 Ukrainian Foreign Trade Long-term Priorities By Volodymyr SENCHENKO |
Long-term forecasts of development of foreign trade of any country are always a top-priority issue both for domestic and foreign investors and businessmen. The attractiveness of sectors of the economy that are highly profitable in the long run is the subject. In this we are talking about a crucial impetus in the development of the economy of the country.
Numerous economic and political factors and their combined effect determine the development of foreign trade of this or any other country. However, there are always principal factors that are crucial ones and they are conditioned by constantly influencing circumstances. These principal factors can be caused by nature or society or even from outside reasons.
Among the general problems of society there have always been and will be issues that are first of all related. These related problems involve providing the population with food, adequate energy resources, a suitable living environment and, finally, providing for security against outside threats to a country such as preventing military takeover and terrorism These four factors define the development trends in the economies of most countries in the world, and consequently, the scope and structure of foreign trade as the most expedient form of exchange of the "results of labor" between peoples and a way to the solution of the above-mentioned issues.
Let's review the potential of Ukraine in these areas.
First of all - the issue of providing food for an ever-growing population. No matter what one says, writes, or what food industry specialists state about quick solutions to food-related issues due to the developments and achievements of modern science and technologies, "food" issues in the current world are no closer to being solved than they were several hundred years or decades ago. However, there are substantial achievements in this field. The "green revolution" and other effective measures have given hope of relief from the lethal threat of hunger in the largest and the most "hungry" countries in the past - India and China. But countries in Africa have taken their place. There is no way to know which countries will take the place of the African countries once those countries become sufficient food suppliers. However, while seemingly pessimistic, it is not unlikely that other countries won't then arrive and take the places of the African countries, Thus, those countries that have the ability to grow food products such as grain and vegetables and to produce meat, milk and other commodities will always be influential in the world market and in world politics. Ukraine with the potential of its fertile land resources, favorable climate and with its thousand-year traditions of husbandry will always be one of powerful exporters of processed food products and unprocessed foodstuffs. Investments in industrial agriculture should never devalue. Undoubtedly, a certain cycle can be observed and of course is present in the agriculture of Ukraine, as well as in other countries that export food products. Last year Ukraine's grain harvest amounted to almost 40 million tons and more than 11 million tons of grain were exported. Ukraine was one of the top five leading grain exporters in the world. But, for the year 2003, a year of disastrous crop failures - only about 22 million tons of grain were harvested. This caused Ukraine to have to import almost two million tons of food grain though at the same time Ukraine's export of fodder grain increased. A similar situation occurred in the year 2002 in Canada - one of the big exporters of grain.
The potential for harvesting huge crops in Ukraine is so large that foreign companies with leading technologies are eager to invest in Ukrainian agriculture. Based on the current average yield of grain crops of about 35-40 centner per hectare and applying new agricultural technologies, one can obtain about two times greater crop yields. Currently Ukraine is just beginning to apply modern technologies in agriculture. So. in the long run Ukraine will always be an influential exporter of grain products in the world's markets. Even with tough competition Ukraine's advantage will be the natural quality of its unprocessed and processed agriculture products.
Energy, the second area. The whole last century can be called "a century of struggle of the developed countries for energy resources". There is even such a saying - "politics smells like oil". The third millenium began under the same "slogan". At the same time scientists are optimistic about discovering soon a technology that will provide full and even an unlimited supply of energy for the needs of modern civilization. But first of all, there are grounds to doubt such excessive optimism, and secondly, there will always be a need for machinery, equipment for generation, transformation and distribution and consumption of energy. Therefore, those countries that have a sufficient supply of raw resources or production potential for the manufacturing of applicable equipment for the whole energy supply "logistic chain", so to say, will always be present with their products in the world market. Ukraine will always be among such countries.
Primary energy resources are limited in Ukraine (except for renewable energy sources like wind, solar, geothermal, hydro energy). However, the country has well-developed sectors of energy machinery production, extraction and transportation of oil, natural gas, coal (fossil fuel sources). Ukraine's current reduction in the export of such machinery is a consequence of the reduction in foreign trade since the breakup of the Soviet Union. This situation is temporary. Besides that, it's worth mentioning some rather significant developments and achievements of Ukrainian scientists and engineers in this field. These include more efficient use of traditional sources of energy and the application of new kinds of energy generation (including even using the energy of space) and ways for saving energy.
In such a way, Ukraine will inevitably expand its presence in the world market offering its products and new high technologies for many sectors of economy. Ukraine's share, which is insignificant now in the world trade market, will be increasing. Confidence in such future development is based on the fact that Ukraine possesses the necessary production and intellectual potential, and the overall demand for such products will be increasing in the future.
The third prospective direction in exporting of Ukrainian goods and services is in the production of equipment and in the development of technologies for the protection of environment and humankind itself. Excuse me for my quirk - protection from humankind, from negative influence of humankind's production activity.
Crisis, if not to say, catastrophic influence of human beings' activity has already created a need to transfer to regulated use and preservation of the natural environment of people. A brilliant Ukrainian natural scientist, Volodymyr Vernadskyi, foresaw such inevitable transfer. Unfortunately, the time to make such a transfer came even earlier than he had predicted. Nature is not able now to "renew" itself.
The pressure of the negative influence of the "destroyed part" of Nature on humankind will be inevitably increasing. Due to this, a demand for different means of environmental protection will be growing.
The Chernobyl disaster placed the Ukrainian population under extreme conditions of survival. This couldn't help but draw attention of the whole Ukrainian state and its population to problems of the environment. There is no other country in the world that spends so much on ecology (8% of the state budget) as Ukraine does due to the necessity of protection for its population from the consequences of the Chernobyl disaster. There is a corresponding Ministry in the structure of the state. And this sword of Damocles - Chernobyl - will be "hanging" over Ukraine for many decades yet.
Naturally, this situation creates a certain pressure on society, arouses worry and makes one look for new ways and means for protection and preservation of the natural environment. This pressure will eventually lead to finding the most expedient ways for the solution of ecological problems. Actually, the process of finding the right and the best solutions has already begun. Gradually science in Ukraine is coming out on the leading positions in solving the issues of environment preservation and protection of people. This is not only about traditional technologies and means of environment protection and protection of the people, but also about completely new approaches and ways of tackling ecology problems. New modern high technologies in the fields of genetics and natural sciences can provide such solutions.
It can be confidently stated that within a decade Ukraine will eventually become one of the leading countries in the field of providing high technologies and products in the world market for solving ecology-related issues. This will be one of Ukraine's distinctive features, so to say. Ukraine is capable of providing such solutions because as a country itself it urgently needs them - and this is the main stimulus to progress. Also a certain part of Ukraine's intellectual and production potential of the former military complex can be re-oriented and used for solving ecology issues. As time goes by, investors who put their resources into this field of Ukrainian science and economy will become "founders" of new spheres for the world economy.
Lastly, production of military products is the fourth direction for Ukraine's foreign trade. Such direction is significant now and will continue to be so in the future. Today Ukraine is in the top ten leading countries in the field of production of military equipment and technologies. During the first years of Independence Ukraine was selling its military surplus that had accumulated during the years of the Cold War. Such activity of the young independent state didn't really bother its competitors that reasonably believed that the country would soon run out of stock of military products. But already in the past year new military products constituted three fourths of Ukraine's total military production. The well-known radar system "Kolchuga" was among such products.In the past two years Ukraine has become more noticeable in the world market in the specific field of military products.
At the end of Cold War the world market of military products experienced a downfall that lasted for several years. Later this market became more active. Unfortunately, military conflicts in different parts of the world are not ceasing, which causes the demand for military products to increase. After September 11, a new threat to the world appeared - terrorism. That also causes the demand for specific sophisticated military equipment to increase.
Ukraine has a huge "heritage" - its military industrial complex, which the country can't but use. Therefore, this direction in foreign trade for Ukraine was, is and will be one of its priorities. Ukrainian military potential can even increase if the country decides to increase cooperation in this field with Russia and several other countries of the European Atlantic community. Such intentions have already been declared and even some agreements on joint efforts in this field have appeared.
Although this market niche is rather specific and pretty much occupied, Ukraine already has competitive products in this field. Evidence of such development is the fact that Ukraine did not take part in an annual exhibition of the means for fighting against terrorism that took place in November of this year in Moscow. The very fact that Ukraine didn't participate in this exhibition is the core evidence for the country's progress in the sphere of military production. The reason for this is that it became a "custom" in Ukraine to evaluate the competitive level of its products by considering what "artificial" obstacles are created for their promotion in foreign markets. At first such obstacles were created for the promotion of metals, chemical products, sugar; and later for airplanes and arms from Ukraine. The list of Ukrainian "non grata" products is increasing. Now obstacles are being created to Ukraine's entry into the world markets. This, counter intuitively, is a good sign that evidences steady progress for the Ukrainian economy.
All the above-described directions of Ukrainian foreign economic trade will be dominant in the nearest decades. On one hand, this is caused by ever-growing needs in the world market, and on the other hand, by Ukraine's current potential in the production of such goods. Of course, now the country's leading and lagging directions of foreign trade can be determined and their respective market shares can be forecasted. But this is the subject of separate market research.
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Read also previous issue' articles:
The Herodotus of Ukrainian History
Ukrainians Want A Country That Respects Them
Ukraine's Brain Drain
Chauvinistic Smoke A Few Words on Russia
A walk on the underside
Re-inventing Production: Military Giants Discover Consumer Goods
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