This morning (July 11, 2016), Canada’s Trade Minister Chrystia Freeland and Ukraine’s First Vice Prime Minister Stepan Kubiv signed the Canada-Ukraine Free Trade Agreement (“CUFTA”) in Kiev, Ukraine. Canadian Prime Minister Justin Trudeau and Ukraine’s President Petro Poroshenko watched the historic event.
After the signing ceremony President Poroshenko @poroshenko tweeted:
Canada-Ukraine Free Trade Agreement offers new opportunities for both nations.We will continue negotiations to expand scope of the agreement.
The text of the CUFTA was released by Global Affairs Canada on their web-site this morning.
The CUFTA is a trade in goods agreement. It does not cover services or investment. The CUFTA includes chapters in the areas of market access for goods, rules of origin and origin procedures, trade facilitation; emergency action and trade remedies, sanitary and phytosanitary measures, technical barriers to trade, government procurement, competition policy, monopolies and state enterprises; intellectual property, electronic commerce, labour, environment, trade-related cooperation, institutional provisions, and dispute settlement.
Upon entry into force of the CUFTA, Ukraine will immediately eliminate tariffs on 86% of Canada’s current exports, with the balance to be phased out or subject to tariff reductions over periods of up to seven years. Ukrainian tariffs will be eliminated on all Canadian exports of industrial products (including aerospace, automobiles, medical-testing equipment, industrial machinery, and chemicals and plastics), fish and seafood, and agricultural products (including cranberries and cherries from British Columbia, processed foods from Ontario and Quebec, Prince Edward Island potatoes, Prairie grains and pulses, Annapolis Valley apples, beef, pork, pet food, soybeans, canola oil, animal feed, and maple syrup). Key Canadian industrial products benefiting from the elimination of tariffs include certain articles of iron and steel, articles of plastics, cosmetics, reservoir tanks and similar containers, and air compressors. Manufactured goods sold to Ukraine include medications, coking coal, pharmaceutical cultures, boring or sinking machinery, trailers and semi-trailers, and certain tractors. Ukrainska Pravda reports that President Poroshenko said that the agreement would come into effect immediately, but the implementation would take place over the course of seven years. This means no delay for a ratification process.
Upon entry into force of the CUFTA, Canada will immediately eliminate tariffs on 99.9% of current imports from Ukraine. This includes elimination by Canada of tariffs on all industrial products, fish and seafood, and 99.9 percent of agricultural imports from Ukraine. Key products from Ukraine that will benefit from this duty-free access include sunflower oil, sugar and chocolate confectionery, baked goods, vodka, apparel, ceramics, iron and steel, and minerals.
The next step is the ratification process in Canada. The CUFTA will be tabled in the House of Commons for review. The Government of Canada also needs to table the Canada-Ukraine Free Trade Agreement Implementation Act in the House of Commons (in order to implement the CUFTA’s requirements in Canadian domestic law) and it must pass the House and the Senate. The Canada-Ukraine Free Trade Agreement Implementation Act will contain the changes necessary to ensure that the agreement can take effect under Canadian law. For example, the tariff elimination and reduction schedules must be implemented via changes to the Customs Tariff.
There are opportunities for Canadian businesses to sell Canadian goods to Ukraine on a duty free basis now (given that it will take effect immediately from Ukraine’s perspective). If Canadian businesses wish to sell goods for which an export permit is required (e.g., military and defense equipment), the export controls rules still apply. There also may be important government procurement opportunities in Ukraine.