Dreaming of Free Trade

Signing a Treaty on Free Trade between Ukraine and Russia is a top priority for developing trade and economic cooperation between the two countries that is to be worked out in 2003. So stated Deputy State Secretary of the Ministry of Economy and for European Integration Issues, Volodymyr Bezruchenko, on January 15. As early as January, a group of Russian experts will visit Kyiv to proceed with negotiations on this issue. Mr. Bezruchenko doesn’t rule out the probability that the treaty will be signed in February in the course of the eighth meeting of the Ukrainian-Russian Joint Committee on Cooperation.

However, the negotiations’ participants will have to make big efforts, since the negotiation process on preparing this important document (five rounds have already been held at the expert level) revealed significant differences in the sides’ approaches. Russians are not going to give up their markets for nothing. In part, this refers to preserving exports duties, which the Russian side insists upon. Besides, they link coordinating the draft treaty to Ukraine’s entering EurAsEC. Discussing the schedule for exceptions from the free trade regime is going more or less successfully: in Mr. Bezruchenko’s words, only two issues (alcohol and confectionery) still need to be agreed upon.

A separate issue regarding bilateral cooperation is the use of anti-dumping, special, and compensational measures in trade between Ukraine and Russian Federation. According to the calculations made by the Ministry of Economy, Ukraine losses caused by these measure amount to $530 million annually. In part, restrictions on the exports of Ukrainian pipes, caramel, etc. were among the reasons for reduced exports of Ukrainian goods to the Russian Federation in 2002. Metallurgic (42%), chemical (28%), and agricultural industries (9.1%) suffered most of all. In general, the export of Ukrainian goods and services to the Russian Federation in the eleven months of 2002 amounted to $4,839 billion, which is $445 million less than during the same period in 2001. Simultaneously, Russian exports to Ukraine in this period have increased by 6.6%, totaling $5,864 billion. Among other factors affecting the reduction in Ukrainian exports to Russia, Mr. Bezruchenko mentioned Russia’s active implementation of imports-replacing technologies and decreasing its commodity turnover with CIS countries. Recall that in September and October of 2002, volumes of monthly exports of Ukrainian goods to Russia stabilized at a rather decent level of $306,7 million. The Ministry of Economy also hopes that this positive trend will be preserved in 2003.