Slovakia concerns over scrapping of tariffs on Ukraine\'s exports

The initiative of a number of European Parliament legislators to drop some 98 percent of customs duties that Ukraine's exporters pay at EU borders would boost the competitiveness of that country's manufacturers, but could also have an adverse effect on Slovak producers, Slovak analysts expect. "The unilateral lifting of customs duties for Ukraine's exports would increase the competitiveness of Ukrainian exporters, as their products would become cheaper in the EU. Increased exports could then benefit the entire economy of Ukraine," said Slovenska Sporitelna analyst Martin Balaz. "Ukraine's exports to Slovakia would likely go up too, and this could have a mildly negative effect on the competitive position of our companies, but not in an overly dramatic fashion," added Balaz. INEKO institute analyst Peter Golias said "Slovak consumers would benefit from imports of cheaper products, while producers would face increased competition. What matters is to make sure that the sudden change doesn't result in an existential threat for some producers." Imports from Ukraine accounted for only 1 percent of all Slovakia's imports last year. Postova Banka analyst Dana Spacirova said that Slovakia mainly exports cars, products made of iron and steel and magnesite. In turn, more than one half of Ukraine's imports into Slovakia is represented by iron ore, as U.S. Steel Kosice gets this raw material from Kryvyi Rih. The proposed measure is estimated to bring an extra 487 million euros (670 million U.S. dollars) to Ukraine's economy per year. But the lifting of restrictions on imports of food and agricultural produce from Ukraine may do Slovak agriculture sector, means Slovak Agricultural and Food Chamber (SPPK) spokesman Stanislav Nemec. "As exports from Ukraine to Russia have all but stopped, we can presume that they will be re-directed largely to European markets and Visegrad Four countries in particular, while western Europe will get nothing of it, or very little at best," said Nemec. Visegrad Four comprises Slovakia, the Czech Republic, Poland and Hungary. "The country to our east has practically lost all options to use Black Sea ports for exports, and as trade with Russia has been limited, what will ensue is a brand new distribution of Ukraine's exports that will be aided by fewer impediments to trade with the EU," he added. He went on to point to a report made by the U.S. Department of Agriculture last year, according to which Ukraine is an important player on grain markets. "While Ukrainian farmers don't sell much of their grain right now and prefer to store it in the country as a safeguard vis-a-vis Ukraine's falling currency, at least some of them will need to empty their inventories to make room for fresh crops within a couple of months. This may push prices down," said Nemec. The Ukrainian hryvna has lost some 20 percent of its value so far this year. This weak currency in combination with dropping customs could harm Slovak chemical industry. According to president of the Pharmaceutical and Chemical Industry Association Roman Karlubik, Ukrainian chemical companies will become cheaper and more competitive, with production conditions and prices far more advantageous in Ukraine than in Slovakia. "Ukrainian chemical companies aren't obliged to comply with the stringent conditions of the European chemical legislation REACH, and with the effect of the EU's other legislative measures especially in the environment, for instance when it comes to limits on the production of emissions," said Karlubik. Slovak products will face pressure in terms of prices that, while not always meeting the same standards of quality, will be of interest to customers thanks to their lower prices, said Karlubik. The Slovak economy could also harm broader economic sanctions against Russia, which is an important trade partner for Slovakia. "We consider the Russian market to be strategic, and we see no reason to address political problems through economic sanctions that would be to the detriment of both sides," said Slovak Prime Minister Robert Fico after a two-day summit of the EU leaders last week in Brussels. The EU leaders agreed on drawing up an impact study that would make it clear how possible sanctions would affect EU countries. The EU has agreed to add 12 more names to the list of Russian and Ukrainian officials under sanctions, thereby bringing their total number to 33. The measures, carried out in partial coordination with Washington, involves slapping asset freezes and travel bans on the individuals concerned. Fico added that these sanctions will have no impact on EU countries' economic cooperation with Russia. "I don't think the political gestures that are being made will affect economic cooperation," said Fico, who arrived at the conference hoping that the EU would not jump into sanctions against Russia too quickly. He discarded the possibility of a scenario that would involve a complete halt in trade with Russia or energy supplies. "We're not suicidal," Fico admitted.