Changes in Ukraine’s foreign trade as a reflection of its progress in integration with the European Union

Abstract

The study aims to assess changes in the ability of Ukrainian goods to compete in the EU market. It reflects Ukraine’s progress towards EU integration in the run-up to Russia’s attack on Ukraine. Using foreign trade measures, including international specialisation, we show the specifics of Ukraine’s integration into the EU. By estimating the level and changes in the market shares of Ukraine’s commodity groups in the EU market, we show its progress in penetrating this market compared to non-EU countries. On the one hand, the geographical structure of Ukraine’s foreign trade changed radically between 2010 and 2021. On the other hand, more minor changes in the commodity structure of exports and Ukraine’s international specialisation were accompanied byan increased market share of Ukraine’s exports in the EU market. It reflected an improvement in the ability of Ukrainian goods to compete, thus fulfilling one of Ukraine’s accession criteria. Calculated on the basis of market shares, the increase in the ability of Ukrainian goods to compete is confirmed by estimates of export competitiveness indicators: the Balassa index of revealedcomparative advantages and the Lafay index. Levels and changes in the three indicators varied between commodity groups. The increase in the market shares of three commodity groups (raw materials, so-called “other manufactured goods” (medium and low technology) and food products) was accompanied by significant and increasing levels of export competitiveness indicators. The decline in the market shares of other commodity groups was accompanied by low and declining levels of export specialisation indicators. Thus, Ukraine’s integration into the EU has so far been based on the expansion of competitive and competitive-enhancing goods, in the production of which Ukraine specialises.