If you reject us, at least praise us

“We are awaiting a positive assessment of Ukraine in the direction of joining the World Trade Organization, and I think Ukraine has earned this high evaluation,” said Prime Minister Yuriy Yekhanurov toward the end of last week. He added that Ukraine has fulfilled most of the WTO admission requirements, and at this stage (the ministerial WTO conference will take place in Hong Kong on Dec. 13-18) it is necessary to designate a possible date for adopting a decision on membership. This is the biggest problem right now.

The highest risk area in the process of negotiating Ukraine’s entry into the WTO is support for agriculture and its aggregate dimensions. Andriy Berezny, Ukraine’s deputy minister of economics, told the roundtable “Ukraine’s Entry into the WTO: Prospects in the Agrarian Sector” that Ukraine will continue to maintain the level of this support at $1.14 billion, which is substantiated in an official document forwarded to the WTO secretariat.

During the negotiations Ukraine was proceeding from the base period for calculating the level of this support in 1994- 1996. But the WTO membership process started dragging out, and now only a few countries, including Australia and the US, want to change the base period by pushing forward the timeframe to 2000-2002, which is more indicative, or so they believe. This option is absolutely unacceptable to Ukraine, because then, says Berezny, the level of state support for the agroindustrial complex, calculated according to the WTO’s methodology, falls to $265 million.

Tetiana Varchenko, deputy head of the International Integration, Investment Policy, and Agrarian Business Development Department, says that in the CIS countries the level of state support for farm producers is actually much higher than what Ukraine is trying to reach: over 700 euros per hectare versus the 33 euros in Ukraine. Varchenko is convinced that our farmers have never enjoyed any targeted assistance from the state, like in Europe. It usually came in the form of debt forgiveness, a fixed agricultural tax, long-term credits, and so on.

Another stumbling block during the talks on agrarian issues is the terms and conditions of raw sugar supplies to Ukraine. Here we are creating a problem for ourselves. Berezny recalls that in 2001, when Ukraine was negotiating its WTO membership, Ukraine’s ministry of agriculture proposed an annual 260,000-ton annual importation quota at a 2-percent importation tax rate. All the negotiating parties agreed, except Australia, which insisted on raising the quota. In 2000-2001 this quota was 260,000 tons; in 2003, 560,000 tons; and in 2004, 125,000 tons. In 2002 and 2005 no quotas were established. However, at the 14th meeting of the working group tasked with studying Ukraine’s application to join the WTO, Ukraine, on the initiative of the Ministry of Agricultural Policy, announced its refusal to impose quotas on the importation of raw sugar. The WTO member countries instantly responded by suggesting a tangible decrease of import duties by Ukraine on sugar and raw sugar. Once again, Australia adopted a rigid stand, says Berezny, by demanding a higher raw sugar importation quota or lower customs rates.

The deputy minister of economics believes that Ukraine’s position on regulating sugar imports to the domestic market is questionable and must be settled as soon as possible. Ukraine now has a rather high sugar import tax rate: 50 percent of the customs value of goods, but no less than 300 euros per ton. This protection level is very high, Berezny underlined, and is thus unacceptable to the WTO member countries. He also reminded those present that a country seeking to join the WTO must guarantee minimum access to the domestic market, proceeding from import indices over the last three years. According to the deputy minister, Ukraine imported 1.4 million tons of sugar in 2003, which is roughly seven times the amount of the quota previously agreed upon.

Naturally, this is happening not because life is beautiful: it is directly connected to the critical situation with the Ukrainian sugar industry, which has long been crying out for reforms. Echoing his boss, Arsenyi Yatseniuk, Berezny referred to Belarus, where for the past five years the four surviving sugar refineries are annually producing 600-700 thousand tons of sugar. In Ukraine, 121 sugar refineries are supplying 1.8 million tons. Everyone understands who is working more productively.

Such frequent references to the Belarusian experience led Natalia Pohozheva, director general of the Ukrainian Agrarian Confederation, to scold the economics ministry for the lack of progressive examples worthy of emulation and insufficient business information. Be that as it may, the negotiations on Ukraine’s WTO membership are drawing to an end. Pohozheva says that, like before, the representatives of agrarian businesses remain in the dark about the consequences of Ukraine’s membership in the WTO for them. This is confirmed by the results of a sociological survey carried out by Tamara Ostashko, an expert with the Agricultural Development Institute. The poll, conducted in August-September 2005, shows that almost two-thirds of rural residents have not heard anything about the WTO, or they only know that there is such an organization somewhere. Only 11 percent of respondents said they are well informed about the WTO.

This is how the current government was thinking about surmounting all the barriers and making all the arrangements to join the WTO in 2005: on the run, without informing all strata of Ukrainian society about this issue and without conducting painstaking work with our parliamentarians. Haste makes waste, they say. Pohozheva says that the package of WTO bills included one on food safety, and it was passed, but then there were second thoughts, for it dealt a “terrible blow” to business, specifically to the processing and food industries. The director general is convinced that this is because “the bill was passed in an untransparent manner; there was no public discussion and professional work [on the government’s part — Auth.].

Characteristically, this roundtable heard no assurances that Ukraine would become a member of the WTO this year. Everyone now realizes that “the train has left the station.” Berezny said that we had a chance right up to October. It’s December now, and the deputy minister’s statement that the Ukrainian economy is functioning in “WTO conditions” is small consolation. Our president is the last unshakeable optimist. When Viktor Yushchenko met recently with US State Secretary Condoleezza Rice, he said that Ukraine is expecting a positive response from the WTO summit in Hong Kong. Well, seeing is believing.