Where will the WTO lead us?

Without a doubt Ukraine’s WTO membership is just a matter of time. The problem is to get to this coveted place at the right time i.e., not suddenly but in a state of preparedness and armed with the required knowledge and skills. This was discussed by Andriy Berezny, the deputy minister of the economy, during public hearings organized by the Federation of Trade Unions.

Unfortunately, to a certain degree his report painted a dazzling picture of how well Ukraine will live after joining the WTO. After noting the possibility of numerous changes in the legislation and regulatory policy in this country, he stressed that the domestic economy is traditionally export-oriented and that this determines the task of joining that organization as soon as possible. According to Berezny, WTO membership will make Ukraine Europe-oriented and this in turn will raise the living standard by 3 percent through the lowering of prices, while GDP growth will increase by 2 percent. In addition, the markets that have opened up and the cancellation of antidumping investigations will allow an increase in the number of exported goods. The economic ministry’s statistics show that this will generate $4 billion. Berezny also believes that the WTO will solve the problem of foreign investments, of which there will be very many, worth $500 million. WTO supporters at the economics ministry have foreseen almost all objections. According to them, even state budget losses from lower customs duties will be compensated by taxes levied on imports now out of the shadow.

Berezny is not at all worried by the possibility that unlimited imports may kill the domestic consumer; he says that a number of industries here have already adapted and are ready to ward off foreign commodity expansion if necessary. Naturally, optimists in the economic ministry see certain problems. These include subsidies for the agrarian “yellow basket” and laws that must still be enacted, yet the overall mood is cheerful. However, its main motives boil down to the president saying that “We must join the WTO,” and the government can only say yes. Also, the government’s task is to convince everybody that this is really so. This has proved anything but easy. In particular, the parliamentarians stubbornly refused to accept the ministry official’s facts and arguments. Berezny’s key opponent turned out to be Valeriy Konovaliuk, first deputy chairman of the budget committee, who could be described as an opponent of “quick” WTO membership. He said that Ukraine would be there two or three years later at best because the domestic economy is totally unprepared to take such a responsible step. Konovaliuk’s first argument was that in all the years of independence Ukraine has managed to renew a mere 6-7 percent of its production facilities, so any industrial efficiency is out of the question, and that Ukraine should join the WTO precisely after complying with this requirement. After pointing out that this country should first receive market economy status and that there are other ways to enhance investment attractiveness and improve export conditions, Konovaliuk proceeded to list possible negative aspects of accelerated membership in this organization. Since state purchases will have to be made without preferences for domestic producers, such tenders will be won only by foreign companies, thus bankrupting the domestic producer. As a result, Ukraine will turn into a raw-materials appendage of developed countries, production will decline, and low-quality foreign goods will find their way onto the domestic market.

In fact, Konovaliuk regards Chinese expansion as the greatest threat (as though “Made in China” labels are not already on half the merchandise sold in Ukraine). His calculations show that by joining the WTO, Ukraine will lose between two and three billion hryvnias.

However, this hawk position was not taken by all the parliamentarians who took part in the discussion. Serhiy Kiroyants, for example, tried to reconcile the disputing sides by declaring that the government also has a right to decide whether we need the WTO. He asked Berezny for more information on what precisely Ukraine should be joining, adding that even parliament doesn’t have a clear idea about the WTO. It seems that there is no concrete program that would make it clear what we are going to join and why. And this, according to Tetiana Stepankova, vice president of the Ukrainian Association of Industrialists and Entrepreneurs, may lead to the eventuality that we will completely wreck our manufacturing, having failed to determine our strategic industries. Her association has its own view on the matter: we have been invited to join the WTO sector by sector, depending on the preparedness of various branches of industry. After listing the advantages and shortcomings, Stepankova arrived at the conclusion that only light industry is prepared to join, whereas for all the others this would be somewhat premature.