One Third of Ukrainian SMEs Hopes to Gain from a Free Trade Area with the EU

Ukrainian SMEs are poorly represented in the European market and do not expect any significant benefits from the free trade zone between Ukraine and the EU. At the same time, they are relatively less afraid of the possible negative consequences of trade liberalization with the EU. In particular, small and medium business less than the big one risks to suffer from Russian sanctions and possible cancellation of free trade regime between Ukraine and the Russian Federation.

Small and medium-sized industrial enterprises of Ukraine trade less with the European Union than the larger ones. This shows a special report prepared by the Institute for Economic Research and Policy Consulting based on the polls of industrial enterprises in Ukraine in 2014. The study of 314 industrial firms shows that while 30% of large manufacturers work in European markets, the corresponding share of medium-sized enterprises is 17.1% and only 3% for small enterprises.

Accordingly, SMEs do not count as much as the big business on the positive effects of the Association Agreement between the EU and Ukraine and enactment of a free trade area (FTA). Thus, 68.2% of large industrial enterprises of Ukraine believe that they will benefit from the introduction of the FTA with the EU. However, only 39.3% of medium and 35.9% of small businesses has such positive expectations.

In general, SMEs do not expect any changes from the opening of the European market, and a significant part fears losses from the planned FTA. Specifically, 23.8% of medium enterprises and 16.7% of small businesses believe that they will lose from the introduction of free trade between the EU and Ukraine. Large enterprises have less negative expectations: their corresponding share is 10.6% of respondents.

On the other hand, the prospect of worsening the trade relations with Russia is seen by small and medium enterprises as not as dangerous as for the large business. If almost half (48.1%) of large industrial enterprises fear sanctions from Russia if the FTA with the EU is implemented, much less small and medium producers consider this risk: 20.6% and 10.9% respectively. Also, smaller companies do not consider a cancellation of the free trade regime between Russia and Ukraine as a threat, if it happens on the initiative of the Russian Federation. This scenario threatens 16% of medium-sized industrial enterprises and 8.5% of small ones, compared to 44.7% of large enterprises.

An article by Iryna Fedets, Institute for Economic Research and Policy Consulting

The Institute for Economic Research and Policy Consulting - Kyiv