming into effect within the period of Ukrainian independence. But the situation with Canada is a specific one. This is because the North American partner opened 98% of its market for the Ukrainian commodities, having set to zero import duties for the majority of commodity groups. The influence of FTA introduction on commodity circulation between the states, the level of increase of the Ukrainian companies’ presence on the Canada’s market, the most promising sectors of the national economy from the perspective of Canada – all these and many more issues in the interview with Roman Waschuk, Ambassador of Canada to Ukraine.

Mr. Ambassador, how has the dynamics of Ukraine-Canada commodity circulation changed within the period after FTA introduction between our countries?

The two-month statistics we have does not give grounds for commodity turnover analysis. Though, it is positive from both sides. I will explain. The thing is that statistics of our countries are a bit different. The Canadian party demonstrates boost of commodity turnover within the first nine months of 2017 up to USD 65 million, i.e. 13,5% more comparing to the same period of 2016. The Ukrainian statistics for the period of three quarters of 2017 estimates USD 33,9 million which is 65% more comparing to the same period of 2016. As you see, the difference is twice bigger. This is due to peculiarities of declaration practice of exporters or statistical systems the adjustment of which will be ensured by the group we are currently establishing.

In fact, the states better maintain import than export statistics. That is why, let’s say, Canada works with the USA in the following way: their import statistics is used as our export ones and vice versa.  If we speak about trade between Ukraine and Canada, we talk about export to Ukraine at a rate of USD 179 million. The Ukrainian data shows that import from Canada equals to USD 196 million. According to our statistics trade balance deficit in Ukraine is less than the one estimated in the Ukrainian statistics.

Could you tell us what kind of commodities make our countries attractive for each other?

I would like to point out that the agreement between Canada and Ukraine has fueled the mutual trade. In 2016 the top-6 commodities of Ukraine’s export to Canada included:  1 — ferrosilicon manganese, 2 — colorants of titanium oxide, 3 — soybeans, 4 — cars, 5 — television and radio equipment, 6 — coffee makers. In our turn, we supply to Ukraine:  1 — coal, 2 — fish (in particular, hake), 3 — shrimps, 4 — pet feed, 5 — medicine, 6 — human or animal blood.

What other sectors benefit from Ukraine-Canada trade liberalization? 

The most promising sectors include, first of all, IT-area, clothes, footwear, furniture, chocolate and confectionary. In particular, there was established a support program for exporters «U CAN Export» aimed at fostering promotion of these goods on the Canadian market. It is important that the project is aimed not at Ukrainian “giants”, but at support of small and medium businesses. We are sure that the companies experienced in export can do a good job on the Canada’s market themselves.

In what way did FTA regime benefit your companies? To what extent does the Ukrainian business exploit opportunities to reach the market of Canada?

The agreement is an asymmetric one. Canada has immediately opened 98% of its market for Ukrainian producers, having reduced customs duties to 0% for almost all commodity groups, except for cars the duty on which will be cancelled within seven years. Also, there are specific restrictions on some agricultural products, which are exported on a duty-free basis only within established quotas. In particular, this is about milk, poultry, eggs, etc.

In case with Canada’s export, Ukraine has opened almost 80% of its market. Duties on some commodities from Canada will be cancelled systematically based on three, five and seven-year long transition periods. And there have been imposed restrictions on importing pork and lard. By the way, talking about lard, the Ukrainian producers persuaded me that it has not only economic but also a symbolic meaning.

Talking about agricultural products, significant dynamics was demonstrated by honey export of which has doubled. This means that there emerge new companies which take up the slacks.  

Analysis of export statistics of Ukraine shows significant leaps of some commodities. Let’s say that export growth of coffee makers within nine months of 2017 estimates 1 500 %, glass containers for transportation and packing of goods – 2 450 %, equipment for seed cleaning, sorting or calibration — more than 3 000 %. Talking about agricultural products, significant dynamics was demonstrated by honey export of which has doubled. This means that there emerge new companies which take up the slacks. Canada’s experience in free-trade areas proves that export grows broad first, and then – deep. To put it in other words, first of all, the range of commodities is increased, and then its volumes of supply are ramped up. Commodity producers which reach a new market explore tastes and demands of consumers and then concentrate upon promotion of commodities. It does not mean that traditional sectors do not face any increase. We, in particular, observe a significant growth related to agricultural equipment. Here, our companies have “overslept” the first phase of large-scale investments into agricultural equipment and are trying to сatch up.

Each market has its own specific features. What kind of difficulties do Ukrainian exporters happen to overcome?

We took into consideration specific features of each market and along with the agreement we have launched Canada-Ukraine Trade and Investment Support Project. Trade means exporting from Ukraine to Canada, and investments mean Canada’s investing to Ukraine. Expert advice is provided to your exporters who are eager to open Canada’s market for themselves. A detailed explanation is provided in relation to market specificities, requirements, ways of adjustment, types of certification required and geographical, palatability and other traits of a consumer.

Are there differences between Ukraine-Canada and Ukraine-EU FTAs?

The most important difference is that Canada’s market is more open for the Ukrainian goods than the EU market. And here there are much less restrictions, and if there are any, they are not really tough. In other words, ship as much as you wish. On the other side, our agreement deals, first of all, with commodities, but talking about trade in services, it is not that much diversified comparing to the agreement between Ukraine and the EU. In that respect, everything is still ahead for us.

Establishment of Canada-EU free-trade area is planned soon. What will this triangle change?

First of all, it is important to harmonize certification of commodities for export with due consideration of all the rules, requirements, qualifications, titles and other aspects. Soon we hope to form a positive free-trade area triangle “Ukraine – Canada – EU”. Then, producers from each side will have a better opportunity to see where inside this triangle there are advantages for their production and choose the most beneficial options for cooperation.

More intensive cooperation is planned in the IT-sphere. As of today, export of IT-services is two-three times the commodity export.

Is Canada involved into investment projects in Ukraine? What projects are the most attractive for investing?

On the part of Canadian investors there is some interest towards Ukraine. During the last two years, most funds were invested into agro-industrial sector. Therefore, one large Canadian fund has already purchased one third of shares belonging to the Ukrainian agro-industrial holding. In future, significant investments are planned to be made into the IT area and everything related to it, for example, infrastructure for information technologies. These are the spheres where I can see potential in the short-term outlook.

Mr. Ambassador, could you please share your predictions as to development of trading relations between our states?

In addition to the commodity market, service market will also grow, in particular, more intensive cooperation is planned in the IT sphere. Export of IT-services is difficult to encompass, but as of today it is two-three times broader than the commodity one. Only one big contract of a Canadian retailer with Ukrainian IT-professionals costs about USD 50 million. Besides, nearly 2 thousand programmers in Ukraine work for Canada. IT-services market belongs to invisible export, but at the same time it is economically sound for your country. And, considering geographical distance between our countries, it can play a huge role.

Canada-Ukraine Free Trade Zone: Half a year of agricultural exports – where are we now?

In summer 2017 Canada and Ukraine agreed on free trade area relations. What has changed in agricultural trade since that time?

Surely, free trade agreement between two countries reveals huge opportunities for Ukrainian agricultural producers. Finally, they have got access to vast and diverse Canadian consumer market.

Canada has agreed to reduce a majority of duty rates all the way down to 0% for Ukrainian agricultural entrepreneurs. But tariff-rate quotas, which were applied earlier to 108 goods and products, are still in force. In its turn, Ukraine, seeking to protect domestically-produced products from highly competitive imports, will incrementally abolish custom fees for Canadian companies in the next 3-5 and 7 years. These measures are taken to help domestic producers stay in business.

Free trade deal signing brings major changes for Ukrainian agricultural sector. On one hand, they are able to freely import their goods to Canada, but on the other, the product quality must be high and they should meet strict requirements in multiple stage quality control procedure. Despite this, far from everyone will take advantage that is offered by such cooperation.

Immigrants create a demand

With its hidden pitfalls Canada consumer market is really hard area to bring exported food products to. Over the last few years increase in Canadian population is drastically low. This is the reason of tightening food quality regulations. In Canada the most widely consumed products are meat, processed meat products, wheat, and processed wheat products. These products are produced in abundance by Canadian agricultural entrepreneurs – the mentioned niche is already full and there is hardly any place for Ukrainian grain crop exporters there.

“In spite of such complicated background there is always a way out,” says Paul Darby, CUTIS Project Manager and Executive Director International Partnerships at The Conference Board of Canada. Immigrants from various countries, including Ukraine, represent a significant part of the Canadian population and create strong demand for food product diversity. Niche product export is thought to be a high-potential growth area.

“In Canada supermarket food product offerings include frozen vareniki, but they are imported from USA. Why would not Ukrainian entrepreneurs take this niche?” says Paul Darby. As he explains, supermarket shelves are rich with variety of traditional food products.

Taking into account the fact, that in Canada live more than 1.5 million of Ukrainians, national agricultural producer products will be in great demand with this ethnic group. Zenon Poticzny, President at Canada-Ukraine Chamber of Commerce, believes that the majority of such products can be labeled organic. “For example, birch water for export is justly considered organic, and large retailer chains willingly sell such products,” points Zenon Poticzny.

Ukrainian entrepreneurs activities shall comply with a number of import and export regulatory requirements, which makes go-to-market a bit complicated but there are niches that Ukrainian products will fit well. It should be noted that premium segment is expending rapidly. This trend should not be underrated while choosing products for export. It means that in the coming years demand on fresh and frozen vegetables, fruits, organic and natural products, juices and preserved food will grow among Canadian consumers. Single-serving buys as well are getting more popular. This is another point to consider attentively.

Not everybody can succeed

Despite free trade agreement and huge food market, exporting goods to Canada is a challenge. Canadian Border Service Agency has some similar functions as the State Committee of Ukraine for Technical Regulation and Consumer Policy renders. It is responsible for various imported food, plant and animal (FPA) products checking. If any sanitary and phytosanitary issue arises, it can cause damage to country image.

Let’s say Ukrainian products are certified by the state control agencies. At this point it is worth noting that supply to retailer chains is another question to solve. Most of the food products (up to 60%) are offered by supermarkets, so independent shops and smaller retail chain share gets lower. Producers should focus on trade relations establishment. Only this way their products can be seen and chosen by Canadian consumers. Canadian multinational retail companies do not spend much time on discussions; they tend to work directly with the agricultural producers, avoiding any third party involvement. Clients are interested not just in required certificates availability, but as well company reputation, social responsibility actions and business plan for future development. Local entrepreneurs must be ready to comply with them all.

Dmitriy Kozonak, Canada-Ukraine Chamber of Commerce member, is sure that Ukrainian agricultural producers success with foreign partners mainly depends on mere interest and genuine involvement. “Entrepreneurs should constantly actively communicate with partners, provide complete business information and express development vision,” explains Dmitriy Kozonak. As the expert sees current situation, the way of thinking prevents Ukrainian producers from confidently taking considerable Canada market share. “The majority of producers shows poor engagement strategy, they are self-assured and simply do not know what goods are in demand. Here is the problem,” adds up the expert.

Huge opportunities

Official figures show that in 2017 Ukraine agri-food exports were valued at $5.8 million, and processed vegetables (canned goods and juices) exports amounted from $83,000 to $2.5 million. Analysts forecast that Canada-Ukraine cooperation will induce agricultural export growth for another 3.5% each year. By various estimates almost 31% of Canadian consumer are willing to pay more for healthy food. It means that food processing entrepreneurs are in fortunate position that opens bigger opportunities for them.

Effective business cooperation with Canadian companies rely on some simple and easy-to-understand rules. Your company must comply with all the norms and regulations and have good reputation among foreign partners. By the way, these requirements are as well easy to fulfill since government agencies and trade associations are ready to give a helping hand. Moreover, all the necessary information can be found in the correspondent web resources.

The experts of CUTIS Project, which has been established under terms of the free trade zone agreement, provide substantial assistance to companies that are planning to export products to Canada. Canada Trade Facilitation Office is a provider of information and advice for small exporters in developing and emerging countries. This organization helps small business to come with their products to Canadian market.

Source: Agroportal.ua

Export. New Opportunities in Canada

A few months ago, the Canada – Ukraine Free Trade Agreement (CUFTA) entered into force, which effectively opens Canada’s huge market to a great number of Ukrainian companies. Ninety eight percent of customs duties for Ukrainian goods have been eliminated. The region’s needs are significant and diverse. Let’s discuss how to enter the Canadian market and what are the market needs?

Trade volumes with Canada fall far short of their potential capacity: this year, exports of Ukrainian goods to Canada amounted to approximately 0.5% of total Ukrainian exports. Meanwhile, Ukraine imported 7 times as much of Canadian goods, although in actual figures it is just as negligible.

Ukrainian apparel manufacturers (-17.2% of customs duties) and footwear manufacturers (-9.7%), as well as Ukrainian farmers (-4.5% of customs duties for vegetables and fruits) will benefit the most from the customs duties elimination. Moreover, the Agreement opens Canadian public procurement market (its volume is $ 12 billion) on the same terms as for local companies, and specific sections of the Agreement protect e-commerce and intellectual property.

According to the Ministry of Economic Development and Trade of Ukraine, implementation of the Agreement will facilitate a fivefold increase in the turnover of goods between Ukraine and Canada. ‘Each export case is unique. Should you find a partner in Canada, which has allocated quotas, then you will be able to export your goods not having to pay import duties. I would rather not overemphasized priority products, because this may discourage some exporters of so-called ‘non-priority’ products. The Canadian market is very diverse: buyers’ needs in one province may differ significantly from those in other provinces. Therefore, consumers’ needs in each and every province should be studied in detail. It’s quite possible that priority products in different regions may vary.’ – says Oleksandra Brovko, CUTIS Senior Trade and Investment Policy Expert.

However, it should be understood that the Agreement includes certain exceptions for a range of products that can be exported without customs duties only within Canadian quotas (e.g. customs duties for poultry, dairy products, eggs and egg products, cheeses and sugar, when exported in quantities exceeding the quotas, may reach 150-300%). So, as we may see, the list of exceptions largely includes processed agricultural products, which are Ukrainian export priority.

‘Maple’ needs

The structure of Ukrainian exports to Canada is mainly comprised of ferrous metals and their products, fats and oils of vegetable or animal origin, oilseeds and oleaginous fruits, machinery, apparatus and mechanical devices, wood and wooden products, milk and dairy products, eggs and honey. The Canada – Ukraine Trade and Investment Support Project (CUTIS) has identified the following sectors of Ukrainian SMEs as priority ones for further export to Canada.

1. ІТ-services.
2. Apparel.
3. Footwear.
4. Furniture.
5. Chocolate and confectionery.

Moreover, some experts believe that frozen fruits and berries, juices, peppers, cabbage, soybeans, legumes, corn, mineral water, ceramic tiles and sports equipment may also be in a high demand.

However, there are also other assessments of the Canadian demand. According to analysts of the Allbiz International Center of Internet Commerce, requests received from Canadian counterparts had completely changed their focus and structure over the first six months of 2017 compared to the same period of 2016. The Top-3 list included orders submitted to breeding nurseries that breed various types of dogs, orders for tobacco for pipes and hookahs, as well as classic cigarettes.

It is notable that in 2016 orders that prevailed on the Allbiz were those from medium-size businesses for gift and souvenir products, ice hockey equipment for various educational institutions and sports facilities, industrial containers, safe boxes, as well as products made of flexible and tempered steel sheets.

Standards First and Foremost

To be exported to Canada some Ukrainian products should undergo compliance assessment. ‘For instance, some manufactured goods (clothes dryers, washing machines, dishwashers, freezers, electric cookers) are subject to mandatory certification. Meanwhile, apparel and footwear do not require certification (except special workwear, which should comply with established technical regulations). In any case, before entering the Canadian market, one needs to study regulatory requirements for a particular product (quality and safety requirements, standards and technical regulations, etc.)’- says Oleksandra Brovko.

CUFTA regulates certain issues, which ensure the mutual access of goods to the markets of both countries. This had to be done in view of different requirements on product quality and safety, labeling and certification. CUFTA has also addressed the rules for identifying and confirming the country of origin. All products should be fully manufactured or sufficiently processed or recycled in accordance with the prescribed rules of origin. As for sanitary and phytosanitary regulations, the countries shall apply the appropriate WTO regulations. Compliance with countries’ obligations in accordance with provisions of the WTO Agreement on Technical Barriers to Trade has been upheld.

Entering the Market

Entering the Canadian market should follow a number of standard procedures, including studying the level, structure and nature of demand for a particular product, assessment of competition, identifying product distribution channels, etc.  Moreover, one should also understand the Canadian business mindset.

«Canadians take their time to carefully study their future partner. They need time to test their partner by matching words to deeds. That is to reach a certain level of trust. Ukrainian businessmen need to promptly and adequately respond to queries and address all these little issues that may arise before a real business relationship is established. Canadians are cautious when choosing a partner – they are interested in the transparency of business, compliance of manufacturing with the environmental norms, energy saving procedures and corporate social responsibility. Canadians value accuracy, when they negotiate they do so to reach an agreement and make a decision and not simply to ‘discuss an issue’ – says Dmytro Kozonak, entrepreneur, member of the Canadian Ukrainian Chamber of Commerce.

The best way to enter the Canadian market for different products may be different. ‘Some foodstuff manufacturers were able to quickly establish business relations with the Canadian importers having only visited a single trade exhibition, without any preliminary contacts. For apparel and gourmet foods manufacturers, an agency scheme works well, in which it would be good to involve a member of the Ukrainian diaspora. For the В2В segment, an appropriate scheme would be to work through importers, distributors and small retailers. With large retailers it may prove difficult to start the relationship from scratch, if an enterprise has no basic voluntary certification (e.g. ISO). Distributors are open for niche products designed for specific ethnic groups’, – says Oleksandra Brovko.

At the start, it would be better to enter the Canadian market through a local partner company. The fact that the Canadian importer takes responsibility for the compliance with all the requirements to the product will make it considerably easier to enter the market. Canadian distributors who work with the supermarkets and small shops usually have their own warehouses in all provinces. Distributors often work on both the Canadian and US markets, which may be helpful for expanding the geographical scope of sales.

Ukrainian exporters may also use the services of CUTIS project and Export Promotion Office – a consultative body under the Ministry of Economic Development, which may help raise awareness as regards the Canadian market, obtain Canadian market analytics and export consulting services as well as assistance in promoting Ukrainian goods and services in Canada and developing cooperation with the Canadian businesses.

The Ukrainian diaspora in Canada, which numbers about 1.3 million people, is also helpful for doing business there. Overall, Canada is a country of migrants, and consumers’ tastes are quite diverse, which creates good opportunities for selling goods to various ethnic groups of buyers. Everything associated with Ukraine is perceived very well.

Useful links for those who would like to enter the Canadian market

    1. Full text of the Agreement (CUFTA)
    2. Requirements for food products
    3. Automated system on requirements for food product exporters
    4. Dairy products requirements
    5. Product labeling requirements
    6. Export requirements for agricultural products
    7. State agencies, whose permissions may be required for the export of goods 
    8. Export and Import Permits Act (regulates the issuance of export permits, specifies the level of tariff quotas)
    9. State agency controlling compliance with the rules of food import (Canadian Food Inspection Agency)
    10. Canadian customs (Canada Border Services Agency) 
    11. Export requirements
    12. Export quotas

Source: Aval Bank

Ihor Sanzharovskyi: Ukrainian producers should find their place on the Canadian market

Market analysis, certification, finding a partner in Canada and fluency in English are just a few of the key “must-haves” for the Ukrainian exporters to Canada. CUTIS project director Ihor Sanzharovskyi talked to UA TV about the crucial aspects of exporting to Canada.

The interview covers the structure of the Ukrainian exports to Canada, the main obstacles exporters face, free trade with Canada, and the prospects of bringing Canadian investments to Ukraine.

“The Canadian market is not empty, it does not simply wait for Ukrainian goods. Ukrainian producers need to find their place on the Canadian market and, let’s be honest, fight for the Canadian shelves,” said Mr Sanzharovsky.

Watch the full interview below:

Zoia Pavlenko: Clean or Rich? How Free Trade with Canada will Impact Environment in Ukraine

Developments of the recent years have dramatically changed the foreign trade of Ukraine: due to the loss of the Russian market Ukrainian manufacturers had to reorient their export trade from the East to the West. Due to the efforts of the Ukrainian government, in particular trade diplomacy of the Ukrainian Ministry of Economic Development and Trade, the free trade zone with the EU was introduced, implementation of Free Trade Agreement with Canada is nearing completion, and active negotiations with Turkey and Israel are currently under way. Every day we witness new success stories of Ukrainian goods on foreign markets.

Graph: The Economist

The aspect rarely mentioned in the discussions of the ‘new way’ of Ukrainian export trade is its environmental impact. In this article we will briefly analyze potential impacts of trade liberalization on the environment in Ukraine. Let’s take as an example the Free Trade Agreement between Ukraine and Canada recently ratified by the Ukrainian Parliament.

From Poor and Clean to Rich and Dirty?

The liberalization of foreign trade, in fact, means facilitating international movement of goods and services. It stimulates production in exporting countries. In theory, such growth leads to a greater consumption of natural resources and growing amounts of industrial waste. This may have both local impact (e.g. discharging of untreated sewage into small rivers) and global impact (increase in greenhouse gas emissions).

In 1955, Simon Kuznets (scientist) suggested the curve of correlation between environmental load level and economic activity (Picture 1). According to the scientist’s theory, growing of the GDP per capita, at first, leads to increase of environmental load, and then – to its reduction. The logic is clear – revitalization of economic activities and new financial resources are used to meet critical needs (filling the gaps), so to say – ‘patching the holes’. In a situation like that, no one worries about environment.

However, later on, when a country is already quite rich and environmental problems continue to accumulate, the environmental protection becomes a pressing matter. The country can invest in the upgrading of outdated production technologies and address negative environmental impacts.

Today, the twenty-fold difference in GDP per capita between Ukraine ($2155) and Canada ($43248) puts them at the different ends of the Kuznets curve. It is possible to assume that increase in the trade relations between the two countries threatens our particular state with environmental degradation. But is it really true?

Is a Leap to Cleanness Really Possible?

The particularity of our country’s participation in free trade agreements is the focus on the export of raw materials that requires considerable use of natural resources. However, even with the gradual shift of focus to the export of manufactured goods with higher added value, we should not forget about environmental impacts of the manufacturing processes themselves (energy and water consumption, emissions of air pollutants, wastewater discharges).

The desire to rapidly increase the economic growth rate and attract foreign investments leads to the loosening of environmental control in Ukraine. This includes a moratorium on environmental inspections of enterprises, formalization of environmental assessment process and delaying of the legislative system reboot with regard to environmental matters. Ukraine became an active participant of the ‘race to the bottom’, because the competition to cut a slice of an ‘international economic cake’ leads to a drop in environmental standards.

It would seem that the prospects are not particularly bright for the Ukrainian environment.  However, in the case of a deeper analysis of international agreements, one can see specific ‘win-win’ opportunities for all parties.

Environmental ‘Letter of the Agreement’

The emphasis on environmental aspects is common for the free trade agreements of the new generation. The Free Trade Agreement between Canada and Ukraine is no exception. The document contains direct links to the environmental conventions and protocols to be followed by the parties. These are, for example, the Convention on International Trade in Endangered Species of Wild Fauna and Flora (СITES Convention), the Montreal Protocol on Substances that Deplete the Ozone Layer, the Stockholm Convention on Persistent Organic Pollutants, etc.

In addition, often before signing a free trade agreement, countries conduct its environmental assessment. This helps each party to provide for possible negative impacts and, therefore, make an informed decision and properly plan appropriate countermeasures. In Canada this is stipulated by the legislation – Environmental Assessment Report of the Free Trade Agreement between Canada and Ukraine is available online.

In the terms of environmental regulation, Ukraine is in a better position than the developed countries at the beginning of their economic upturn

While analyzing the articles of the agreement, one can assume that in the terms of environmental regulation Ukraine is in a better position than the developed countries at the beginning of their economic upturn. Since even Canada, learning from its own mistakes, ended up with the need for introduction of more stringent environmental regulations and development of innovative and cost-effective production technologies. And Ukraine can simply adopt these ready-made tools that, in addition, will bring Ukrainian production closer to the European and international standards.

Let Consumers Choose by the Means of a Dollar

Ralph Fücks, the popular German author, in his book ‘The Green Revolution’ claims that, in the modern world, economic growth and environmental protection are not opposed, but become a single whole. So, the obvious solution of the environmental-economic dilemma would be a capital investment in the upgrading of Ukrainian production. Of course, in reality, such quick changes are not so easy to introduce. However, there is an obvious and environmentally-friendly winning approach for small and medium export businesses – let foreign customers support the investments in sustainable production of Ukrainian goods.

In Canada, more than 50 percent of the population identify themselves as responsible consumers.

Greater attention on the part of Ukrainian producers to the environmental protection issues may be rewarded in the markets of the developed countries, such as Canada. Here it has been long-established and growing trend of responsible consumption, when the consumer deliberately buys those goods that reduce the use of energy or water, contain recycled materials or can be recycled themselves, are non-toxic and biodegradable. For example, in Canada, about 58% of the population identify themselves as responsible consumers. Not to mention the global crush on organic products.

The ‘eco-friendly’ image is certainly not just the writing on the label. This is a strategic work, investment and brand development. In some cases, the claimed environmental benefits of the product must be approved by an independent third party in the form of an appropriate certificate. For example, in Canada, consumers very well know product certification according to the ISO 14001 “Environmental Management System” standard, organic certification of agricultural products according to the Canada Organic Regime, timber certification by Forest Stewardship Council (FSC), certification of energy efficiency of electrical appliances by Energy Star, etc.

It is also important to remember that unfounded marketing claims of environmental benefits of your products are the examples of so-called ‘greenwashing’ and involve administrative liability both in Canada and in Ukraine.

The real environmental benefits of goods have direct financial benefits: for example, the cost of the certified organic agricultural products in Canada, on the average, is 40% higher than of their conventional equivalents. So, there is a possibility to not only compensate the costs associated with certification and investments in the production, but also get the higher returns.

Special focus of the Free Trade Agreement between Canada and Ukraine and other international agreements on environmental aspects may create conditions for a quantum leap of domestic producers. Why do the same mistakes, which the developed countries has already made, and go through decades of the depletion of raw material resources, when it is possible to look forward, follow the global trends and get additional price advantages? It is environmental friendliness of Ukrainian goods that can be a part of the brand of Ukraine in international markets and, at the same time, the key to sustainable development of Ukrainian economy.

Information and support on environmental aspects of export to Canada are available at the government Export Promotion Office and Canada-Ukraine Trade & Investment Support project.

Author: Zoia Pavlenko, Ukrainian Environment Expert at CUTIS project

Roman Waschuk: CUFTA isn’t grants or cash loans – it is opportunities to earn money on Canadian market

Every tenth glass of apple juice, drunk by Canadians, is made of Ukrainian concentrate. Delo.ua has asked the Ambassador of Canada in Ukraine, Roman Waschuk, what else Ukrainian businesses could need in order to find the path to Canadians’ hearts.

– How soon, after the Free Trade zone (FTZ) between our countries is in effect, can we talk about wide mutual investments and access of Ukrainian goods to Canadian market?

Ukrainian party has already done the part of its job – it has ratified the Agreement for FTZ by the Parliament. Two formal steps remain to be done by ourselves: the third ballot in the Senate and signature by the Governor General of Canada, David Lloyd Johnston. Then comes the exchange of notes on ratification and in a month the FTZ between our countries becomes effective. Thus, it should all happen during the summer. Since that moment, 99% of all quotas and duties will be eliminated and 0% rate will be applied to the exports of Ukrainian goods to Canada.

However, the question is, to what extent and how prepared the Ukrainian businesses are to use these opportunities. I would like to stress, though, that our attempts to propagate this agreement and Canada-Ukraine business forum, that was held last June, have already increased the interest in Canadian market in Ukraine and Ukrainian market in Canada. That is why we experience certain revival of our commercial relations – before the FTZ Agreement takes effect.

– Are you sure, that the FTZ between our countries will work in summer already? What if life brings nasty surprise, such as the Senate’s countervote or the Governor’s General non-signing the document?

I can assure you that no surprise is envisaged, because, when both upper and lower house make the unanimous decision, there can be no doubts.

– I agree. When can we see the first practical results of the FTZ though?

This is impossible to forecast, because it all depends on the entrepreneurs and companies from both sides, that should enjoy the privileges of the FTZ Agreement. However, I am certain, that both Canadian and Ukrainian businesses are prepared to use new trade opportunities. And, as an evidence of my words, a visit of 14 Ukrainian companies, representatives of food industry, to Canada has already been scheduled for early April. This trip is arranged within the Ukrainian Export Support Program.

Ukrainian delegation will meet Canadian importers, supermarkets’ owners, etc. And this can be considered as a preparatory step, which aims at increasing our trading volume.

– You emphasized a key point while talking about the FTZ launch: “if Ukrainian businesses are ready”. What do you think Ukrainian businesses have to do in order to increase demand for our goods? How to reach out to Canadians? Will Ukrainian goods be popular with Canadian customers?

Ukrainian businesses have to study Canadian market in the first place. For that very purpose we have launched the Canada-Ukraine Trade and Investment Support project. It has got an office in Kyiv. It also cooperates with Canada-Ukraine Chamber of Trade and Canada-Ukraine Trade and Investment Support (analytical entity of Canadian businesses). They are the ones who provide consultations to the interested companies. I.e., there is a whole structure that can orient Ukrainian businesses whether their goods have a perspective on Canadian market, what should be changed in order to attract Canadians.

By now, 9 priority groups of goods have been identified (clothing, textiles and confectionaries, machine building – milling equipment, that are in demand in Canada, dish-washers) and one service sector – the IT, which has been successfully operating between ourselves.

– This is what Canada is interested in obtaining from Ukraine. What is it Canadians have to offer to us?

By the results of the year 2016, the basis of Canadian exports to Ukraine is formed of coal and metallurgy. And the beginning of this year also shows revival of this sectors. Supplies of fish and shrimp are top second (we’re close to the ocean, after all). Then come aircrafts and aircraft components (to replace Russian parts). And this segment is very perspective, because our jointly manufactured high tech goods can be sold on the third markets. A big portion of our exports accounts for pharmaceuticals and soya (mostly seed). I have recently visited Kharkiv oblast and I was told that local specialists prefer Canadian seeds for they are cold resistant and fit good to continental climate.

A big portion of Canadian exports (almost $3.5 million) accounts for pets’ food (cats and dogs) and materials for cattle artificial insemination. By the way, a big part of Ukrainian dairy herd are Canadian descendants.

Thus, the range of exports to Ukraine is large, but we work on its extension.

– This is great that our countries plan to extend our commercial horizons. However, plans do not always coincide with reality. Who can guarantee that Canadians need Ukrainian goods? What goods from Ukraine are currently being sold in Canadian stores? Are they popular?

A Ukrainian company, before entering Canadian market, does promotional launch with engagement of certain PR-companies. I know that a Ukrainian birch sap producer is being entering Canadian market right now. They will sell their goods through one of the biggest chains of our supermarkets. And, if Canadians are going to like it, the supplies will grow.

For instance, in 2016 our country bought concentrated apple juice from a Ukrainian producer for the amount of CAD 9.5 million and your country became top second external supplier of this product. On top of that, every tenth glass of apple juice, drunk by Canadians – is made of Ukrainian concentrate.

I would like to mention honey. Ukraine can occupy this niche, because Ukrainian honey supplies to the EU are subject to quotas, while being unlimited to Canada.

– We have to be honest, though. I presume that Canadian customers got used to, for instance, American quality of goods, while our products are hardly competitive…

You are excessively humble, because there is a fair amount of Ukrainian companies, especially those who have bought modern production facilities, that can produce goods of the world’s top level. A lot of Ukrainian manufacturers also develop partnerships with Canadian distribution networks and our embassy helps with this.

– FTZ is often perceived by Ukrainian businesses as another opportunity to sell their goods. However, some experts with more strategic vision say that the Agreement should be treated as a partnership and we also have to think, how our countries can help each other. How do you think the commercial partnership between Ukraine and Canada should look like?

Canada-Ukraine Trade and Investment Support’s findings indicate that after FTZ agreements with other countries are signed, investments in both directions have doubled. The wider commercial opportunities are, the more the countries learn about the investment potential of each other.

As far as Ukraine is concerned, on the verge of 2016-2017 an investment in food industry was made – a Canadian investment fund bought 30% of shares of one of the biggest local agricultural holdings “Astarta”.

We can also see that Canadian capital comes to Ukraine through acquisition of large international entities that operate here. When I have recently visited Kharkiv, I learned that 50% of a big local outsourcing company had been purchased by the National Pension Fund of Canada. Thus, Canadian capital flows to Ukraine through many channels including indirect ones.

Currently we see the increase of project and investment interests. Talking about projects, there is a rocket project being prepared on the East Coast of Canada, with the plans to build a small space launch complex, from which Ukrainian rockets “Cyclon-4” are to be launched. The rockets are manufactured by “Pivdenmash” holding. The plan is to launch medium sized satellites to the orbit.

– But, honestly, what is Canada’s interest to the FTZ with Ukraine? What, in your opinion, the agreement gives to highly developed Canadian economy and Canadian businesses?

Indeed, we are interested in selling our goods in Ukraine. Even though Ukrainians love to cry poor, they buy a lot of luxury goods. Of course, Canadians don’t want to miss this profitable opportunity.

Apart from that, the FTZ between our countries is a gesture of economic support for Ukraine. And these are neither any grants, nor financial loans, but a real opportunity for Ukrainians to earn their living by trade with Canadian market. It is profitable for both, Canada and Ukraine.

For example, Ukrainian canned apricots could be of enormous demand in Canada, if they are cheaper than Austrian ones, because only 1% of Canadian territory harvests apricots (due to special climate conditions).
In general, the part of Ukrainian production facilities, that used to work for Russian Federation, can find their markets in Canada.

On the market of services, this exchange between our countries is being going on for a while, because it is less regulated, specifically in IT. It is hard to make precise calculations but I believe it is over $40 million on the annual basis. Canadian employers highly value knowledge and talents of Ukrainian programmers, because they don’t only support the existing systems, but also create new ones.

– In numerical terms, what is the current place of Ukraine in Canadian trade volume?

70% of Canadian commodity turnover accounts for USA, with the rest of the countries comprising 30%. As far as Ukraine is concerned, the current number is very modest – less than 1%. However, thanks to FTZ, we can reach much higher indicators, considering that every additional million wouldn’t go amiss for your country. So, we will make money step by step.

– Is such a readiness by Canada to launch FTZ with the EU and Ukraine connected with the complicated situation around Trans-pacific partnership and USA’s statements of the need to reconsider North American Free Trade Agreement?

Not at all. As far as Ukraine and the EU are concerned, the FTZ negotiations are under way for almost 6 years, while Trans-pacific partnership problems had started long before. Apart from that, both Canada and other countries understand that diversification of trade flows is a positive thing for national economy.

Of course, various processes are going on in the world, including political issues that need to be adjusted to, i.e. the Ukrainian situation with coal and metallurgical complex. Back in January 2016 Ukraine didn’t buy Canadian coal at all, whereas in a year Canada sold coal for the amount of $48 205 062. Therefore, when forecasting the future we cannot rely on the last year’s statistics.

The Canadian party doesn’t want to promise to Ukraine any sky-high results. However, if any Ukrainian company finds its market niche in Canada, it can make very quick progress, because Canadian market grows continuously and our population has substantial buying power. Canadians are especially attracted by high quality and cheap goods. So, when there is a will, there is a way.

– You mentioned a rocket project that is being done by Canada jointly with “Pivdenmash” holding. Are the investments coming from both parties?

Ukraine is a supplier of rockets and investments come from the North America. They are provided by the group of American space program engineers. This is purely commercial project to launch the satellites by the means of Ukrainian rockets, which is assisted by Canadian government and the Ministry of Transport of Canada, as this is from the shore of Canada that safe launches are possible.

– What is the term of the contract with Pivdenmash and when is the launch of the project?

You should get this information from Pivdenmash, but I think this is going to be a long term project. As for the project start is concerned, the beginning of construction of a space site is scheduled for early next year. New launches start in late 2018 – early 2019.

– And how’s our cooperation in defense and military technical sector going on?

As far as the contracts in space and aircraft industry are concerned, the first flight on AN-132 was on March, 31. The aircraft was engineered by Antonov plant for Saudi Arabia and it has got Canadian engines.

The Minister of Defense of Ukraine, Mr. Poltorak, comes to Canada in mid-April. He will sign a military cooperation agreement, which facilitates our dialog in this sector. I won’t go into details so as not to rush ahead of things.

 

Olga Vergeles: Canadian Supermarkets are Interested in Ukrainian Goods

The Parliament of Ukraine ratified the Canada Free Trade agreement on March, 14.Now, in order to become effective, the Agreement must be signed by the President of Ukraine, ratified by the Senate and signed by the Governor General of Canada. In a month after the ratification procedures are over the Canada-Ukraine Free Trade Agreement becomes a reality. According to experts, it may happen in summer, 2017.

Last year a Canada-Ukraine project for trade and investment support (CUTIS) was launched in order to help Ukrainian companies to enter the Canadian market. The Project is financed by the Canadian government and aims at technical assistance to Ukrainian exporters. propozitsiya.com learned from CUTIS Project Manager Olha Vergeles, what preferences Ukrainian exporters are going to get after the markets are open and in what goods Canadian customers are interested the most.

Who and how will CUTIS assist?

— We have a very good cooperation with the Ministry of Economy of Ukraine, in particular, the team of the trade representative of Ukraine, Natalia Mykolska and Export Promotion Office at the ministry. Together we support small and medium Ukrainian businesses that plan to enter the markets of Canada. Big holdings are capable of hiring consultants and prepare themselves for entering the market while small businesses often lack knowledge and they don’t know what to start from.

A study is currently underway, on the basis of which five groups of goods and services will be selected, that are of the most interest to Canada as imports from Ukraine. CUTIS will be looking for the producers of these goods and invite them to participate in the project. We have planned seminars and information sessions covering the most important export issues. We will also provide technical assistance on packaging, labeling, certification and, most of all, assist in searching for partners, organize meetings. According to our plan, Ukrainian companies will participate in trade shows and exhibitions in Canada.

How will the 5 groups of priority goods be selected?

— The selection will be done in 2 phases. We have analyzed the dynamics of Ukrainian exports to Canada and Canadian imports in general, in order to find out, which goods are being actively imported by Canada with positive trends during the recent 5 years and in which of these groups Ukrainian producers can compete.

We also looked at export opportunities of Ukraine and excluded the categories that are inaccessible for small and medium businesses. At this point, we have already selected 9 groups of goods and one group of services. The next step is to define five priorities. However, keeping in mind the fast dynamics of export markets, we are prepared to reconsider the five priorities. Apart from that, we always support anyone who wants to export to Canada, even if the goods are not part of the five priorities.

Will there be the goods of the food industry included?

Chocolate and confectionaries, as well as processed and canned fruit and vegetables, food processing equipment (refrigerators, flouring mills, packaging equipment) are already on the top-10 list. The final data on the priority groups will be available in April 2017.

Has CUTIS been frequently approached?

— Yes, we are very active online and tell a lot about Canadian market, using all possible resources. I obtain 2-3 requests from various companies on a daily basis. We have been approached by vegetable and fruit producers and well as gardening businesses. Among the frequently asked questions are: how to find a partner, what Canadian customers are looking for, etc.

We plan a Ukrainian trade mission to Canada in April. The group has been joined by frozen fruit and vegetable producers. They have already got international certification and are prepared to meet with representatives of Canadian retail chains.

How can one start cooperating with the project?

— For the beginning I kindly ask to send a brief information on a company (titles, web page, the range of products, certificates available, the scope of production) – this enables us to collect a company profile, which is included in our database. The applications should be sent to the email address office@cutisproject.org.

We receive requests from Canadian chains occasionally. E.g. we have been approached by Canadian companies interested in leading Ukrainian producers of fresh vegetables and frozen fruit.

Have there been any success stories yet?

— CUTIS co-organized a Ukrainian-Canadian forum in June 2016. 93 meetings took place during the Forum, resulting in 4 signed contracts. A pilot office of one Ukrainian company has been opened in Canada. A Ukrainian producer of birch sap met with the representatives of the biggest Canadian chain of supermarkets. They entered into contractual negotiations, including discussions of insurance and the range of products.

Only 4 contracts have been signed as a follow-up of the Forum. Why so few?

— This is a very good number if you take into account high requirements and conservatism of Canadian market. There are some problems with communication and compliance to product requirements. A lot of Ukrainian companies are not ready to export: they seem to show interest, they write about the advantages of their products, send presentations. However, when asked if they are ready to modify their business for exports, the businessmen realize that they are not prepared for it so far.

What are the three major requirements for the products?

— Certification, the required volumes, and terms of delivery are the main ones.

Is this feasible for the products to get straight on the shelves of supermarkets?

— It is quite feasible. But one should have patience. We’ve been working with a number of powerful chains. They file their requests with product groups. Ukrainian companies also have to be prepared to produce under the private label, when goods, produced in Ukraine, are sold under Canadian brand. It is quite profitable for a Ukrainian producer, for Canadians have little knowledge of our brands, whereas launching ad campaigns is very expensive and doesn’t guarantee further sales.

Indeed, there is a powerful diaspora, who buy Ukrainian goods in small stores, but this isn’t a big Canadian market. End buyers don’t know a lot about Ukrainian goods. Apart from that, in order to supply branded products, there need to be large volumes delivered, which is not always affordable to small and medium-sized producers.

Which products are of demand in Canadian supermarkets?

— Primarily, frozen berries and vegetables. Processing companies are interested in fresh vegetables for further production of mixes, salads, sandwiches. Apples are potentially interesting, but it comes down to the price and logistics because Canada gets apples from nearer countries resulting in their relatively lower prices. We’ve been talking to a Ukrainian company, that wants to enter Canadian market with its fresh vegetables. They are aware that, in order to make this happen, they need to have a logistics center in Canada, where the vegetables are packaged and quickly distributed among relevant stores. This option is sensible from the exports stand point because small producers can be engaged in forming big batches to Canada if they are dictated the technology of growth or production.
What should one be prepared for when planning exports to Canada?

— There is a false impression that, once the meeting took place, the contract can be signed in a month. Developed markets don’t work this way. Negotiations often last up to one year. Canadians are very conservative. They want to contact one specific person. They build relationships and communications slowly. To be honest, nobody is looking forward to seeing us in Canada. Therefore, we have to promote our products.

What are other main mistakes of new exporters?

— If a company visited a conference or a forum, it doesn’t mean that they are going to get a flow of clients and contracts right after. This will not happen. They have to visit a few more forums. And not just they visit but also fix appointments beforehand. Because, by the way, big Canadian chains will not pay attention to the proposal sent to a general office address, even if all relevant certificates are available.

Exports take time, resources and energy. The main mistakes are a lack of strategy and financial calculations. For example, juice producers, we have been taking care of, lower the price for the sake of entering the Canadian market. However, they do not guarantee exclusive terms. The common issue and the major factor of entering the Canadian market are the search of a partner and building mutual understanding.

What are the specificities of Canadian business culture?

— Conservatism. Digital tools commonly used here are not so widespread there. And not because they cannot afford them, but because a telephone is a tool for conversation and nothing more. Therefore, during a business meeting, people don’t exchange email addresses to make things faster. Rather, a Canadian businessman comes back to his office, opens his mailbox and gets to your message, probably, the next day. If the information isn’t given in appropriate format, he will not open the file at all.

There are specific standards involved. Thus, you either follow them or you’re out. If a company has certain proposal review procedure, it will not make any exceptions. These are the things Ukrainians do not understand, because they think, “hey, they are Ukrainians too, so we always find common ground”. It all goes in a profound and consistent way, step by step, as it is supposed to be. This is a major difference and the first thing that needs to be considered. Nobody is going to meet with you without preliminary arrangements made, without company information and presentation.

Why is it worth to export to Canada

— This country depends on its imports, which comprise 31% of Canada’s GDP. The National diversity of Canada is also an advantage. Every 5th citizen of Canada was born outside the country. On top of that, Canada is a regional hub, from which one can enter the markets of the US and Mexico.

What advantages is the Free Trade Agreement going to bring?

— Canada provides full and instant access to its markets, which is zero custom rate for most of the goods. However, some of the goods will be subject to quotas. Ukraine will go through gradual liberalization process – 3 to 7 years. Ukraine will also use tariff quotas for some goods, in particular, for frozen pork and lard. Sugar is excluded from the terms of the Agreement.

The Agreement provides for the Parties to work towards mutual recognition of accreditation authorities. In medium terms this means that Canada acknowledges Ukrainian accreditation authority (National Accreditation Agency of Ukraine) and a Ukrainian producer doesn’t need to go through more expensive certification in Canada.

The Agreement contains provisions on public procurement. Canada spends almost CAD 15 billion on procurement and Ukrainian companies will become eligible to participate.

How will the quotas be administered?

— Limitations are applied to wheat, barley, poultry, dairy produce, eggs, cheese, and sugar. It applies to all countries, not just Ukraine, though. Some quotas are not taken up. For instance, only 54% of dry milk whey quota was taken up in 2015 marketing year. Within the quota, 0% duty rate is applied. The specificity of Canada is the responsibility for imports, including the quality of goods, getting a license to supply within the tariff quota, taken by the importer. Even if the goods are shipped with violations or don’t comply with customs regulations, all the fines and penalties will be charged on the importer. Therefore, when a Ukrainian importer finds a partner in Canada, the latter will tell him about all the details because he is primarily interested in having the goods complied with all the requirements and no violations. Administering quotas is also a responsibility of an importer.

As far as margarine, wheat and barley are concerned, it works on “first come – first served” basis. For other goods limited by quotas, a preliminary distribution principle applies, i.e. one need to get the right to supply product within the quota by filing a respective application. This is within the authority of the Ministry of Foreign Affairs of Canada.

Do European exporters use the resource of the Еxport help desk. Is there any similar resource in Canada?

— Using the resource of Automatic Importing Reference System, by the code of goods (4 digits) you can get all the compliance requirements for agricultural produce. It is worth pointing out the purpose of imports: participation in trade shows, sales. All this information is available on the web pages of Canadian state control authorities.

Are there any special requirements to packaging and labeling?

— They frequently forget that food product should be labeled in two languages, with none of the language given the priority, i.e. fonts and lay-outs should be equal. An interesting detail: an expiry date is put in a “reverse” order as for Ukraine: year, month and date. There is a list of acronyms of months – the mix of English and French. As far as the indication of the country of origin, there is a list of produce (wine, dairy produce, honey, fish, meat, eggs, fruit, and vegetables) which must contain this indication.

— Developed countries practice responsible consumption. Is this relevant to Canada too?

— 60% of Canadians consider themselves responsible consumers and over quarter of them are prepared to pay for additional environmental and social benefits, such as: equal employment opportunities for women, equal pay, no adverse environmental impact. Right environmental labeling can inform the consumer of the advantages.

Is organic produce also popular?

Canadian organic market is the world’s top fifth – around $5 billion. The best-sold produce are fresh fruit and vegetables. The volumes of Canadian organic imports are constantly growing. Thus, 20 million Canadians report buying organic food on a weekly basis. They are prepared to pay a higher price for organic produce. The margin may reach 90-300%. The biggest margins can be obtained on organic juices and yogurts. It is important to note, that American organic certificate is also valid in Canada.

How much will the exports grow after the market is open?

— We will not see the instant growth of exports in 2017 because of the specificity of Canadian business mentality and unpreparedness of Ukrainian companies to supply big volumes. Ukrainian counterparts will most likely become more active. At least a year is required to have a substantial shift.

Stepan Kubiv: Why FTA with Canada is part of our European integration

On the 14th of March Parliament ratified the Free Trade Agreement between Ukraine and Canada.

I would like to remind that the Agreement is the part of the government’s policy to extend trade opportunities for Ukrainian exporters. And Ukraine’s direction towards the EU plays vital role.

We, basically, talk about the triangle of opportunities and interaction in production among Ukraine – Canada – the EU, with the leading idea of Ukrainian and European cooperation in agricultural, manufacturing and other areas with the emphasis on innovations and high technologies.

Can we call this triangle of opportunities equilateral though?

What is it Ukraine has to offer to technologically developed Europe and Canada in order to become an equal counterpart of a new level of economic and commercial relations?

After manufacturing ties with Russia had been ruined, Ukrainian manufacturers started to direct their efforts to create production chains with the EU and other countries. Thus, according to The World Integrated Trade Solution (WITS), Ukraine imported to Russia in 2015 $1.9 billion intermediary goods (inputs for manufacturing), and exported $2.1 billion. To compare, imports of similar intermediary goods to Canada comprised the price equivalent of $9.4 million with exports of $17.6 million.

It is obvious that Ukrainian companies cannot instantly overcome the dependency on the intermediary manufactured goods. Therefore, the extension of alternative cooperation and search for manufacturing and commercial partners in the EU and Canada is very timely and important. I should remind here of a recently initiated Ukraine-EU Industrial Dialogue, which started a few weeks ago in Brussels. Within this dialog, the EU and Ukraine initiated horizontal interaction between some companies, NGOs and professional associations, agricultural in particular. These are, in fact, the stakeholders of the relationships that organize joint business processes.

How Canada is involved here?

First of all, access to big Canadian market place creates wide opportunities for exports of jointly manufactured Ukrainian and European products in North America. I talk about aircraft engineering, IT products, textiles, agriculture including organic produce.

Very few people know that joint efforts of Ukraine and Canada in agricultural segment can make ourselves the biggest world wholesale trader in the area of grain growing and processing. By the way,

Since the Free Trade Agreement with Canada was signed three Ukrainian companies (two in agricultural business) received over $300 million of direct investments from Canada.

Along with that, Ukraine is committed to switch from the raw material orientation of its economy to an advanced technological model of manufacturing with high added value. Such production is supposed to contain large portion of small and medium businesses, that often create production ties with big companies and employs a lot of workers.

For example, in the fall of 2016 a German company “Bader” opened a new factory of a premium class vehicle leather production in Lviv oblast, which employs around 3 thousand workers. And this is just one of the cases of successful cooperation of Ukraine and the EU.

That is why the interaction of Ukraine and Canada is important in that very triangle with the EU. Because that very triangle creates new opportunities for cooperation in production and manufacturing, where Ukraine offers very beneficial conditions for salaries and convenient locations of industrial facilities of the joint ventures.

For Ukraine it will mean new modern production, which includes, apart from agribusinesses, car manufacturing, aircraft engineering, pharmaceuticals, textiles and innovative technology solutions.

Foreign direct investment in manufacturing will bring to Ukraine capital equipment, state of the art technology, managerial and marketing solutions and experience. This means greater multiplication effect from investment, because investors “imbed” new production facilities in already existing manufacturing chains.

Therefore, our employees are the decisive competitive advantage of Ukraine in our relationship with highly technological manufacturing of the EU countries and Canada.

They have extremely high, even under European standards, education and qualification levels. They major in natural sciences, technologies, engineering, and mathematics. They are able to create new knowledge, produce, adapt and use state of the art technology.

These qualities, multiplied by hard work and competitive labor cost, create enormous opportunities for manufacturing competitive products and create attractive opportunities for every joint Ukrainian and European manufacturing or investment project, which brings its manufacturing facilities to Ukraine.

Under the conditions of tougher world competition, it will be beneficial for the EU to place their manufacturing facilities in Ukraine where we have space and conditions for starting new facilities and labor resources for arranging qualified technological processes.

This scenario, by the way, will keep qualified Ukrainian personnel from moving to Europe, because, unlike with service industries, manufacturing requires an employee’s participation in the production process.

This is extremely important for development of regions, because qualified engineers and high technology production specialists will have more employment opportunities in Ukraine, particularly in the regions with sufficient manufacturing space.

The AuthorStepan KubivThe First Vice Prime Minister of Ukraine, The Minister of Economic Development and Trade

Source: European Pravda

Zenon Potoczny: Canada will help Ukrainian business people to enter Canadian market

In the course of the first official visit of Justin Trudeau, the Prime Minister of Canada, to Ukraine the final draft of the Agreement on creating Free Trade Area between Ukraine and Canada was signed at last. Remembering the current modest trade turnover, one should hardly expect any immediate benefits as a result of the Agreement, but in the long-term perspective, 500 billion Canadian market has got a lot of interesting things to offer to Ukrainian manufacturers.

Ukrinform talked about the new trade agreement and the specific aspects of bilateral economic relations with Zenon Potoczny, the President at Canada-Ukraine Chamber of Commerce and one of the most active lobbyists for trade facilitation among the countries

CHOOSING TOP-5 OF THE INDUSTRIES

– First of all, please tell us your evaluation regarding Canada-Ukraine Business Forum held in late June in Toronto?

– Very positive! The Forum was attended by a multitude of participants: more than 150 Ukrainian and 230 Canadian companies. Besides, high profile official delegations from both countries took part. All in all, everything went very well. Bilateral meetings deserve special mentioning. Business people literally were standing in queues to communicate with each other. This is a very good sign, confirming that there may be potential specific business deals.

Businessmen literally were standing in queues to communicate with each other.

– What specific deals are you referring to? What are the achievements of the Forum, in general?

– I can tell about my own organization. We signed the Memorandum on Cooperation with the Ministry of Economic Development of Ukraine, and we are going to work on promoting exports of Ukrainian goods and services to Canada as well as on analyzing the investment projects and engaging investors from Canada.

– As far as I understand, you are referring to CUTIS (Canada-Ukraine Trade and Investment Support project) aimed at promoting Ukrainian exports to Canada, aren’t you?

– Exactly. The Government of Canada allocated 13.6 million dollars to implement this project within 5 years. The project partners include Canada-Ukraine Chamber of Commerce, Conference Board of Canada and the Ministry of Economic Development and Trade of Ukraine. With this latter we are supposed to have consultations, provide recommendations and agree on our activities. In fact, Canada-Ukraine Business Forum was held under the auspices of CUTIS.

– So, do your plans include holding similar events in future to promote bilateral relations, especially Ukrainian exports?

– Yes, they do, we have these ideas. Generally speaking, CUTIS primary objective is to analyze Ukrainian economy in order to identify 4-5 areas that constitute the most interest for Canada from imports’ perspective. After we identify these fields, we shall choose specific Ukrainian companies ready to export. Also, we shall be able to train them, inform them about the local (Canadian) laws and policies, Canadian tax and other regulations, and, more broadly, to assist them in producing marketing strategies. Finally, we are going to bring the companies’ representatives with ready marketing offers to Canada as members of the trade missions. There they will have an opportunity to pitch their projects and services and to tell the potential clients about them.

– When shall we expect the first findings of the CUTIS surveys on perspective areas?

– The work will be started very soon and the first findings will be published in 6 months – 1 year.

HELPING UKRAINIAN EXPORTERS

– What are the prospects the FTA offers for Ukrainian manufacturers? Why does Ukraine need this Agreement?

– At present there are lot of customs duties that constitute the barriers for Ukraine-Canada trade. The FTA will remove 99% of these barriers. This will help both Ukrainian and Canadian companies significantly enhance their volumes of exports. However, the Agreement is not restricted to removing the customs duties; it will withdraw other trade barriers as well.

The Agreement is not restricted to removing the customs duties; it will withdraw other trade barriers as well

– Will the Ukrainian goods be able to compete realistically with Canadian ones, remembering the difference in standards and approaches to production in our countries?

– This is also a constituent part of the CUTIS project: within the frame of it we must help Ukrainian exporters to meet the regulatory requirements of Canada. If they succeed in meeting them, their products will enter the market.

– True, but whereas the FTA comes into force late this year, the change in standards may take years…

– The Agreement comes into force through its ratification by the Parliaments. However, we should start preparatory work right now. We are already in position to clarify the requirements of Canadian private and public sectors for Ukrainian companies. The sooner we start to work with Ukrainian exporters and train them the better. If we want to launch trade immediately after the Agreement’s ratification, one should not lose time now.

– Do you have concerns regarding potential harm to Ukrainian domestic producers as a result of opening the markets?

– Certain problems may occur, but if you check some examples globally, then, irrespectively of the countries having FTAs, in most cases they are mutually beneficial. Otherwise, such practices as free trade areas agreements simply would not exist.

TOUGH CANADIAN TARIFF RATE QUOTAS

– Does the FTA Agreement include provisions on changes in the sphere of investments?

– Yes, it does. In fact, the Agreement is quite comprehensive and does not include only goods, but also workforce exchange as well as other aspects of bilateral trade, such as customs’ documents. There are chapters on intellectual property and environmental issues. Besides, Ukrainian companies are provided with access to Canadian public procurement.

– The Government of Ukraine perceives IT as one of the most promising industries of Ukrainian economy. How do you evaluate the perspectives of Ukrainian IT industry in Canada?

There are a lot of Canadian companies that use the services of Ukrainian IT sector

– It is obvious that IT is a significant and successful sector in Ukraine and it will be very interesting to Canada. In fact, there are already a lot of Canadian companies using the services provided by Ukrainian IT sector; they place orders for Ukrainians to develop software and suggest other types of outsourcing activities. The Agreement also includes all these issues.

– Maybe it is too early to talk about that, but are there any discussions on amending the present Agreement or about signing a new broader one?

– So far everyone focuses on the valid agreement. However, in due course when we start to operate within its framework, there may be a need in some additions.

– Canada was quite skillful in introducing tariff rate quotas for the most successful Ukrainian exports, such as chicken meat or grain. Will this story with EU tariff rate quotas very quickly exhausted by Ukraine repeat in the case with Canada?

– It is true that tariff rate quotas have been set for some Ukrainian goods; but Canada practices this approach with all the countries. There were a lot of talks and discussions on this issue, but no other way out was identified. Hence, there will be tariff rate quotas for some goods and Ukrainian companies will have to fit into them.

THE WINDOW TO USA AND MEXICO

– What are the concerns the Canadian investors have when investing in Ukraine?

– First of all, it is corruption. However, despite the fact that it is not that easy, the situation is improving, especially in view of current Government’s resolute position. The overall situation is much better than it was 20 years ago. One more problem is about judiciary system, but here there are also hopes for positive changes related to the adoption on the new law.

– Are there any Ukrainian investments in Canada?

The sooner the FTA comes into force the earlier a nice window to USA opens

– There are small investments in the construction area, but I have not heard about any large-scale investments. There are also a lot of Ukrainian companies that have some unique inventions, and they try to open an office in Canada to sell these inventions here. Some businessmen even discuss the opportunities to start additional production here to enter the US market. So, the sooner the FTA comes into force the earlier a nice window to USA opens.

– You mean to say that Canada-Ukraine FTA may become a bridge for Ukrainian companies to reach the US and Mexico, don’t you?

– Yes, exactly. In due course the process will reach this stage; however, the US has not launched discussions with Ukraine on free trade yet, therefore, it is the FTA with Canada that opens up this window of opportunities for Ukraine. However, taking into account the rules on the country of origin, you will not be able just to transport goods from Canada to the US. If you want to reach huge NAFTA members’ markets, Ukrainians will have to produce their goods in Canada or assemble them there.

CANADIAN BUSINESS CONSERVATIVE STAND

– In Ukraine’s early years of independence, Canadian investors had some very negative experience in Ukraine. Has the situation changed now?

Ukraine has never been internationally interesting as a country to invest in, so you should inform Canadians about its strengths

– As soon as Ukraine became independent, numerous Canadian companies (most of them owned by the Canadians of Ukrainian descent) attempted to start doing business here. They wanted not only to make some money, but to help the country where their ancestors had been born. Unfortunately, these “pioneers” faced huge disappointment. As a result, the investments from Canada to Ukraine almost ceased to exist. When Kuchma was President, the Canada-Ukraine Chamber of Commerce had to even close down its office, because there was no investment base due to excessive practices of hostile takeovers and fraud. We resumed our work when Yushchenko was elected President. And we felt a new wave of interest within the recent years. The Forums like the one held in Toronto promote this interest, because Ukraine has never been internationally interesting as a country to invest in, so you should inform Canadians about its strengths. Unfortunately, many businessmen think that occupation of Crimea and the war in the East makes it dangerous to stay at the most of Ukraine’s territory.

– What is the image of Ukraine as viewed by Canadian business community currently? Has the country managed to improve it?

– Indeed, the political situation’s change in Ukraine influenced its image beneficially. At present the democracy level is much higher than it was earlier. Every TV channel broadcasts journalist investigations. The schemes are revealed: the country’s transparency is rising. This helps not only average citizens, but businesses as well: they feel that they are able to expose their problems for the public, and they are not afraid of this.

– Why is the Canada-Ukraine trade turnover so low then; 280 million dollars per year for such countries is a very small sum.

– Canadian businessmen are quite conservative. If you want to draw their attention, the investment climate inside the country must be better. However, in due time, after the FTA Agreement is ratified, the mutual trade and investments will grow.

– Has the Canadian investors’ interest in Ukraine grown after FTA Agreement was signed this year?

– Yes, the mutual interest has grown. The number of CUCC members has significantly increased both in Ukraine and Canada.

THE ART “TO SELL”

– What objectives does the CUCC set and how does it reach these objectives?

– Our key role is to promote trade relations among two countries. We provide advice on search of business partners, facilitate dialogue among businessmen, we are looking for interesting Ukrainian projects, which are not currently fit to be presented for an investor. We can help with finishing a presentation, developing a business plan, make calculations and present the project in the best possible way. Our organization also fixes up workshops, business meetings, group visits from Ukraine, etc.

– How often do businessmen approach you to get advice?

Launching FTA is a priority for the Government of Canada. And for the Government of Ukraine as well

– We are receiving a lot of various proposals; most of them are not even ready to be presented, because Ukrainian companies often do not know how to “sell” themselves to an investor. We focus on small and medium sized companies, because it is the sector that is able to improve the well-being of the people. The large rich companies order perfect investment proposals themselves, they have no need in a chamber of commerce.

– Why did the FTA negotiations take such a long time – seven years?

– I assume that taking into account the trade turnover among the countries, FTA was not a priority. On the other side, this Agreement may be viewed as an attempt of Canadian Government to help Ukraine, because within recent two years the negotiations were very intense. In contrast, in Yanukovych times the dialogue was almost stopped. At present, Justin Trudeau said that FTA’s launch will be a priority for the Government. We hear the same comments from the Ukrainian side; thus the process is likely to accelerate.

Source: Ukrinform / Maksym Nalyvayko, Ottawa – Kyiv

Photo: Oleksiy Kovalyov, Yuriy Rylchuk / Ukrinform.

Paul Darby: Canada seeks Ukrainian exporters who will be able to succeed overseas

With the financial support provided by the Government of Canada the Сonference Board of Canada, a research organization, launches a project to identify the Ukrainian companies with potential capacity to export goods to Canada. Paul Darby, CBC, told Delo.UA whom they intend to find and what they are going to do for that.

There are a lot of reasons why we have started this project. There are a lot of Ukrainians in Canada: Ukrainian diaspora is 1.3 million people. Certainly, they are interested in working with Ukraine. Besides, currently Ukraine-Russia relations are tense. Ukraine seeks new markets for its exports, and we are ready to help, because Canada is one of such potential markets. In my view, at present the project is even more timely than if we had launched it 3-4 years ago.

We have signed an agreement with the Ukrainian Chamber of Trade and Commerce and the Government of Canada on the launch of the project aimed at increasing Ukrainian exports to Canada as well as increasing investments from Canada to Ukraine. The project is scheduled for five years. We are at the very initial phase now, and so far we conduct meetings with various organizations and are taking a closer look at local producing companies.

As soon as we finish our survey, we shall be informed which products we are going to focus on; then we shall start choosing specific producing companies. We must understand where exactly the goods are produced. Therefore, we are going to work with the companies based in regions and involve local organizations and chambers of commerce to conduct trainings.

But, I am certain that we are willing to find the companies whose products include specific added value. You see, surely enough, one can sell honey somewhere abroad at a ridiculously low price. Instead, one can sell beauty care products made with honey, and one is supposed to make much more money on selling these products than just honey.

Our key partner is the Ministry of Economic Development and Trade.  But we also work with private sector organizations, e.g. regional chambers of commerce. In future we plan to cooperate in some areas through partnerships with training organizations and universities that would contribute to transferring the knowledge to small and medium businesses’ owners.

Our target audience is the small businesses with prospects for exports to Canada.

Additionally, we are going to provide technical assistance. First, it is about packaging, marketing staff to sell the goods for Canadians, providing advice on Canadians’ quality requirements. Besides, it is about conducting trainings to train the individuals who will be helping local exporters to enter the external markets.

We plan to spend around 1 year to study the Ukrainian market in order to understand which products will sell well in Canada and which companies are fit to do exports. Our mission is just the first step. Then through analysis of the collected data we need to specify how the project shall be developing in future. It will take around two months. After that, by around June, the project will start to work in its entirety: the key activities will commence and financial support will be provided.

It is the Government of Canada that finances the project, but the private sector is supposed to share some expenditures. Within the frame of the project we plan to bring the companies to Canada to attend various events, trade shows, organize b2b events. The companies will have to cover some of the expenses to travel there. We do not know yet which share of the expenses must be covered by the companies: maybe it will be 50/50, or maybe they will cover 1/3 or 2/3 of the costs. It will depend on the sector where the company works, the type of business and products we shall choose as well as their prospective chances for success. However, the companies will have to cover at least 1/3 of the costs, anyway. The project’s total budget is 13 million CAD.

One of the objectives we are addressing within this mission is to meet other donor organizations. We have already had a meeting with the EBRD and we are considering the opportunities to cooperate with them to this or that extent. We already spoke with them about this, but we have not reached any specific decisions yet. However, there are areas where our cooperation with EBRD might appear efficient.

EBRD works on use of EU funding to support private sector, but they do not always focus specifically on exports, they concentrate on support for local producers’ development. We are interested in cooperating with them as partners who are able to help with developing local manufacturers and prepare them for exports activities.

More information on participating in the project is available through sending an e-mail – isanzharovskyi@yahoo.com – to Ihor Sanzharovsky, the project director in Ukraine.

If you want to provide information about you for the project, you should include the following data while sending an e-mail to this address: the name of your company; the name of an owner/chief executive officer; contact info; what your company’s products are, your production volumes; whether you have an experience in exporting your products and why will your product be a success at the market of Canada.