Israel and Ukraine sign free trade agreement: What will it mean for business?

Legislation | 23 January 2019

Let's take a look at what the new free trade agreement between Israel and Ukraine will mean for trade between the two nations.


Israel and Ukraine have signed an historic new free trade agreement (FTA) that could lead to better interactions between businesses from the two nations.

Benjamin Netanyahu, prime minister of Israel, joined Ukrainian president Petro Poroshenko at a press conference to announce the deal on Monday (January 21st) and said it is expected to lower import costs for Ukrainian products at the same time as increasing exports.

The FTA gives Israeli companies full access to the Ukrainian market and grants Ukrainian companies tax benefits for products that they are sending to Israeli markets.

It is estimated that bilateral trade could be boosted to the tune of 20 per cent as a result, amounting to €880.32 million over the course of the next five years.

Under the deal, duties on 80 per cent of Ukraine's industrial exports to Israel and 70 per cent of Israeli exports to Ukraine have been officially abolished.

The full effects of the FTA may take until the middle of the next decade to be felt, but it is likely that the heavy industry sector in Ukraine will reap the benefits in particular.

Speaking at the press conference, Mr Netanyahu said: "This brings our cooperation to a new level. We eliminate existing trade barriers, give companies from Ukraine and Israel wider access to markets, and further activate business activities."

He added that this is something the two nations have been working on for many years and that they hope to further increase their cooperation in fields such as technology, aerospace and science going forward.

Mr Poroshenko had earlier visited the Holocaust memorial in Jerusalem and met with his Israeli counterpart Reuven Rivlin as part of the diplomatic trip.

Meanwhile, Israeli ambassador to the Ukraine Joel Lion has said in an interview with Ukrinform that he expects trade between the two nations to grow by 15 per cent over the next five years as a result of the FTA.

He said agriculture is likely to remain the main area of sale for Ukraine, with 63 per cent of exports from there to Israel currently agricultural products. 

The Ministry for Economic Development and Trade has also said it thinks the FTA will be beneficial to the trade balance between the two countries.

However, it will not apply to the temporarily occupied territories of Crimea, the city of Sevastopol and certain areas of Donetsk and Luhansk until the full restoration of the constitutional order of the state of Ukraine on them.

According to the Export Strategy of Ukraine, Israel is one of the top 20 promising markets for Ukrainian products and is a major trading partner for the Middle East region.

They also enjoy cultural connections due to Soviet immigration during the early to mid-1990s. According to Mr Lion, relations between the two nations are very good and Ukraine sees Israel as a role model.

"They see us as an example of a country that gained independence and developed an economy while surrounded by enemies and involved in wars," he told the Jerusalem Post. "They need to find new markets, retread their factories for the new world. In the last four years they are becoming independent, and they see in Israel an example of a country that succeeds."

It will certainly be interesting to see how this FTA develops in the coming years and whether or not it can be used as a roadmap for other nations in a similar position.