Ukraine's Foreign Trade Balance in 1998

Development of Ukraine's foreign trade in 1998 was going on in difficult conditions, which did rebound its indicators. ' Foreign trade turnover of commodities and services was USD 2,563.7 mln., 13.2% or USD 4,952.9 rnln. down from 1997 figures (USD 7,516.6 mln.).

In the total turnover, trade with commodities amounted to 83.9%, and trade with services – 16.1%.

Against the year 1997 USD 18,970.3 mln.), volume of commodities and services exported in 1998 suffered a 13.2% decrease (USD 2,513.1 mln.) to USD 1,457.2 mln.

Imports turnover in 198 dropped by 13.2% or USD 2,439.8 mln. to USD 106.5 mln. compared to 1997 (USD 18,546.3 mln.).

In 1998, foreign trade with commodities and services indicated favorable lance of USD 350.7 mln., which 17.3% or USD 73.3 mln lower against 1997. The cover ratio of ports by exports in trade with commodities and services in 1998 was 1.02, the same figure as s registered in 1997.

Needless to mention, with the slowdown of production, lack of credit sources, chronic payment crisis, and enlargement of internal barter operations, foreign trade is among major factors to stabilize national economy.

Throughout 1993-1997, due to increase in exports, its share in GDP increased from 12.9% to 40%.

The MFERT repeatedly alleged that the potential of extensive factors of export growth is exhausted. Should the national economy be not actively restructured, even the current level of trade would hardly be retained. The more doubtful it would since favorable conjuncture of 1996-1997 changed to the contrary.

In 1998, foreign trade turnover was USD 27,313.0 mln., reduced by 12.9% or USD 4,046.9 mln. against the previous year.

In 1998, commodity exports indicated USD 12,637.4 mln., which is 11.2% lower than those in 1997. Imports turnover was USD 14,675.6 mln., reduced by 14.3%. Foreign trade balance was negative — USD 2,038.1 mln. compared to the year before, though improved by 29.6% or USD 857.9 mln.

In 1998, trade with commodities featured exceeding commodity imports' decrease rate over that of the exports' (by 3.1 percentage points).

Traditionally, in total exports, the largest share belongs to base metals, including ferrous metals — a 32.4% of total commodities and services exported (USD 5,335.7 mln.), machines, equipment, mechanisms and overland, air and water transports - a 10.9% (USD 1,785.8 mln.), products of chemical and associated industries - a 9.7% (USD 1,595.1 mln.), mineral products - a 7.1% (USD 1,163.6 mln.), and products of agricultural and food processing sectors - a 8.4% (USD 1,379.4 mln.) etc.

In 1998, volume of barter operations decreased compared to 1997: wood and wood products — by 64.1%, textile — by 11.5%, devices and apparatuses — by 3.1%, and surface, air and water transports — by 14.2% etc.

At the same time, the decrease in exports of agrarian produce was registered. Thus, in 1998, volume of agrarian produce and foods exported decreased by 23.4% compared to 1997.

Considerable decrease was helped by the situation in food processing industry, which exports declined as low as 2.1 times (in particular, sugar and confectioneries — as low as 2.9 times), and cattle production (as low as 1.6 times).

Exports of metallurgic products fell by 9.6%, of equipment and mechanisms — by 19.4%.

In 1998, development of export supplies from Ukraine underwent influence of numerous unfavorable factors, which negatively affected Ukrainian economy on the whole.

Events which were seen in foreign trade in the year expired were not casual. Even in 1997, alarming tendencies started showing up. Conjuncture of traditional Ukrainian sale markets started changing. The factors which supported development of exports throughout 1995-1997 (in particular, liberalization of foreign trade, increase in prices, regularization of legislation etc.) revealed exhaustion.

Matured the necessity to make structural changes in the export-oriented industries as well as to undertake steps aiming to improve quality and competitiveness of domestic products.

It is necessary to keep in mind that total reduction in the world trade entailed by the proceeding financial crisis influenced development of Ukraine's foreign trade.

The world financial crisis provoked crisis on the world commodity markets, which revealed in the decreasing demand and gross worsening of a price conjuncture for principal exports' commodities. Financial crisis did intensify the problem of poor qualitative characteristics of Ukrainian production.

It is necessary to mention that metallurgic and chemical products, which make about a half of Ukraine's export potential, were loosing competitiveness on foreign markets lately.

Analysis of export pricing evidences that main reason of export non-profitability lies in too high production costs, which along with low-level quality makes it practically noncompetitive.

It is impossible to pass over the hard outcome for trade due to financial crisis in Russian Federation. Slackened trade with Russia — principal trade partner of Ukraine (RF contributed a 38.5% to trade in commodities and services in 1998) paid its shot to the reduction in total Ukraine's foreign trade.

At the same time, it is necessary to note a positive impact on the state of export-import operations and trade balance of the country by timely anti-crisis measures. Realization of these steps allowed to stave off deepening of negative tendencies caused by crisis in foreign trade.

Thus, in October 1998, volume of commodities and services exported increased by 9.6% (compared to September) to USD 1,244 mln. having reached the August ceiling, which is practically the crisis-before level. In November, it touched USD 1,670 mln., which exceeds September level by 47.1%.

The trade with Russian Federation (RF) improved somewhat — volume of October export to RF increased versus September by 41.7% to USD 176.5 mln. In November this indicator was USD 233.5 mln., increased by 87.4% or USD 108.9 mln. against September, and 32.3% or USD 57.0 mln. against October. During the year, the government endeavored to prevent worsening of the situation in foreign trade, and retain positive developments in the industry, undertake measures to overcome crisis and make breakthrough via leading strategic directions of development. This process was made by the creation of favorable conditions to implement trade, perfection of legislative base, supporting of negotiation process and strengthening of infrastructure etc.

Within the frames of these measures, in 1998, the limitations to export Ukrainian products to Israel were discontinued by withdrawal of a special regime of import to Israel of some sensitive for that country products. In 1998, compared to the previous year, this provided increase in exports to this country as high as 1:9 times, and improved positive balance by USD 64 mln.

Thanks to insistent cooperation with the State bodies of the USA and EC, in 1998, the litigation to review the number of antidumping measures in regard to products of Ukraine's origin (magnesium, titanium sponge, ammonium nitrate, non-natural corundum, carbamide, cast iron etc.). As a result, antidumping custom duties for import of titanium sponge to the USA were discontinued. In 1998, EC quotes on steel and textile were significantly increased. It was planned that the measures to prevent new antidumping investigations be introduced, closure or limitation of sensible export markets be anticipated, and constant monitoring of state of affairs be done. Thus, introduction of a double control over the exports of seamless pipes to EC in early 1998 allowed preventing both threat of antidumping custom duties introduction and loss of market with a total volume of USD 50 mln. annually.

Imports turnover of commodities in 1998 was USD 14,675.6 mln., reduced by 14.3% or USD 2,452.4 mln.

The largest contributors to imports were power products (a 39.2% of total commodities and services imported) as well as machines, equipment, mechanisms and overland, air and water transports (a 21.2%). In total imports, production applied for needs of domestic production holds over 80%.

In 1998, compared to 1997, the largest reduction of import incomes was registered in the sector of mineral fuels, oil etc. — by 23.9% or USD 1.87 bin.

There was a decrease in proceeds from imports of agrarian produce, which is sufficiently produced in Ukraine, in particular, import of meat and food sub-products reduced by 19% or USD 16 mln., and products from cereals — by 67% or USD 36 mln. etc.

Simultaneously, incoming from imports of the following commodities increased: fish, crustaceans, mollusks (from USD 79.6 mm. to USD 129.5 mm., or by 62.8% or USD 49.9 mm.), animal and vegetable oils and greases (as high as 2.4 times or by USD 53.8 rnln. - from USD 39.8 mln. to USD 93.6 mm.) etc.

Starting from 1997, imports started decreasing. This was helped by the active measures to decrease import of commodities which are produced in Ukraine in sufficient volumes, primarily, of consumer goods, in particular, of agrarian produce.

While in 1996 commodity imports increased by 38.5% or USD 4.9 bin. compared to 1994, in 1997 it suffered a decrease of 2.8% or USD 500 mln. Last year, commodity imports decreased by 13.9% or USD 2.1 bin.

Also vital were the Government measures to limit imports by individuals, that is introduction of maximal duty-exempt imports of commodities at ECU 200. By the estimates, imports of agrarian produce by individuals nearly halved in 1998.

On the whole, it should be mentioned that such indicators as foreign trade turnover, export and import turnover largely depend on he amount of internal consumption and GDP.

With a constant decrease in GDP, arouses the situation with a deficit on the internal market of resources for internal consumption. Liquidation of he deficit is possible if increased imports of required resources and decreased exports gradually.

Extensive development f export within the period of 1995-1997 (without making structural changes in export-oriented and other brunches of economy) was made also due to decrease in internal consumption.

Further decrease in imports (taking into account saturation and high content of energy carriers in industrial production, which exceeds 80% of total imports) will be possible only when took into account needs of branches of economy in production resources.

Actually, current level of imports meets minimal needs of Ukraine.

In 1998, foreign trade turnover within the trade with services was USD 5,250.7 rnln., reduced by 14.7% or USD 906.0 mm. versus the previous year.

Export of services from Ukraine in 1998 was USD 3,819.8 mm., which is 19.4% lower than the 1997 turnover, and imports increased by 0.9% to USD 1,430.9 mm. versus 1997. The trade with services indicated a positive balance of USD 2,388.9 mln.

Decrease in services' exports was stipulated, primarily, by the reduction in services of pipeline transport helped by the reduction in tariff rates for transportation of Russian gas through Ukraine's territory (by 29.3% or USD 788.1 mln.), and by reduction in communication services (by 6.4%).

Traditionally, Russian Federation was a principal consumer of Ukrainian services (a 60% of services exported).

In 1998, there was a tendency for further decrease (by 29.4%) in export of services to CIS countries, mainly, to RF (by 30.0%) and Belarus (by 28.7%), and increase — to "distant" foreign countries — Belgium (as high as 1.4 times), Spain (by 22.9%), Great Britain (by 13.4%), Germany (by 9.7%), Ireland (as high as 3.6 times), and Mexico (as high as 11.1 times).

Among "distant" foreign countries, the largest amount of services was exported to:

• Germany - USD 130.0 mln,;
• the UK- USD 123.2 mln.;
• the USA- USD 132.2 mln.;
• Austria - USD 76.5 mln.;
• Turkey- USD 59.4 mln.;
• Switzerland - USD 59.4 mln.

In 1998 transport services traditionally were the largest contributors to exports - USD 3,215.3 mln. (a 84.2%), and, in particular, services of pipelining — USD 1,897.7 mln. (a 49.7%), naval transport — USD 451.0 mln. (a 11.8%), railway transport - USD 392.8 mln. (a 10.3%), and air transport - USD 211.3 mln. (a 5.5%).

Services were imported for a total of USD 1,430.9 mln., increased by 0.9%. There was less import from CIS countries (by 7.9%), in particular, from Russian Federation (by 9.4%). Imports from other countries worldwide increased by 4.3%: Austria (as high as 1.9 times), Great Britain (by 35.5%), Netherlands (as high as 1.5 times), Belgium (as high as 3.6 times), Switzerland (as high as 2.2. times) and Poland (by 46.0%).

In trade with services, the positive balance of USD 2,388.9 mln. was registered, which compensated somewhat the negative balance in trade with commodities. Throughout recent years, geopolitical structure of foreign trade with commodities and services keeps on suffering changes. While in 1997, share of foreign trade turnover with CIS countries was 51.2% of the total, it decreased to 45.5% in 1998. including exports decreased from 47.0% to 39.8%, and imports — from 55.4 % to 51.3%. However, foreign trade turnover within the trade with other countries worldwide increased from 48.8% to 54.5%, total exports — from 53.0% to 60.2%, and total imports — from 44.6% to 48.7%.

In 1998, foreign trade turnover of commodities and services in trade with CIS was USD 14,817.1 mln., which is USD 4,378.7 mln. or 22.8% lower compared to 1997 (USD 19.195.9mln.).

Exports turnover decreased by 26.5% or USD 2,364.9 mln. to USD 6,554.0 mln. Compared to 1997, import from these countries decreased by 19.6% or USD 2,013.8 mln. to USD 8,263.1 mln. The 1998' trade results indicated a negative balance of USD 1,709.1 mln. against USD 1,357.9 mln. in 1997.

Traditionally, Russian Federation is the largest trade partner of Ukraine. In 1998, RF contributed 38.5% to Ukraine's foreign trade turnover, including 31.3% in exports, and 45.8% in imports (36.5% in trade with commodities, including 23.0% in exports, and 48.1% in imports).

In 1998, foreign trade turnover of commodities and services in trade with Russian Federation was USD 12,532.2 mln., reduced by 17.1% or USD 2,587.3 mln. against the corresponding period the year earlier.

Besides, compared to 1997, export of commodities and services decreased by 25.7% to USD 5,155.2 mln, and imports — to USD 7,377.0 mln. (-9.8%). The balance was negative — USD 2,221.8 mln. Within the structure of Ukrainian export to Russian Federation, 90% was contributed by the products with high-level of processing (services 43.6%, commodities — 56.4%, including metallurgic products — 15.9%, machinery — 15.0%, food-stuffs - 9.2%, chemicals -8.9%, mineral products, metal ores — 1.7%, wood, pulp and paper — 1.5%, products from stone, gypsum, cement — 1.2%, products of light industry — 0.8%, devices and apparatuses — 0.6%, other commodities - 0.5%).

In the structure of imports from RF, energy carriers had a share of 69.1% (gas, oil, oil products and others). Taking into account machinery, chemicals, metallurgic products, wood and products from wood, the share of imported industrial commodities applied for needs of home production equals about 90%.

In trade with other CIS countries, there was a trend of exports (-29.4%) and imports decrease (-57.7%), which resulted in the 43.9% reduction in foreign trade turnover of services in trade with CIS countries. This does not concern Russian Federation, which turnover was USD 2,285.0 mln. Besides, exports turnover indicated USD 1,398.9 mln., and imports - USD 886.1 mln. Foreign trade balance was positive - USD 512.8 mln.

In 1998, the largest consumers of Ukrainian commodities and services were as follows:

• Belarus - USD 575.7 mln. (a 3.5% of total commodities exported from Ukraine);
• Moldova - USD 217.7 mln. (a 1.3%);
• Uzbekistan - USD 148.6 mln. (a 0.9%);
• Turkmenistan — USD 125.4 mln. (a 0.8%);
• Kazakhstan - USD 96.9 mln. (a 0.6%) etc.

The largest imports to Ukraine was from:

• Belarus - USD 374.4 mln. (a 2.3% of total commodities imported to Ukraine);
• Kazakhstan - USD 352.1 mln. (a 2.2%);
• Moldova - USD 68.8 mln. (a 0.4%);
• Uzbekistan - USD 33.0 mln. (a 0.2%);
• Azerbaijan - USD 29.3 mln. (a 0.2%) etc.

In trade with other "distant" foreign countries features certain stability.

In 1998, foreign trade turnover of commodities and services with other countries worldwide was USD 17,746.5 mln., which is 3.1% or USD 574.2 mln. lower than in 1997. The figure includes exports turnover - USD 9,903.2 mln., which is 1.5% or USD 148.2 mln. lower than that in 1997, and imports turnover of USD 7,843.4 mln., 5.2% or USD 426.0 mln. lower compared to 1997.

The trade balance was positive - USD 2,059.8, 15.6% or USD 277.9 mln. up from 1997, which compensates the negative balance in trade with CIS countries.

Mainly, commodities and services were exported to European countries (a 29.8% of commodities exported from Ukraine), Asia (a 20.0%), America (a 6.6%) and Africa (a 3.7%).

On the European continent prevails the trade with EC countries, including Turkey (as the member of EC customs unit and Associated member of EC) — a 21.8% of foreign trade turnover of commodities and services. In 1998, foreign trade turnover of commodities and services was USD 7,087.8 mln., including export of USD 3,452.6 mln., and import of USD 3,635.2 mln.

The trade balance was negative - USD 182.6 mln. against the negative balance of USD 806.9 in 1997.

In trade with CEFTA countries, foreign trade turnover of commodities, services and works decreased from USD 3,162.0 mln. in 1997 to USD 2,846.2 mln. in 1998 (by 10.0% or USD 315.8 mln.), exports turnover decreased from USD 1,636.0 mln. to USD 1,509.6 mln. (by 7.7% or USD 126.4 mln.). Also, imports decreased — from USD 1,526.0 mln. to USD 1,336.6 mln. (by 12.4% or USD 189.3 mln.).

The foreign trade balance was positive — USD 173.0 mln., which is as high as 1.6 times (+USD 62.9 mln.) compared to 1997.

The negative trade balance remains in trade with Poland (-USD 161.8 mln.), Czech Republic (-USD 34.3 mln.),

Slovenia (USD 41.6 mln.), which is covered by the positive trade balance in the relations with Romania (USD 121.6 mln.), Slovakia (USD 70.5 mln.), Bulgaria (USD 127.9 mln.), and Hungary (USD 90.6 mln.).

With NAFTA countries, foreign trade turnover increased from USD 1,480.5 mln. in 1997 to USD 1,635.8 mln. in 1998 (by 10.5% or USD 155.3 mln.), with a simultaneous increase in exports from USD 487.0 mln. to USD 700.0 mln. (by 43.7% or USD 213.0 mln.) and decrease in imports from USD 993.5 mln. to USD 935.8 mln. (by 5.8% or USD 57.8 mln.). There was a negative trade balance of USD 235.8 mln. against the negative balance of USD 506.5 mln. in the year before.

In 1998. mainly commodities and services were exported to:

• China - USD 767.5 mln. (a 4.7% of total commodities and services exported from Ukraine);
• Turkey - USD 755.7 mln. (4.6%);
• Germany - USD 768.7 mln. (4.7%);
• Italy - USD 600.9 mln. (3.7%);
• USA - USD 634.3 mln. (3.9%);
• Poland - USD 349.7 mln. (2.1%);
• Hungary - USD 293.1 mln. (1.8%) etc.

The leading countries. Ukraine imported commodities and services in 1998 from:

• Germany - USD 1,342.5 mln, (8.2% of total commodities and services imported to Ukraine);
• USA - USD 87.7 mln. (5.4%);
• Poland - USD 511.5 mln. (3.1%);
• Italy - USD 422.4 mln. (2.6%);
• France - USD 311.9 mln. (1.9%);
• Great Britain - USD 316.5 mln. (1.9%);
• Austria - USD 207.3 mln. (1.3%).