Ukraine responded to Belarus’ restrictions on imports from Ukraine with special duties for Belarus

Ukraine threatens Belarus with introducing special duties on sensitive Belarusian exports in order to persuade Belarus to renounce unilateral restrictions on imports from Ukraine. The Belarusian authorities were given some time to demonstrate their readiness to normalise Belarusian-Ukrainian trade relations. The most anticipated scenario is that both countries lift their import restrictions entirely.

As of July 26^th, Ukraine will introduce prohibitive tariffs for the imports of some Belarusian goods to Ukraine. The relevant decision of the Ukrainian Interdepartmental Commission was published on July 16^th.

Ukraine’s prohibitive measures include: 55.29% of the customs value for some confectionery and dairy products, electric bulbs and complex fertilizers and 60.05% of the customs value for beer and tyres from Belarus.

Ukraine’s actions followed Belarus introducing licensing on beer imports as of May 1^st, 2014 and licensing on confectionery and confectionery raw materials imports as of June 1^st, 2014 for a six-month period. In Belarus, licensing has restricted imports of mainly Ukrainian goods. For instance, in four month of 2014, Belarus’ beer imports totalled USD 9.8 million and the share of beer imports from Ukraine was USD 7.1 million. Similarly, the share of Ukrainian chocolate imports was USD 3.4 million out of total imports worth USD 4.4 million.

Duties, imposed by Ukraine will de facto bar exports from Belarus to Ukraine – economically, it will make no sense to import tyres, dairy products and confectionery from Belarus. Belarus’ tyre-makers will be hit the hardest from the new rules – in H1 2014 Belarus exported tyres to Ukraine worth circa USD 22 million. “Belshina” [Belarus Tyre] might lose the Ukrainian market entirely and will be unable to cross over to other markets rapidly.

Ukraine is will protected from negative consequences from import restrictions. She can import mineral fertilisers from Russia or other countries and replace Belarusian dairy products with those produced in Ukraine. Unlike Ukraine, Belarus risks incurring not only tactical but also strategic losses if the aforementioned restrictions remain in effect as scheduled until late 2016 – Belarusian exporters will hardly manage regaining their positions on the Ukrainian market.

Ukraine is introducing the restrictive measures for a long time-period in order to prompt Belarus to end discriminatory practices against Ukrainian products, which is especially important in connection with possible restrictions on the supply of Ukrainian goods to the Russian market. Until recently, Belarus was deaf to Ukraine’s requests to lift the restrictions.

Foreign trade between Ukraine and Belarus remains in surplus, since duties do not concern the most sensitive products – petrochemicals. By indicating the size and timeframe for ‘special’ duties, Ukraine signals Belarus to start negotiations on mutual abolition of restrictions, which is currently in Belarus’ interests. Interestingly, trade wars are not beneficial to either party.

Belarus still has some time to demonstrate her readiness to ‘normalise’ Belarusian-Ukrainian trade relations. The most anticipated scenario is that both countries lift their import restrictions entirely.