The aim of the study is to develop theoretical principles, methodological and practical recommendations for measuring the role of preferential market access in export performance at a disaggregated level. The study allows us to draw the following conclusions: The scope of the Association agreement, including creation of a Deep and Comprehensive Free Trade Area between Ukraine and the EU, the agreement contains provisions for comprehensive reduction of most tariffs and tariff equivalent measures, and binding commitments on regulatory alignment. Such widespread coverage means that the DCFTA addresses tariffs and most transaction costs, aligns with theory and should act as a stimulus to export. The gravity model predicted trade under the DCFTA to be much higher than actual trade despite alignment of the DCFTA with theory. It is shown that a meaningful analysis of tariff liberalisation can only be undertaken at a disaggregated level. In the case of Ukraine only 17.1 per cent of Ukraine's exports faced tariffs pre DCFTA, and therefore, the benefit of tariff liberalisation can only be on a small portion of Ukraine's exports. When analysing the export performance of products that actually improved tariff access, these performed considerably better than aggregate exports. It is therefore recommended that when assessing the impact of tariff liberalisation policies, policy makers and scientists should isolate the effects of those exports that had a tariff preference rather than total trade. To estimate the size of the tariff preference benefits under the DCFTA, the potential effect is usually based on the size of change compared with existing or the MFN rate. In the real world, a more realistic measure is the relative margin of preference (RMP) comparing tariffs faced by Ukraine with the weighted tariff applied to actual competitors in the EU market. Immediately post DCFTA, tariffs on Ukrainian exports to the EU were 0.91 per cent lower than other suppliers. So although Ukrainian exports gained an improvement in market access compared with its third country competitors in the EU market with the implementation of the DCFTA, the size of the relative margin of preference has been shown to be less than one per cent. In assessing the potential benefits of tariff preferences, it is recommended that policy makers and scientists measure the relative changes in tariffs rather than the absolute. Partial equilibrium models are able to isolate the static tariff liberalisation impacts of consumption, trade creation and trade diversion effects on existing exports, referred to as the intensive margin. This model showed that 55 per cent of the increase in exports with tariffs post DCFTA is due to improved margins of preference. Moreover, these partial models can be improved by using RMP, rather than absolute changes in tariffs to provide a more realistic approach and this should always be used. Using the least traded methodology to define "zero" exports pre DCFTA, the extensive margin (new products traded post DCFTA) was estimated at only 1.4 per cent of total exports which means that there have been few new exports, but not all of these would be as a result of the changes in margins of preference. A probit regression model was used to explicitly link the extensive margin of trade with tariff changes and show that tariff preference changes accounted for only 0.05% of the extensive margin. The post DCFTA period coincided with a change in exchange rate policy in Ukraine from a fixed to managed floating system that saw a significant devaluation in the hryvnia euro rate, reducing prices on all Ukrainian exports. The real exchange rate models showed that the devaluation of exchange rate experience post DCFTA had a positive impact on trade and suggested a much bigger influence over Ukraine's export growth with the EU (6.26 per cent) of post DCFTA than tariff impacts. It is recommended that scientists look at other factors such as the exchange rate to contextualise the export performance as in the case of Ukraine, it was shown that devaluation has had a much more powerful impact on Ukraine's exports to the EU than the tariff effects. To determine the extent to which residual barriers to trade exist, the "frictionless" trade benchmarking theory was adapted to measure product underperformance. The measure shows a small, but significant level of Ukrainian export sectors that are underperforming in the EU. The use of this technique linked to a specific agreement is recommended as a useful tool for policy makers to identity residual barriers post implementation, and can then focus government dialogue and negotiation to eradicate any non-tariff barriers and address informational frictions on those specific sectors.
