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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

The Flip Side of Protectionism

17 November, 1998 - 00:00

The European commission on textile production may raise the question
about returning to the Ukrainian textile export quotas, which existed before
January 1, 1996. The Ministry of Industrial Policy told The Day
that agreement to keep the quotas at their current level was achieved during
the most recent negotiation in Brussels, but the Ukrainian side made several
concessions.

More than once the Ukrainian government has increased unilaterally import
tariffs on this group of products. Import tariffs for 200 items have been
recently increased five times over (from 10% to 50%). Officials also included
items that fall under validity of the agreement between Ukraine and the
European Union of November 9, 1995 for four years, which facilitated access
to the European market by Ukrainian manufacturers.

With steeply reduced demand on the domestic market, Ukrainian clothing
manufacturers would have appreciated an increase in exports to the EU.
Its volume last year was quite large with almost three million textile
articles exported last year. This year it is expected to reach 5.5 million.
Almost all the exported articles are manufactured according to the so-called
reprocessing scheme, such that they arrive on European markets under European
trademarks, successfully competing with local products.

As for our domestic market, textiles do not constitute even 0.5% of
total Ukrainian imports. Last year, Ukraine officially imported per capita
$4 in clothing. True, the supply is basically provided by shuttle traders
and thus is not reflected in the customs report. However, as a rule, shuttle
traders are indifferent about tariffs, be they are high or low.

Without doubt, our textile sector workers have no time for national
pride - production volume has dropped five times since independence, and
they are trying hard not to allow its stoppage.

Should the EU make its quota regime stricter, such an outcome is possible.
Then the government will not have to take care of domestic manufacturers,
for Ukrainian brands could simply disappear.

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