The fruits of the economic integration

European integration remains a priority for our state, Yanukovych stated in his address on the 19th anniversary of Ukraine’s independence. Ukraine’s entry into the international economic arena started after joining the World Trade Organization (WTO), which provided many new trading opportunities for domestic business. Now the next step in integrating Ukraine into the international economy is associate membership status in the European Union, for which we must pass another milestone: join the free trade area (FTA) with the EU. What is the progress of the negotiations on preparing the draft regarding the FTA? What are the main economic gains of Ukraine from WTO membership? The answer to these questions you can find below, in The Day’s interview with Deputy Minister of Economy of Ukraine Valerii PIATNYTSKY.

The Ministry of Agrarian Policy announced a possible introduction of export quotas for grain in the amount of 2.5 million tons from September 1 to the end of 2010. What reaction should we expect from WTO-member countries?

“So far these are just statements. The export of grain from Ukraine continues. If you assume that the quotas are imposed from September 1, 2010, then, in my view, the relevant governmental bodies will carefully prepare arguments for members of the organization, relying on provisions of the agreement signed with the WTO. Although the introduction of export quotas on grain supplies can cause some dissatisfaction with certain WTO members, in my opinion Ukraine should not fear sanctions or any radical reaction in response. In addition, today we do not speak about a complete ban of export for a long time. The agreement allows the use of quotas if the country’s food security for certain types of products is threatened.”

THE WTO HELPED UKRAINIAN ECONOMY TO WITHSTAND

Ukraine has been working within the WTO framework for over two years. What, in your view, are the main economic benefits from membership?

“We have the right to influence the future rules of trade, covering 153 countries, through the submission of our positions to the secretariat. Furthermore, the WTO is not just an organization, but also the system of clear rules, the observance of which adds overall stability to each party. For example, 2008 was the most successful year for Ukrainian trade in all the years of independence: the total goods turnover was 170 billion dollars. Our country belonged to the thirty largest trading countries in the world. However, Ukraine’s entry into the WTO coincided with the global recession that hit turnover: in 2009 it dropped to 100 billion dollars. It could have been worse. However, WTO membership helped the Ukrainian economy not to tumble deeper into a crisis. I mean that in a crisis all countries have a huge desire to protect their markets. But within the WTO no nation took serious restrictive measures regarding WTO members.”

THERE WILL BE NO ADDITIONAL QUESTIONS TO RUSSIA WHEN IT JOINS THE WTO

With what states does Ukraine currently conduct bilateral negotiations on their joining the WTO?

“We joined all working groups of the countries interested in joining. We are actively working with Montenegro, Serbia, and Bosnia and Herzegovina. Negotiations with Yemen, Lebanon, and Laos are continuing. The agreement with Samoa is already signed. We monitor the accession process of former Soviet Union countries, including Belarus and the Russian Federation.”

What are your requirements for Russia within a bilateral agreement on joining the WTO?

“The bilateral protocol is not a necessity because Ukraine and Russia have an agreement on a free trade area. Right now work on improving the mechanisms of free trade between our countries is taking place. If the renewed free trade agreement with Russia is based on the WTO standards, there is no point in raising questions about additional concessions from Russia while signing the bilateral protocol within the framework of the WTO. On the other hand, the work on a multilateral agreement continues in regard to how Russia will fulfill all WTO rules, and in that aspect all participating countries have their suggestions.”

As a member of the WTO, Ukraine also has a right to make proposals to “bargain” more favorable terms of trade with a country which is about to join the WTO. Earlier we also had to compromise with other participating countries. What points in the negotiations with Russia on the WTO will be crucial for Ukraine?

“At a time Ukraine raised a question to Russia on the application of certain aspects of sanitary and phyto-sanitary re-gulation pertaining to domestic meat and dairy products. But during the year-long pause which Russia made on the issue of joining the organization these restrictions disappeared. So today there is no sense to return to them. On the Russian part there are no restrictions for Ukrainian products in terms of sanitary and phyto-sanitary regulations. If they arise after Russia’s joining the WTO, we, of course, will protect our interests through the mechanisms permitted by the organization.

“We have a possibility and a right to ask Russia questions, and we are not afraid to do it. If Russia had joined the WTO first, it would also have had this right. But a right is not an obligation. Today there is a normal format of talks between Ukraine and Russia, during which all issues are solved. Therefore, there is no need to use the WTO instruments to resolve disputes. Moreover, turnover between our countries continues to grow. Do we need to break this trend?”

Will the Ukrainian party suggest reducing or even canceling the export duty for Russian energy resources during the preparation of the bilateral agreement with the Russian Federation? Would this allow us to reduce the cost of gas for the Ukrainian economy, simply by using legal mechanisms of the WTO?

“The multilateral document which I have already mentioned presupposes a proposal of other WTO members to reduce export duties on all goods from Russia. And Ukraine has no intention to repeat that request.”

AGRICULTURE AND INTELLECTUAL PROPERTY ARE CONTENTIOUS SECTIONS OF THE FTA

The twelfth round of negotiations on establishing an FTA with the EU is fi-nished. What parts of the agreement are actually resolved?

“A consensus was reached in many sections. For example, a common language was found in the customs cooperation, the rules of the passage of goods. For a long time we could not agree with European colleagues on the technical and phyto-sanitary regulations. Now this debate is resolved and the technical data processing on these sections is ongoing. Following the adoption of the law about state procurement in Ukraine, the section on state procurement went forward, too.”

And what positions remain the most debatable?

“Today there is no proposal from the EU regarding the access of Ukrainian services to European markets. There are still questions on tariff quotas for agricultural products. In the field of intellectual property there are issues concerning access to the Ukrainian market of original and generic drugs, and the rights to their production. The fact is that the EU is for original drugs. But their production and distribution in Ukraine would mean the emergence of much more expensive products for consumers. For instance, today buyers can purchase generic drugs for 100 hryvnias. Originals cost several times more. Besides the commercial component, this issue has a social component as well. So the debate continues. There are also issues on the use of geographical names in alcoholic beverage products.”

IT IS TIME FOR SMALL BUSINESS TO LOOK FOR NICHES IN EUROPE

What possibilities do FTAs provide for small and medium business?

“We used to sell millions of tons of steel, grain, and oil. On the one hand, it is not bad, because it provides income for large enterprises. But under the establishment of the FTA introducing small tariff quotas for certain types of goods is presupposed as well. For large industrial monsters such quotas are not interesting. This concerns small and medium businesses. In other words, Europe is ready to let small and medium business from Ukraine operate on its market. But today such businesses must start searching for niches on this market. For example, you can sell oil not only by barrels. You can package 200 ml bottles of soybean, corn or sunflower oil with different additives. In addition, it is necessary to study the system of getting into European trading networks, where consumer demand is formed. Or who hinders our businesspeople to learn how to produce toothbrushes in line with European standards and export them to the EU?

“But the success of small and medium business will depend not only on the high quality of their products, but also on the stability of supply. Therefore, it is important that the state should make every effort to establish a normal operation of small businesses with customs. Otherwise, they will prevent our small and medium enterprises from entering the European market.”