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  • A third of Ukraines small and medium business hopes to benefit from the Free Trade Area with the European Union

    23.02.2015

    Ukrainian small and medium enterprises are poorly represented on the European market and expect no major benefits from the establishment of the Free Trade Area between Ukraine and the European Union. At the same time, they are less wary of risks associated with the trade liberalization with the EU. In particular, small and medium businesses are less likely than big ones to suffer from sanctions from Russia and from a possible cancellation of free trade between Ukraine and the Russian Federation.

    Small and medium-sized industrial enterprises in Ukraine trade with the European Union less than do larger ones. It has been shown in the special report, published by the Institute for Economic Research and Policy Consulting. The report is based on the Institute’s 2014 polls of the Ukrainian industrial enterprises. The studies of 314 industrial firms show that while 30% of large manufacturers work on European markets, the corresponding share of medium-sized enterprises is 17.1%, while the share of the small ones is only 3%.

    Thus, SMEs expect fewer gains from the Association Agreement of the EU and Ukraine and from the enactment of the Free Trade Area (FTA) compared to big enterprises. In particular, 68.2% of Ukrainian large industrial enterprises believe that they will benefit from the introduction of the FTA with the EU. However, only 39.3% of medium-sized firms and 35.9% of small ones share these positive expectations.

    For the most part, SMEs do not expect any changes from Ukraine’s broader access to the European market. In fact, a considerable part of them fears loss following the envisioned FTA. Specifically, 23.8% of medium enterprises and 16.7% of small enterprises think they will lose from the introduction of free trade between the EU and Ukraine. There are fewer negative expectations among large enterprises: the related share is 10.6% of the respondents.

    Then again, the prospect ofthe deterioration of trade relations with Russia doesn’t seem as hazardous for small and medium firms as for the big business. While almost half (48.1%) of large industrial enterprises fear sanctions from Russia following the implementation of the FTA with the EU, much fewer small and medium producers are concerned about this risk: 20.6% and 10.9% respectively. Also, smaller companies do not consider a possible cancellation of the free trade regime between the Russian Federation and Ukraine, if initiated by the Russian Federation, a threat for their operations. This scenario appears risky for 16% of medium-sized industrial enterprises and 8.5% of small ones compared to 44.7% of large enterprises.

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    IER "Business Surveys"

    Authors:  Fedets Iryna
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