In order to assess the impact of CUFTA on bilateral trade, we have developed a gravity model that takes into account international trade flows between all countries. The gravity model estimates that the signing of CUFTA increased total Ukrainian exports to Canada by 6.5% between 2016 and 2018. At the same time, it was felt that CUFTA had no significant impact on the dynamics of total Canadian exports to Ukraine during this period. However, the effect of CUFTA on certain product categories appeared to be greater at the HS2 level (from 2 to 6%): fish (HS03), pharmaceuticals (HS30), electrical machinery (HS85), etc. According to our estimates, CUFTA has not yet had a significant impact on business dynamics due to the short period of time analyzed less than a year and a half. We believe it will develop in the future, because free trade agreements will need more time to influence trade. At the same time, Ukraine immediately eliminated tariffs on 34.7% of tariff positions and a total of 72.6% of Ukrainian tariffs were released for imports from Canada. The other tariffs will be phased out in 3, 5 and 7 years. About 1% of Ukraine`s tariff positions for certain agricultural products from Canada remain mandatory (living destinations, animal products, vegetables, vegetable oil, prepared foods). Ukraine`s largest tariff reductions after CUFTA came into force in 2017 were for preparations for vegetables, fruits, nuts, cereal and flour preparations, cocoa and confectionery preparations, beverages, clothing and textiles, soap and cosmetics, cereals, etc. Diversifying trade and investment with key markets around the world is a priority for the Canadian government.
The government is also committed to strengthening Canada`s relationship with existing partners in the free trade agreement. A recent study of Canada-Ukraine business models and trends has found great potential in Ukraine for Canadian companies that manufacture vehicles, engines, turbines, aircraft and turbo-aircraft, petroleum gas, ethylene polymers, rubber, pulp and meat. The Sme CanExport program provides up to $75,000 to help Canadian small and medium-sized businesses export their products and services to new international markets. It covers up to 75% of the costs of a wide variety of marketing activities, such as business travel, participation in business events, market research, intellectual property protection and advice specializing in business, legal and tax matters. b) promote the harmonious development of economic relations between Canada and Ukraine by developing reciprocal trade to create economic development opportunities; Effective August 1, 2017, the Canada-Ukraine Free Trade Agreement (CUFTA) aims to improve market access conditions for Canadian and Ukrainian businesses, including the removal of tariffs. With the entry into force of the CUFTA, Canada immediately eliminated tariffs on 26.5% of its customs positions, resulting in 98.1% of Canada`s customs positions on imports from Ukraine being exempt from tariffs. The largest tariff reductions under CUFTA were shoes, animal or vegetable fats and oils, textiles and clothing, raw skins, leather and furs, wood and wood, plastics. 2) global tariff quotas for certain agricultural products (volleys, dairy products, eggs, wheat, barley, etc.). Following the entry into force of CUFTA, 86% of Ukrainian imports from Canada have been exempt from tariffs and the remaining tariff benefits are expected to be imported by January 1, 2024.
In the meantime, Canada immediately eliminated tariffs on 99.9% of imports from Ukraine, and Canada Tariff Finder was designed to help Canadian businesses, importers and exporters more easily find customs information for products with scodes.