Ukraine has WTO membership strategy but no idea of consequences
The Ministry of the Economy presented Ukraine’s WTO membership strategy yesterday. It appears that the cabinet experts have failed to solve all problems stemming from membership talks by the end of this year. In fact, the ministry sees the only problem in the requirements imposed on Ukraine by its foreign trade partners (simplifying access of imported goods to the Ukrainian market). As for possible complications in some of the industries, the cabinet does not believe that they will be serious.
Economy Minister Valery Khoroshkovsky does not intend to offer any compensation to the industries currently least prepared to compete with foreign companies on the domestic market. “We can only point to problems and let them solve them independently,” he said, expressing the belief that Ukraine cannot afford to assist backward industries. Nor did he seem worried about what will come of them after lifting the import barriers. He says that Ukrainian producers are quite competitive on the market of inexpensive goods, and that few if any Ukrainians can afford expensive items. Actually, this is what makes the ministry optimistic.
The document with the pompous title, “Strategy,” sounds something like a WTO membership campaign brochure, albeit with convincing argumentation. WTO membership is expected to allow Ukraine to expand its participation in the international division of labor; the discriminatory access of Ukrainian commodities to foreign markets will be eliminated, promising a growth of Ukrainian metal exports to EU worth $150-180 million (1.4 times). Also, foreign investment will show substantial growth. The ministry’s experts believe that prosperous foreign investors will be attracted especially by the wholesale and food industries. Both are mentioned in the strategy, obviously meant for the sector lobbies in parliament.
The Agrarians have until recently been most outspoken opponents of Ukraine’s WTO membership. Still, the economy minister declared that their opposition has noticeably softened. Increasing agrarian subsidies (up to $1.37 billion a year) is the cabinet’s key argument to make them change their mind. At present, the government’s support of agriculture is a far cry from this, so the argument did play its role. At the same time, few in the agrarian lobby seem aware that the cancellation of the uniform land tax is the condition on which such subsidies can be raised to such a level.
Economy Minister Valery Khoroshkovsky announced this without mincing words, adding that WTO regards today’s tax concessions enjoyed by the agricultural producers as another kind of subsidy and that its amount will be computed in the near future. All this points to a heated debate just starting up between the agrarian lobby and the cabinet.
The fact that Ukraine’s WTO membership strategy does not offer a comprehensive picture of its consequences for all industries is evidence that the government is in the first intellectual and lobbying phase of the project. Yesterday the minister once again admitted that he does not have a clear view of these consequences, meaning that working out any amounts of compensation (if found necessary) would be premature. Meanwhile, the stated date of Ukraine’s accession to WTO is getting closer. The Ukrainian sector entrepreneurial elite seems to have accepted the unavoidable necessity of WTO membership. However, the ministry’s attempt to grope for that membership in the dark, without figuring out the consequences first, is unlikely to succeed. Verkhovna Rada is hearing the cabinet’s report on the current status of talks with WTO tomorrow and the key lobbyists are likely to accuse the ministry of doing just that: groping in the dark. While Minister Khoroshkovsky’s efforts to expedite Ukraine’s WTO membership deserve all possible praise, he lacks answers to several major questions and thus can expect problems.
