A high-ranking Ukrainian official released an ambitious statement last week. Ukraine hopes to play an important role on international food markets, Vice Prime Minister Viktor Tikhonov stated. Tikhonov took part in the closing ceremony of the 10th Economic Summit Poland-Ukraine, which took place in Warsaw.
This statement from the Ukrainian official seems to be an ambitious one, but it only seems so at first sight. Food exports can return considerable profits to certain commercial structures only, although they do not bring notable income state-wise. High-tech branches of industry bring largest profits, which makes governments concentrate their efforts on the development of high technologies first and foremost.
During the recent 20 years, Ukraine has been receiving most of its currency income from the exports of metallurgic and chemical industries. The enterprises of these two industries manufacture their products on outdated equipment of Soviet times. Ukrainian exporters are still competitive in the sector of not very high technologies.
However, they already have to face serious competition on the market. The quality-price ratio of Ukrainian products directly depends on the cost of energy carriers and raw materials, which the country imports from other countries, including Russia.
However, the state of affairs in the food industry, mentioned by the Ukrainian vice premier in Warsaw, leaves much to be desired.
According to the Ukrainian Club of Agrarian business, the imports of vegetables and fruits in Ukraine in 2010 increased by 4.2 times in comparison with 2005 and exceeded $860 million. In physical terms (in tons that is) the imports of agricultural products gained 77 percent.
It goes without saying that Ukraine cannot grow everything that local customers need. It can be possible that such an impressive increase in imports occurred because of increasing volumes of imported pineapples, bananas, citruses, kiwis, mangoes, and other exotic fruit. If so, it would mean that the well-being of Ukrainian citizens has been growing during the recent years. As a matter of fact, Ukraine has been increasing the imports of traditional vegetables that can grow in the country very well.
For example, the imports of potatoes, cabbage, onions, carrots, tomatoes and cucumbers have increased 18.5 times during the recent five years. In 2010, those imports hit the level of 190,000 tons. As for traditional fruits, Ukraine imported over 210,000 tons of foreign-grown apples, pears, cherries and apricots in 2010 (five times as much as in 2005).
Why do Ukrainian agrarian entrepreneurs use the year 2005 in their statistics? In the old days, it was considered a tradition to compare the achievements between the Soviet and the tsarist regimes. The Soviet era would very often be compared to the situation in the country in 1913 - the last peaceful year in Russia before WWI. In 2005, Ukraine joined the World Trade Organization.
China used to make a political decision about the need to join the WTO too. The decision was made after the Chinese scrupulously analyzed all pros and cons of the initiative. It took China decades to finalize the WTO membership. Beijing was struggling for every single percent.
The Ukrainians decided not to go through so much work. They simply accepted the conditions, which the previous administration of the country considered unacceptable. It goes without saying that Ukraine simply wanted to become a WTO member before Russia. As a result, Ukrainian grocery stores now sell Egyptian potatoes, European apples and carrots and American meat and poultry.
It would not be a problem at all, if Ukraine had surplus currency earnings from successful exports of some of its products, or if agriculture in Ukraine were completely unprofitable. However, Ukraine is known for its rich soils and its climate, which is very favorable for agriculture.
Prices on food in the whole world increased a lot in January 2011. The prices on crops have gone way up because of natural disasters, such as floods in Australia, extreme cold in the USA, drought in Argentina, etc. Some experts believe that the price rise occurs because to the policies conducted by financial authorities of the United States.
It just so happens that the world in standing on the brink of the global food crisis. Consequently, expensive food will be affordable only for the rich. For many countries, food exports do not bring much income. Russia, for instance, banned the exports of crops, whereas Ukraine suspended its crops exports indefinitely. Both the WTO and the international community were concerned about Moscow's and Kiev's decisions.
Ukraine has completed its integration in the world economy. Now the Ukrainian administration is perplexed about the fruits of that integration. The Ukrainian agriculture is ruined, and it is very hard for the country to feed its own nationals, being a WTO member.