WTO membership pluses and minuses assessed by government
The Ministry of Industrial Policy has produced an outlook for developments in various branches of the Ukrainian economy in case this country joins the WTO. It is expected that the removal of customs barriers will be good news for the metallurgical, chemical, textile, and mechanical engineering industries. Simultaneously, automobile and furniture manufacturers will suffer losses due to the influx of imported goods onto the domestic market. It will be recalled that the WTO is an international organization that unites 144 states, accounting for 91% of world trade, on the basis of transparent economic borders.
As assessed by the Ministry of Industrial Policy, after Ukraine joins the WTO, the additional earnings of steel makers will be at least $150 million a year. This means that on its way to the WTO the government will enlist support of one of the most influential sector lobbies. The ministry has not yet assessed the additional profits of the chemical and light industries, but their export is expected to increase considerably, too. Yury Petrovsky, chief of the ministry’s foreign economic relations department, explained the absence of specific calculations for some branches by the lack of time, means, and personnel. Incidentally, Ukraine applied for WTO membership in 1994.
In the meantime, it is known for sure that the removal of customs barriers will inflict UAH 61.7 million in losses on furniture manufacturers. Volodymyr Varenytsia, head of the furniture industry department, said that, although he was not against international trade integration, he would not allow the furniture market to be left unprotected against imported goods: “The conditions of WTO membership offered to our sector envisage cutting the import duty, now 25%, to zero. In this case our budget and domestic producers will get a similar zero.” As furniture and woodworking business people hold several influential positions in various public administration bodies, this could touch off heated debates over conditions for the competition of Ukrainian and foreign enterprises on the domestic market.
As to automobile making, the decision has already been made. Privileges for the AutoZAZ-Daewoo joint venture will have to be lifted, for they too obviously break the international principles of fair competition. The Zaporizhzhia Car Plant is going to lose import VAT and land tax exemptions. “When the plant comes to a halt, it will lose 262 million hryvnias, and the budget will lose 68 million,” said Yury Yakovenko, head of the automobile-making department of the Ministry of Industrial Policy. Yet, his fatalism might well be exaggerated. Mr. Petrovsky immediately parried that the government was completing working out a number of measures to compensate for the likely losses to AutoZAZ-Daewoo.
According to the ministry, heavy machine-building is also a sector that could suffer from the influx of imported items. But the advent of foreign investments in the shape of modern equipment should be considered as a boon rather than a bane. Moreover, mechanical engineering department chief Volodymyr Tkachenko announced that the sector is in fact prepared to join the WTO, “Enterprises are getting ready, while the politicians are dragging their feet.”
In many respects, it is the interrelated political and economic interests of sector industrial lobbies that will play the decisive role in Ukraine’s WTO membership. The cabinet is making it clear to them that joining the organization is inevitable. “Enterprises just don’t have a choice. They should get ready to working in the conditions of free competition”, says Mr. Yakovenko. But acute debates are unavoidable also. By next summer, parliament will have to pass 14 bills regarded as a condition for this country to join the WTO, the Tax Code being the most important of them. Although Ukraine applied for WTO membership eight years ago, the bitterest battles over this matter will break out precisely now on the home stretch.
