Premier’s Optimism Brings Us No Closer to WTO

The date of Ukraine’s admission to the World Trade Organization may be known as early as May after the eighth round of talks in Geneva, announced Ukraine’s Deputy Minister of the Economy Andriy Honcharuk during a round table on Ukrainian and Dutch businesspeople, Forum (www.for.com.ua) quotes Ukrinform. It will be recalled that Ukraine officially applied for WTO membership as early as 1993, but even now in the third millennium it still seems a long way from it. What stands in the way of our integration into the world trade community?

This subject was discussed by The Day’s correspondent with foreign experts on WTO membership, independent expert Klaus KAUTZOR-SCHROEDER and Ukrainian-European Policy and Legal Advice Center (UEPLAC) senior consultant Saul ALANOCA.

“Mr. Kautzor-Schroeder, you specialize in trade in the service sector. The latest State Statistics Committee report says Ukraine’s foreign services trade surplus dropped in 2000 by 15.0% to $2,126,000. Yet, the overall foreign services trade increased by 2.5%, compared to 1999, to $4,847,600, including exports worth $3,486,800 (down 3.5%) and imports worth $1,360,800 (up 22.2%). Transport and state services continue to make up the largest share of overall Ukrainian exports: 83.7% and 49.3% respectively. Would you tell us how these indices compare with those of Western Europe?”

K. K.-S.: “It should be noted that, in spite of a reduction in export services last year, the overall balance remains positive. The situation in other European countries differs from that in Ukraine. For instance, Germany displays a service trade deficit, because there was a negative balance in tourist services: Germans prefer traveling abroad to receiving tourists. The US, Britain, and France show a service trade surplus. The first two of these countries mainly achieved this at the expense of financial services by banks and insurance companies, while France did so owing to high revenues from tourism. Of course, the services trade in Ukraine is far smaller than in these countries, where this variety of trade is considered one of the main sectors of the economy. Ukraine’s admission to the World Trade Organization and integration into the European community is supposed to increase these figures. For example, Ukraine, with its beautiful Black Sea sun spots, has good opportunities for the development of tourism.”

“Could Ukraine render financial services as successfully?”

K. K.-S.: “I am not an expert in this field, and I have been to Ukraine only a short while. I can only note that after joining the WTO, Ukraine will have more foreign banks on its territory, which will stimulate its economic development.”

S. A.: “The advent of foreign banks boosts competition, and this will bring down loan interest rates (now 30-40%) and increase loan volume. By joining the WTO, Ukraine would commit itself to adopting legislation placing Ukrainian and foreign banks on equal terms. It is possible that Ukraine’s admission to the WTO will also cause many Ukrainian banks to merge in order to reinforce their positions or to merge with Western banks, as is the case in Russia. In the long term, one can predict Ukraine would have fewer banks than now.”

“Would Ukraine’s WTO membership mean recognition of it as a market economy country?”

K. K.-S.: “An interesting question. The former Soviet states that are now WTO members have been recognized by this organization as market economy countries. I think Ukraine will receive the same treatment, although there can be exceptions, of course.”

“What is your assessment of Ukraine’s preparedness for joining the WTO?”

K. K.-S: “Ukraine has made major efforts in the past few years to become a WTO member, although there were periods when this process slowed. Admission to the WTO is a complex and lengthy process. For example, China began negotiating WTO membership 14 years ago and is still not a member. Russia also began this procedure in 1993 but has not yet been admitted. A country which intends to join this organization must attend special meetings to explain the way its trade system works. This procedure alone could last at least three to four years. Besides, the candidate country must hold bilateral talks about trading with WTO members interested in its markets. Incidentally, about 20-30 countries are showing interest in Ukraine. It took Kyrgyzstan the shortest time, twenty- eight months, to join the WTO because it agreed to all the proposals made during the bilateral talks. Very much depends on the extent to which the government speeds up this process.”

S. A.: “A country like Ukraine should have more experts dealing with WTO admission problems. At the Ministry of the Economy, these matters are dealt with by a department consisting of five persons, out of which only three are directly in charge of WTO issues. Still worse is the situation with the staff of other ministries, where this job is usually assigned to one person. But there is also a still higher governmental level which must develop a strategy for WTO membership. And if this issue has not become the object of continuous discussion on the top level, this shows the absence of the government’s political will.”

“In addition to will, financial resources are also needed.”

S. A.: “I have recently been to Yemen, which also hopes to join the WTO. In that country, which is far less developed than Ukraine, the WTO admission committee has a budget of $100,000 which can be doubled, if necessary. The budget of a similar committee in Jordan, now a WTO member, was $200,000-250,000. I know nothing about such budgets in Ukraine, but I do now that even traveling to Geneva (the WTO headquarters — Ed.) presents problems to people due to lack of funds. It is also a pity that Ukrainian representatives in Geneva very often demonstrate obvious incompetence: for some reason, the proposals are prepared and presented by different people.”

“To what extent is it now realistic to discuss the specific dates of Ukraine’s admission to the WTO?”

S. A.: “Last year we learned from the Ukrainian media that Ukraine would join the WTO by the end of the year. This is not serious from the political viewpoint. In this case, the words of a high official ran counter to reality and show his ignorance.”

K. K.-S.: “It should also be remembered that Ukraine is not the only country in the process of WTO admission: there are currently thirty such countries. This means the time allotted for negotiations with each candidate is very limited. According to the procedure, each country is assigned a time for negotiations. This is the rule of the airport: if you missed your turn, go back to the end of the line. Ukraine is already missing its turn scheduled for March 5 because it failed to prepare the documents on time. Now it is at the end of the line, and a new date will come in late May or June.”

“Still, Prime Minister Viktor Yushchenko says reassuringly that Ukraine will become WTO member in 2001.”

S. A.: “This can be interpreted in two ways. First, the premier wishes to see Ukraine in the WTO, but this also requires political will and financial resources. At least, there is a desire but there is no will — a certain link is missing between them. The other explanation is that the Ukrainian premier might be poorly informed about the real state of affairs.

“I think Mr. Yushchenko made too optimistic a statement about the possibility of Ukraine’s admission to the WTO in 2001.”