Ukraine and Turkey finalize free trade agreement: what will change for business?
13 March 21:03
Ukraine and Turkey are approaching the ratification of a free trade agreement. This was stated by Ukrainian President Volodymyr Zelenskyy, "Komersant Ukrainian" reports, citing a message on the official Telegram channel of the country’s leader.
Zelensky said that Kyiv is ready to ratify the Free Trade Agreement with Turkey during the upcoming visit of President Recep Tayyip Erdogan.
This agreement, which both countries have been working on for more than 15 years, will be an important step towards deepening trade and investment cooperation between the two countries, boosting exports and opening up new opportunities for Ukrainian and Turkish businesses.
What we know about Zelenskyy’s meeting with Turkish businessmen
Volodymyr Zelenskyy made the statement during a working meeting with representatives of the Turkish government and business on March 13 as part of bilateral talks on deepening cooperation between the two countries.
One of the key issues was the joint production of drones, which has become strategically important for both countries. Ukraine already has a positive experience of cooperation with Baykar, which produces Bayraktar TB2 and Akıncı attack drones used by the Armed Forces of Ukraine.
In addition, Turkey is interested in rebuilding Ukraine’s infrastructure, particularly in the construction of roads, bridges, and residential complexes. Given the extensive experience of Turkish companies in infrastructure projects, their participation in Ukraine’s post-war recovery could be an important element in the process of economic stabilization.
Details of the Free Trade Agreement between Ukraine and Turkey
The agreement was signed on February 3, 2022, but its ratification was postponed due to the outbreak of a full-scale war in Ukraine. The Turkish parliament ratified the agreement in the summer of 2024, and Kyiv plans to finalize the process in 2025 during Erdogan’s visit.
Key provisions of the Agreement
Liberalization of trade in goods.
Turkey will abolish import duties for about 93.4% of industrial and 7.6% of agricultural goods of Ukrainian origin. After transitional periods (lasting from three to seven years), additional duties will be canceled for 1.5% of industrial and 28.5% of agricultural goods. Ukraine, for its part, will eliminate import duties for about 56% of industrial and 11.5% of agricultural goods of Turkish origin. After transitional periods (from two to ten years), additional duties will be canceled for 43.2% of industrial and 53.7% of agricultural goods.
Protection of domestic producers.
Ukraine retains duties on the export of scrap metal, used cars, and second-hand goods. It has also established three- and five-year transitional periods for duties on vehicles and light industry products, which will protect domestic producers.
Simplification of trade procedures
The parties agreed to simplify trade procedures in accordance with their obligations under the WTO Agreement on Trade Facilitation. This includes stimulating multilateral cooperation to enhance participation in the development and implementation of international rules and recommendations for trade facilitation.
Establishment of the Joint Committee.
To ensure the proper and effective implementation of the Agreement, the Joint Committee will be established to monitor and resolve issues arising in the course of implementation of the Agreement.
Expected results from the implementation of the Agreement
Increase in trade turnover
The Agreement is expected to increase trade between Ukraine and Turkey. Prior to the signing of the Agreement, mutual trade reached record levels, growing to $7 billion, which indicates that the goal of $10 billion is realistic.
Expanding export opportunities
Ukrainian companies will have access to the Turkish market with zero duties on more than 10,000 products, and tariff quotas and duty reductions will be granted for another 1,300 products. This will create opportunities for exporting products with deep processing and higher added value.
Attracting investment and creating jobs
The Agreement is expected to facilitate investment, exchange of technologies and experience, which in turn will lead to the creation of new jobs and modernization of production in Ukraine.
Upon ratification and entry into force, the Free Trade Agreement between Ukraine and Turkey will be an important step in strengthening economic ties between the two countries, opening up new business opportunities and contributing to the economic development of both countries.
It is expected that free trade will help increase bilateral trade, which in 2021 amounted to $7.4 billion, and after the agreement enters into force may exceed $10 billion annually.
What the agreement means for business and the Ukrainian economy
New opportunities for Ukrainian exporters
Ukrainian producers will have simplified access to the Turkish market, which will increase exports of products from the engineering, metallurgy, light and food industries. Customs costs will also be reduced, which will increase the competitiveness of Ukrainian goods.
Expanding cooperation in the agricultural sector
Ukraine and Turkey already actively cooperate in grain exports. Thanks to the agreement, agricultural enterprises will be able to increase supplies of agricultural products, including oil, wheat, corn, and poultry.
New Turkish investments are coming
Turkish investment is expected to increase in various sectors of the economy, including energy, transportation, and logistics. Turkish companies may become key partners in the restoration of industrial facilities, ports, and roads.
Prospects and challenges of the agreement between Ukraine and Turkey
Despite positive expectations, experts emphasize several challenges that may arise after the agreement enters into force:
Protection of Ukrainian producers
Turkish goods may create competition for Ukrainian enterprises, which requires mechanisms of state support for national producers.
Risks for the steel industry
Ukrainian metallurgists may face pressure from Turkish producers with lower production costs.
Trade logistics
Due to the war, some logistics routes have been disrupted, which may make it difficult to increase trade turnover.
What’s next?
The Ukrainian side is convinced that the ratification of the agreement will be a historic event for economic relations between Kyiv and Ankara. It is expected that the document will enter into force in the summer of 2025, and Ukrainian and Turkish businesses will be able to take advantage of new opportunities.
The final approval of the agreement during Erdogan’s visit could send a powerful signal to other countries about the prospects for deepening economic cooperation with Ukraine even in times of war.
