Ukraine parliament ratifies free trade agreement with Turkey after nearly two decades of talks

With the Ukrainian parliament's ratification of the free trade agreement with Turkey on July 14, a deal nearly two decades in the making is now poised to enter into force.

Background and Negotiations

Negotiated since 2007, the agreement—which was signed during President Recep Tayyip Erdoğan's February 2022 visit to Kyiv—has generated both enthusiasm and resistance within the two countries' business communities. The central challenge was balancing Ukraine's interest in gaining access to Turkey's heavily protected agricultural market with Turkey's push to export more industrial goods to Ukraine. Producers in sensitive sectors on both sides feared heightened competition.

Key Provisions and Tariff Liberalization

Under the agreement now set to enter into force, liberalization will be substantial but deliberately phased to give sensitive domestic sectors time to adjust.

Turkey's commitments:

• Immediate elimination of tariffs on 93.4% of Ukrainian industrial goods and 7.6% of agricultural products
• Tariffs on an additional 1.5% of industrial goods and 28.5% of agricultural products to be removed over the next three to seven years

Ukraine's commitments:

• Immediate elimination of tariffs on 56% of Turkish industrial goods and 11.5% of agricultural products
• Tariffs on an additional 43.2% of industrial goods and 53.7% of agricultural products to be phased out over transition periods of up to five years (industry) and ten years (agriculture)

Geopolitical Context

The deal will enter into force under circumstances neither side could have anticipated when negotiations began. Russia's full-scale invasion of Ukraine has radically altered the economic and geopolitical landscape, prompting the inclusion of a special clause allowing both sides to review selected provisions after ratification.

Expanding Economic Cooperation Beyond Trade

The free trade agreement's immediate objective is to expand bilateral commerce toward the $10 billion target set out by Volodymyr Zelenskyy and Recep Tayyip Erdoğan. According to the Ukrainian Ministry of Economy, bilateral trade reached $8 billion in 2025, making Turkey Ukraine's third-largest trading partner and second-largest export market, with Ukrainian exports totaling $2.7 billion.

Trade Imbalances and Structural Challenges

Yet the structure of this trade remains unbalanced. Ukraine has traditionally maintained a trade surplus with Turkey, but the destruction of industrial capacity and the Russian occupation of agricultural regions have reversed this dynamic. Ukrainian exports have declined, while wartime demand has driven up imports of Turkish machinery, vehicles, fuel, equipment, and construction materials.

Currently, grain and sunflower oil account for approximately 77% of Ukrainian exports to Turkey. Much of this production is processed by Turkish companies into higher-value products, such as flour and consumer foods, for sale domestically or re-export to third markets. As a result, much of the added value is generated in Turkey rather than Ukraine.

Opportunities and Risks

The free trade agreement could help change this pattern. While many Ukrainian commodities already enter Turkey at low or zero rates, the new framework improves access for processed foods, feed concentrates, and more deeply processed oil products. This creates a stronger incentive to build processing capacity in Ukraine instead of exporting raw materials.

But the agreement also carries risks for the Ukrainian economy while benefiting Turkish businesses. Turkish textile, machinery, fruit, and vegetable producers are highly competitive, while their Ukrainian counterparts face high energy costs, labor shortages, damaged infrastructure, and other challenges.