$75 million now and more later
The imposition of US trade sanctions on Ukraine for its failure to legislatively settle the CD problem has had no bomb effect on Ukrainian CD vendors. Not even a shade of panic was to be seen last Wednesday in one of the biggest CD markets at Petrivka. None of the vendors polled by The Day’s correspondent is going to react in any way to the news about the imposed sanctions (although the news has reached everyone). When asked how they see the present situation, many answered, “I don’t care anything about what they’re going to impose out there, and I guess my boss doesn’t care, either.” Most of those who sell compact discs believe that the restriction of exports and imports of certain types of products will not impact on their trade. The only threat, they say, can be a presidential decree banning the sale of unlicensed products. But even this threat doesn’t seem to frighten some vendors: they are positive that they will sell unlicensed (and cheaper) discs as long as there is demand for them, no matter what sanctions there might be.
The decree to impose $72 million trade sanctions on Ukraine signed by US President George W. Bush on December 20 last year came into effect on January 23, The Day learned from the press service of the US embassy in Ukraine. According to an embassy source, the official rationale of the custom tariffs which actually ban the imports of Ukrainian metals and some products of the chemical and light industries is the same: the absence of effective measures to fight counterfeit laser discs produced in this country. And, as expected, the bill On State Regulation of Production, Export, and Import of Laser Discs adopted by Verkhovna Rada on January 17 did not impress the US side in the least. According to Yaroslav Voitko, the head of Ukraine’s trade mission in Washington, DC, the document (which was born not without financial influence on the lawmakers) “did not satisfy the United States” because it “did not satisfy the requirements of international legislation.” We should do justice to the diplomatic tactfulness of US Embassy Consul for Economic Affairs Ken Fairfax who, according to a UNIAN report, said the American side received the text of the document only on Monday. It is being analyzed, he said, and the sanctions could later be canceled. The embassy press service even reassured The Day that “considering the specific relations with Ukraine, the US trade representative is ready to speed up the procedure of canceling the sanctions,” of course, on the same condition, “the law’s satisfying WTO norms.”
“The law adopted by our parliament does not quite meet the wishes of the international community,” Deputy Chairman of the State Department for Intellectual Property Issues Viktor Redko told The Day. “If they were fully taken into account, it would be possible to fully regulate the use of intellectual property with the copyright owner’s permission.”
According to Mr. Redko, the law limits the influence of copyright owners on our manufacturers since it “focuses primarily on the licensing of CD manufacture as a type of economic activity while placing copyrights as secondary.” However, he maintains, “the new law provides for mechanisms to fight breaches of intellectual property rights, administrative or even criminal liabilities [up to five years imprisonment].”
It should be noted that the United States is also dissatisfied with the law as “overlooking” the discs moved through Ukraine’s territory by transit, those brought in or out of it by individuals for their own use, and those sent by international mail.
Far from all experts, however, regard the imposition of US sanctions on Ukraine exclusively within the context of the copyright protection drive. “The raised custom tariffs on Ukrainian metal products vis-а-vis the impending recession of the world economy was quite expected,” believes Olha Pintiuk, an economist with the International Center for Policy Research (ICPR). According to the center’s data, there is a visible trend of restricting the imports of Ukrainian metals in the United States: while Ukraine accounted for 5% of the aggregate US imports of metal produce in 2000, in 2001 the figure shrank by half. “This resulted primarily from the anti-dumping investigations and the steady raising of custom tariffs,” she stresses. “The United States’ drive to defend intellectual property rights is clear evidence of its natural wish to protect its own market.” She does not believe, though, that the trade sanctions are likely to seriously hit Ukraine’s economy: from 2000 to 2001, the share of exports to the United States by Ukrainian metallurgical industries shrank practically threefold from 10%.
The Ukrainian government has a different view on the effects of the sanctions: on January 22 Prime Minister Anatoly Kinakh reiterated that Ukrainian exporters might well lose at least $470 million annually. Thus the Cabinet of Ministers will recommend President Leonid Kuchma sign the CD bill passed by Verkhovna Rada and submit his proposals for its improvement. Incidentally, as Redko told The Day, “Our department is already drafting a new version of the law that would take into account all the nuances.”
Parallel to that, the Interfax-Ukraine news agency reports, Premier Kinakh will try to “do everything possible to minimize the negative consequences of the possible introduction of US sanctions.” This should certainly mean that it is going to be very difficult to do that “everything.” The demand for the products of metallurgical enterprises in this country is far lower than the supply, so it will be absolutely impossible to reorient the export metal to the domestic market. It should be noted in this connection that according to ICPR data the metallurgical sector accounted for 26% of Ukraine’s overall industrial production in the first eleven months of last year. “It is extremely difficult to find other external markets,” Ms. Pintiuk says. “Russia doesn’t need our metal, it has enough of its own. The only hope left is Asian countries. This year, the exports by Ukrainian metallurgical enterprises have fallen by 4-5%.”
INCIDENTALLY
On January 23 Prime Minister Anatoly Kinakh announced a total ban on the import of US chicken meat by Ukraine. The next day Jim Sumner, president of the US Poultry & Egg Export Council, said the decision of the Ukrainian authorities was unjustified and deserved countermeasures. It is still unclear what exactly countermeasures he meant.
Mr. Kinakh said the ban on the import of American poultry should in no way be construed as retaliation to US sanctions. According to the premier, the decision on allegedly foul fowl was preceded by a long investigation that just happened to end simultaneously with the Americans imposition of prohibitive duties on metallurgical and chemical products. It is also worth noting that, addressing a press conference some time earlier, the premier mentioned imported chickens immediately after he promised to staunchly defend Ukrainian interests in our relations with the US and have the sanctions lifted. Many journalists have somehow gained an impression that these two events are connected.
