RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/ACC/SPEC/UKR/6/Add.6 
21 September 2005 
 (05-4176) 
Working Party on the 
Accession of Ukraine Original:   English 
 
 
 
ACCESSION OF UKRAINE 
 
Domestic Support and Export Subsidies in the Agricultural Sector  
 
Addendum  
  
 The following submission, dated 5 September 2005,  is being circulated at the request of the 
Delegation of Ukraine. 
 
 
_______________ 
 WT/ACC/SPEC/UKR/6/Add.6 
Page 2  
 
 Agricultural Support Policy in Ukraine on the eve of and upon Accession to the WTO
 
On the eve of Ukraine's accession to the Worl d Trade Organization, attention has been 
concentrated on agricultural issues that are being re solved in Ukraine in acco rdance with existing law, 
instructions from the President of Ukraine and the Cabinet of Ministers of Ukraine, and the Action 
Program of the Cabinet of Ministers of Ukraine "Towards the People". 
The current situation requires that measures of State support be undertaken for three reasons:  
− one third of the State's population resides in rural localities - 15 million people; 
− necessity of ensuring the sector's sustaina bility in the country with a transition 
economy; and 
− expedience of restoring volumes of agricu ltural production that have fallen by three 
times since Ukraine's independence. 
It is apparent under such circumstances that reviving the agrarian sector is a top-priority 
political and economic goals faced by governmental authorities.  Therefore, the State's long-term 
strategy of support for the sector is defined (at least until 2010) in the Law of Ukraine "On State 
Support of Agriculture in Ukraine", which entere d into force as from the 1 January 2005.  The 
following instruments of government regulation have been chosen: 
− Commodity intervention is a sale of agricu ltural produce during a price growth at an 
organized agricultural market above the maxi mal levels (including sale of commodity 
derivatives), which is done with the purpose of achievement of equilibrium levels; 
− Financial intervention is a purchase of agricultu ral produce during a decline in spot prices at 
an organized agricultural market below the mi nimal levels (including sale of commodity 
derivatives), which is done with the purpose of achievement of equilibrium levels; 
− State pledge purchase is a transfer of an object of state price regulation (the pledged object) to 
the state food reserve in the event that the budge tary loan and/or charge for its usage have not 
been paid within the time period set in the cont ract.  The budgetary loan is provided by the 
Agricultural Fund to a producer of grain, which is an object of state price regulation.  This 
object serves as the collateral for the loan, which is confirmed by transfer of a simple or 
double warehouse certificate or warehouse receipt to the creditor; 
− Budget subsidies to producers of animal produc ts – as calculated based on a metric unit of 
live weight of sold (realized) livestock and poultry or on a metric unit of weight of sold milk and wool; one head of thoroughbred pedigree ca ttle, which was owned by a subsidy recipient 
at the beginning of the next budget year.  In the State Budget of Ukraine for 2005, 
UAH 654 million is earmarked for financial support of production of animal products; 
− The Agrarian Fund forms a agricultural food reserve, volumes of which will be 10 per cent in 
2006 to 20 per cent in 2010 pursuant to the Law, in order to undertake State interventions funded out of the State Budget.  In the St ate Budget Ukraine for 2005, UAH 335 million is 
earmarked for these purposes; and 
− Credit subsidies – these mean subsidizing a por tion of payments (interest) under short- and 
long-term credits provided by banks.  In the State Budget for 2005, UAH 350 million is 
earmarked for reducing the cost of short- and long-term credits to agricultural enterprises.  
The Law of Ukraine "On State Support of Agricu lture in Ukraine" defines fundamentals of 
State policies in the budgetary, credit, pricing, insura nce, regulatory and other areas of management of 
agricultural market development and assuring of fo od safety of the population.  All measures provided 
by the new Law are aimed to stabilize markets and th e price situation, and full implementation of all 
provisions of the Law requires budgetary financ ing in the amount of at least UAH 6 billion 
(approximately US$ 1 billion) per year.   WT/ACC/SPEC/UKR/6/Add.6 
 Page 3 
 
 
 Commodity interventions through the Agrarian Fund will prevent any critical situations with 
provisions of the Ukrainian population with basic foodstuffs, especially with bread, and will preclude 
groundless speculative fluctuations of prices on the food market, which fluctuations are related to 
monopolistic and unfair competition actions. 
The Agrarian Fund will also finance State pledge purchases of grain.  It will also coordinate 
the providing of credit subsidies to producers of products, which are subject to government price 
regulation, and of budget grants to  producers of animal products. 
For purposes of establishing a comprehensive syst em of agricultural product insurance and 
regulating an agricultural product insurance mark et, it is contemplated to establish a Fund for 
Agricultural Insurance Subsidies that will provide insurance subsidies to producers of agricultural 
products. 
The Law contains a rule that prohibits central  or local government authorities to impose any 
restrictions on rights of owners of agricultu ral products, and bans groundless administrative 
intervention into their business activities.  Sanctions  against the administrative bodies for such illegal 
decisions are also contemplated. 
Appropriate State support is needed for purposes of stabilization and further development of 
Ukraine's agrarian sector.  This need results both from objective particularities in the functioning of 
agriculture that are common both for Ukraine and developed countries,  lagging of domestic 
agriculture in comparison with that of the devel oped countries in terms of technological levels of 
production, as well as from a need to  resolve problems specific for the Ukrainian agrarian sector that 
have amassed over the years of post-Soviet deve lopment.  Positive achievements of land reform 
carried out during 1999 – 2001 have not yet lead to a radical and effective revitalization of 
agricultural production, invigoration of investment pr ocesses in other sectors of industry and a rise of 
welfare of the rural population.  It requires a comp rehensive approach to agricultural support policies. 
During the previous negotiations Ukraine explained on several occasions the current 
negotiating position regarding the AMS in the amount of US$ 1.14 billion and the selection of the 
period of 1994 – 1996 as a base period.  This position is based on tasks that have been set by the 
Government for resolving transition economy problems. 
Firstly, these include stabilization of the market s for plant and animal products.  Introducing 
intervention purchases of agricultural products is re garded as a measure to stabilize markets of 
agricultural products.  The Government's close attention concentrated on market stabilization 
measures is explained by the fact that, along with  positive effects of market pricing (reduction of 
government intervention into business activities, deve lopment of entrepreneurship, transformation of 
production strategies that take account of mark et needs), such objectionable tendencies as 
considerable fluctuations of prices, instability of re venues of agricultural producers and a rise of retail 
prices for basic foodstuffs have been also observed on the markets.  Stabilizing the domestic market is 
of considerable importance for the global market, on which Ukraine is represented and has an impact 
upon global market conditions with its volumes of trade.  It is also important for importers to have a 
stable internal market in Ukraine. 
Stabilization of the agricultural product markets has considerable social effects.  In 2003, 
22 per cent of the population fell under the category of  the poor in Ukraine, and 11 per cent fell under 
the category of the extremely poor.  Sixty per cent of workers have monthly salaries below the 
minimum subsidence level1.  Households with an income belo w the poverty line (US$ 23 per month) 
spend on consumption of bread and bakery products approximately 31  per cent of the total monetary 
                                                      
1 UAH 342 or US$ 64 per month.  WT/ACC/SPEC/UKR/6/Add.6 
Page 4  
 
 expenditures.  In accordance with the FAO criteria (less than US$ 1 per diem), the level of food safety 
in Ukraine fell to a critically dangerous level in the late 1990's.  
One of the strategic goals in agriculture is to stabilize the livestock sector, which will promote 
ensuring food safety in the country and providing the population with quality and safe foodstuffs.  In 
addition, given the fact that it is women, who ar e primarily employed in the livestock sector, it is 
possible to resolve the problem of employment of women in rural localities by resolving the livestock 
sector problem.  
Depreciation of capital assets for production has reached a critical point.  The annual 
depreciation of capital assets, in first technical assets, exceeds their renovation by ten times.  An 
annual decrease in the number of tractors, combines a nd agricultural machines is about 10 per cent.  
Depreciation of machinery totals 75 per cent.  Al most no funding of capital expenditures, including 
renewal of livestock and transplanting of perennial plantings, is provided.  Until land is actively used 
in financing schemes and the land regulation system is fully operative, the problem with long-term 
capital investments will remain unresolved.  Theref ore, no restoration of capital assets without State 
support is possible.  Hence, lack of budget support  in this area constitutes a potential threat of 
substantial reduction or even loss of agricultural production.  
Ukraine's forthcoming accession to the Worl d Trade Organization coincided with the 
commencement of the process of transformation of agricultural support in Ukraine.  Positive tendencies of economic growth have been observed in Ukraine's economy in the past years, which 
gives reasons to increase State Budget funding for this sector.  
In 2001 – 2004, new programs of budget suppor t of and for the sector were introduced – 
partial compensation of costs of complex machinery,  reduction of costs of long-term credits (partial 
compensation of interest payable under credits  from commercial banks and credit unions, which 
credits contemplate funding of capital expenditures,  including purchases of machines and machinery, 
renewal of livestock etc., partial compensation of the price of domestically produced mineral 
fertilizers and expenses of agricultural enterprisers incurred as result of sowing of spring grain crops). 
The system of agricultural support began to tr ansform through reduction of such indirect 
types of support as write-offs of debts, tax bene fits, subsidies through a VAT mechanism and through 
an increase of direct budgetary transfers to agri cultural producers.  The Law of Ukraine "On State 
Support of Agriculture in Ukraine", premised on a new basis, continues the effect of the Law of 
Ukraine "On Stimulation of Agricultural Devel opment for the Period of 2001 – 2004", to wit: 
commodity and financial interventions with respect to plant products, establishment of minimum and 
maximum purchase prices, State pledge procurement of grain, credit subsidies, State support of 
producers of animal producers.  
All of these measures will be related to the le vel of the AMS, which is a base for assuming 
commitments to reduce agricultural support within  the framework of the WTO.  Upon becoming a 
Member of the WTO, Ukraine will be able to join  negotiations within the World Trade Organization 
dealing with further liberalization of trade in ag ricultural products, and will be pleased to accede to 
new commitments to reduce domestic support of ag riculture together with other countries.  
Ukraine has already evidenced its adherence to the principles and long-term goals of the 
World Trade Organization, specifically "establishment of  a fair and market oriented system of trade in 
agricultural products", by accomplishing essential ch anges in agricultural policies, whereof the 
Members of the Working Party had been notified by  Ukraine during official multilateral and bilateral 
negotiations during 1997 – 2004.  To date, the schedule of liberalizati on of access to the agricultural 
and industrial sectors of Ukraine's market has been  already agreed upon with a majority of members 
of the Working Party, evidence of which is bila teral negotiations completed with 38 countries.   WT/ACC/SPEC/UKR/6/Add.6 
 Page 5 
 
 
 In discussing Ukraine's selection of the peri od of 1994 – 1996 as a base period and the level 
of the AMS amounting to US$ 1.14 billion, the Members of the Working Party considering the 
application of Ukraine for WTO accession shoul d take into consideration those significant 
concessions that are made by Ukraine in respect of  access to its market of agricultural products.  
Upon accession to the WTO, the average import ta riff will be equal to 12 per cent, which 
means essential liberalization and opening of the domestic market for the entire nomenclature of 
agricultural products, as well as reduction of the ex isting tariffs under the Law of Ukraine "On the 
Customs Tariff of Ukraine" by a few times, rather th an in per cents.  Thus, at the present point of 
negotiations Ukraine's tariff position on wheat and wheat flour is two times less than the existing tariff 
(as calculated into ad valorem ), on sunflower seeds – by ten times, on sunflower oil – by five times, 
on refined sugar– by two times, on butter– by 1.5 times, on meat and potatoes – by three times, on 
poultry meat – by seven times. 
In certain concessions, in particular in relati on to commitments assumed not to apply export 
subsidies in agriculture, Ukraine is even ahead of  the current round of the negotiating process "Doha 
Development Agenda".  (Pursuant to the Reso lution of the General Council of the WTO, the 
Members have agreed to eliminate all forms of agricultural export subsidies during a specific period 
of time) 
Certain countries noted measures of the so-calle d Soviet period included by Ukraine into 
tables of the base years 1994 – 1996.  By their effect, State procurement purchases were aimed to support market prices, and at present there are introduced intervention purchases that will have a similar impact on market prices.  It means that it is only a change of the name and a certain 
transformation of the mechanism; consequently, it is not expedient to raise an issue of their inclusion 
into the AMS.  As regards the level of support of  domestic producers in the Soviet Union prior to 
1991, it was by 5-6 times higher as compared with the year 1994 – 1996.  
In parallel with "amber box" programs, funding of  "green box" programs will be expanded.  It 
is quite apparent that an increase of funding fo r development of infrastructure and services, i.e., 
"green box" programs if the base sector itself is  insufficiently effective, is inadvisable.  
Funding of "green box" programs is among stra tegic areas of agricultural development, to wit: 
− development of advertising a nd other marketing services;  providing of all market 
participants with information on the market  situation, establishment of the system of 
an agricultural advisory service; 
− reformation of the system of agrarian scien ce in order to raise efficiency of scientific 
research and introduce same into production practices; 
− preparation of a program for social developm ent of rural localities in the direction of 
development of infrastructure of non-productive designation in the rural localities;   
− adoption of a program for creation of new jobs, employment and qualification re-
training;  preparation of a program aimed to  raise the level of general and specialist 
education in the rural localities;  
− environmentalization of production of agricultural products, assurance of 
environmental safety of land use and protection of the environment; and 
− payments under regional assistance programs. 
Funding of "green box" programs has been annually increasing.  The amount of funding of 
"green box" programs provided in 2004 is twice highe r than that in 2002.  These programs are funded 
pursuant to the Law of Ukraine "On the State Budget" for a given year.  WT/ACC/SPEC/UKR/6/Add.6 
Page 6  
 
 The Government has been persistently taking e fforts to improve the legislative framework for 
food market development and reinvigoration of stock market trading and production and service 
cooperation, to harmonize the system of agricu ltural product standardization and certification and 
rules on sanitary, veterinary and phytosanitary contro l in conformity with international requirements, 
to develop mechanisms for reinvigoration of deve lopment of small and medium business in rural 
localities, and to improve and modernize the transport infrastructure. 
Proceeding from the foregoing, Ukraine cons iders years 1994-1996 as a base period which 
permit to obtain the right to provide "amber box" support above the minimum " de minimis " level, 
which, in its turn, will ensure the implementation of strategic internal tasks in the agrarian sphere and 
in the economy as a whole and will promote the best performance of the long-term objective 
determined by the Agreement on Agriculture, name ly – "is to provide for substantial progressive 
reductions in agricultural support and protection sust ained over an agreed period of time, resulting in 
correcting and preventing restrictions and distortions  in world agricultural markets" (see Preamble to 
the Agreement on Agriculture). 
_______________ 
 
  WT/ACC/SPEC/UKR/6/Add.6 
 Page 7 
 
 
 ANNEX 1 
Proposals to the Draft State Budget of Ukraine for 2006  
from the Ministry of Agrarian Policy regarding for agriculture  
 
Including 
Codes Name of Expenditures by 
Program Classification Approved by 
the State 
Budget for 
2005, taking 
account of 
changes Proposals of 
the Ministry 
of Agrarian 
Policy for 
2006 "Green box" "Amber box" 
1 2 3 4 5 6 
2800000 Ministry of Agrarian Policy  3,906,910.5 14,122,559.8 8,487,559.8 5,635,000.0 
  Management and administration 77,810.0 180,715.8 180,715.8 0.0 
  including:     
2801010 General management and 
administration in the area of the 
agriculture  14,006.9 29,627.1 29,627.1  
2802010 Management and administration 
in the area of veterinary 
medicine 63,210.9 149,818.0 149,818.0  
2808010 Management and administration 
in the area of protection of rights to plant varieties 592.2 1,270.7 1,270.7  
  Science 58,089 61,009.0 61,009.0 0.0 
  including:     
2801030 Applied R&D efforts in the area 
of development of agricultural 
production 4,745.0 7,345.0 7,345.0  
2801050 Development of highly 
important latest technologies in 
the area of agricultural development, financial support 
of education of scientists and 
researchers 3,009.1 4,069.8 4,069.8  
2801060 R&D in the area of 
standardization and certification 
of agricultural products 40,913.0 37,256.0 37,256.0  
2801360 State scientific and technical 
programs and scientific portion of State special-purpose 
programs in the area of 
agriculture 1,981.2 0.0 0.0  
2809020 Fundamental research by the 
National Agrarian University in 
the area of agricultural sciences 1,141.0 2,165.7 2,165.7  
2809030 Applied R&D by the National 
Agrarian University in the area 
of agricultural sciences  6,299.7 10,172.5 10,172.5  
  Education 534,239.1 960,162.8 960,162.8  
  including:     
2801080 Training of personnel for the 
agriculture by higher educational institutions of the І 
and ІІ levels of accreditation 195,541.8 346,022.5 346,022.5  WT/ACC/SPEC/UKR/6/Add.6 
Page 8  
 
 Including 
Codes Name of Expenditures by 
Program Classification Approved by 
the State 
Budget for 
2005, taking 
account of 
changes Proposals of 
the Ministry 
of Agrarian 
Policy for 
2006 "Green box" "Amber box" 
1 2 3 4 5 6 
2801100 Training of personnel for the 
agriculture by higher educational institutions of the 
ІII and ІV levels of accreditation 189,534.3 411,623.2 411,623.2  
2801110 Methodical support of activities 
of agrarian educational institutions 2,996.1 5,638.2 5,638.2  
2801130 Training, re-training of and 
qualification improvement 
courses for worker personnel in the agriculture 4,750.0 4,880.0 4,880.0  
2801140 Qualification improvement 
courses for personnel employed 
in the agriculture by post-education institutions  3,140.6 3,611.4 3,611.4  
2809040 Training of personnel for the 
agriculture by higher education 
institutions of the І and ІІІ 
levels of accreditation within 
the National Agrarian 
University 26,405.7 44,816.4 44,816.4  
2809050 Training of personnel for the 
agro-industrial complex by the 
National Agrarian University 88,267.5 141,089.6 141,089.6  
2809060 Qualification improvement 
courses for personnel conducted 
by the Institute for Post-
Education of Agricultural Managers and Specialists within 
the National Agrarian 
University 1,103.1 2,481.5 2,481.5  
2809800 Allocation of premises for the 
Ukrainian laboratory for quality 
and safety of agricultural 
products 22,500.0 0.0 0  
  Budget institutions 406,877.1 991,820.2 991,820.2  
  including:     
2801310 Arrangement for and regulation 
of activities of institutions in the 
system of the agriculture 128,548.9 191,813.1 191,813.1  
2801320 Research and experimental 
development projects in the 
system of the agriculture 42,630.1 71,791.8 71,791.8  
2801570 Providing for activities of the 
Agrarian Fund 6,000.0 22,500.0 22,500.0  
2802030 Arrangement for and regulation 
of activities of institutions in the 
system of veterinary medicine 214,311.2 665,711.0 665,711.0   WT/ACC/SPEC/UKR/6/Add.6 
 Page 9 
 
 
 Including 
Codes Name of Expenditures by 
Program Classification Approved by 
the State 
Budget for 
2005, taking 
account of 
changes Proposals of 
the Ministry 
of Agrarian 
Policy for 
2006 "Green box" "Amber box" 
1 2 3 4 5 6 
2808020 Arrangement for and regulation 
of activities of institutions in the system of protection of rights to 
plant varieties  15,201.9 39949.3 39,949.3  
2808050 Participation in the international 
Union for the Protection of New Plant Varieties (UPOV) 185.0 55.0 55.0  
2801540 Compensation to the Pension 
Fund for losses resulting from 
the use by fixed agricultural tax payers of a special rate of the 
mandatory pension insurance 
charge  1,207,400.0 2,584,000.0 2,584,000.0  
  Program on development of 
rural area 1,622,495.3 6,263,852.0 2,728,852.0 3,535,000.0 
  including:     
2801170 Radical improvement of lands 
of agricultural enterprises 10,000.0 150,000.0 150,000.0  
2801180 Agro-technical  certification of 
agricultural lands 5,000.0 5,000.0 5,000.0  
2801190 Selection in livestock and 
poultry husbandry at 
agricultural enterprisers 124,000.0 568,852.0 568,852.0  
2801200 Measures to fight vermin and 
diseases of agricultural plants  5,000.0 174,000.0 174,000.0  
2801210 Financial support of production 
of plant and animal products 689,500.0    
New 
program State support of production of 
animal products  654,500.0 2,500,000.0  2,500,000.0 
New 
program State support of production of 
flax products 35,000.0 35,000.0  35,000.0 
2801220 Selection in plant growing 100,000.0 100,000.0 100,000.0  
2801240 Credit subsidies to agricultural 
enterprises that produce 
products that are subject to State price regulation 350,000.0 700,000.0  700,000.0 
2801280 Financial support of and for 
agricultural enterprises that are 
located in especially difficult climatic conditions 20,000.0 100,000.0 100,000.0  
2801290 Holding of State exhibition 
measures in the area of the agriculture 6,250.0 8,000.0 8,000.0  
2801300 Reformation and development 
of the utilities sector in rural 
localities 17,000.0 40,000.0 40,000.0  
2801330 Establishment and support of 
the reserve stock of sorted 
hybrid seeds  5,000.0 10,000.0 10,000.0  WT/ACC/SPEC/UKR/6/Add.6 
Page 10  
 
 Including 
Codes Name of Expenditures by 
Program Classification Approved by 
the State 
Budget for 
2005, taking 
account of 
changes Proposals of 
the Ministry 
of Agrarian 
Policy for 
2006 "Green box" "Amber box" 
1 2 3 4 5 6 
2801340 Prevention of expansion of 
pathogens of animal infection diseases  15,000.0 39,000.0 39,000.0  
2801420 Introduction of energy-saving 
technologies in the agriculture   10,000.0 10,000.0  
2801430 Partial compensation of the 
price of complex agricultural machines and machinery  70,000.0 300,000.0  300,000.0 
2801560 Formation of the State Food 
Reserve  0.0 1,098,000.0 1,098,000.0  
2801580 Reduction of costs of insurance 
premiums (contributions) actually paid by agricultural 
market operators 54,000.0 280,000.0 280,000.0  
2801590 Founder's contribution to the 
statutory  fund (capital) of the agrarian exchange 36,000.0 0.0 0.0  
2802020 Anti-epizootic measures and 
participation in the International 
Epizootic Bureau  111,445.3 125,000.0 125,000.0  
2808030 Radical improvement of lands 
of sort research stations and 
base stations  1,000.0 6,000.0 6,000.0  
2808040 Selection in the variety testing 
sector  3,300.0 15,000.0 15,000.0  
  New programs  3,081,000.0 981,000.0 2,100,000.0 
New 
program State pledged grain procurement  825,000.0 825,000.0  
New 
program Support of activities of the Fund 
for Agricultural Insurance Subsidies   20,000.0 20,000.0  
New 
program Provision of advisory services 
in accordance with the State 
Special-Purposes Program of Agricultural Advisory Actions  73,000.0 73,000.0  
New 
program Partial compensation to 
agricultural enterprises for 
sowing of spring and winter grain crops, burdock and soy 
under intensive technologies   1,600,000.0  1,600,000.0 
New 
program Subsidies for sowing of sugar 
beets   480,000.0  480,000.0 
New 
program Compensation of losses 
resulting from payments for 
electricity consumed by agricultural producers for 
irrigation of agricultural crops  20,000.0  20,000 
New 
program Identification and registration of 
agricultural animals   63,000 63,000  
__________