7. Foreign trade

Cigarettes

Since 1999 cigarette export exceeds import, while average price of imported cigarettes is about 1.5 higher that exported ones, so the balance of cigarette trade these years changed from –6 mln USD in 2003 to +29 mln USD in 2005. Cigarettes are exported mainly to the former USSR countries: Armenia, Belarus, Moldova, Georgia and Azerbaijan (56% in 2005), but recently large quantities of cigarettes produced in Ukraine are exported to such countries as Taiwan, Turkey, Iran and Mongolia. Cigarettes are mainly imported from Russia, Germany, Greece and UK.

Table 9. Balance of tobacco foreign trade in Ukraine in 1996-2005

Raw tobacco

While Ukrainian tobacco production needs more raw tobacco than the country can produce, some Ukrainian tobacco is exported. Since 2000 the raw tobacco export from Ukraine exceeds its growing in Ukraine (see Tables 1 and 9). It means that some raw tobacco is re-exported. Raw tobacco is mainly exported from Ukraine to neighboring CIS countries (Russia and Belarus), but also to some European countries: Poland, Belgium, Macedonia, Germany and the Netherlands.

In 2000-2005 import of raw tobacco to Ukraine increased almost twice to about 80 thousand tons. The main country from which raw tobacco is imported is Brazil. Among the top 12 raw tobacco importers to Ukraine are the USA and such EU countries as Italy, Germany and Greece, and only two former USSR countries – Moldova and Uzbekistan.

In 1996, 41 thousand tons of raw tobacco (production + import – export) were used to produce 45 billion cigarettes, or almost 1 gram per cigarette. In 2005, 78.7 tons of raw tobacco were used to produce 120 billion cigarettes, or just 0.65 gram per cigarette.

Foreign trade balance

General tobacco trade balance for Ukraine is negative. In 1996-2000, the combined import spending exceeds export earnings by USD525 million (Table 9). In 2001-2005 the balance was even worse: USD914 million. Within the last ten years (1996-2005) Ukraine lost USD 1439 million due to foreign tobacco trade. Within the same period the state budget has collected USD 1447 million as excise tax revenue (without the Pension fund tax). So the revenue from excise tobacco tax was equal to foreign tobacco trade loss.

The negative balance is mainly caused by the following factors: 1) Ukrainian factories import most of the raw tobacco; 2) the price of imported raw tobacco and cigarettes exceeds the price of exported ones; 3) huge smuggling of cigarettes produced in Ukraine, which are made from legally imported raw tobacco (so if smuggling from Ukraine will be reduced the legal trade balance will improve).

Content 'Tobacco or Health in Ukraine. Economic issues, 2006 update'

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