Kyiv has chance for bigger foothold on Russia’s markets with WTO help
In 2002 Ukraine will complete considering the commercial claims put forward by various members of the World Trade Organization, in 2003 make appropriate changes in its laws, and join WTO, forecast Deputy Economy Minister Andriy Honcharuk on February 27. The WTO Ukrainian group of representatives of 43 countries, slated to meet in early May, will prepare draft conditions for Ukraine’s entry into this organization.
The WTO is a union of countries abiding by the principles of free trade and offering much as possible the same terms for foreign businesses those offered their residents. With import duties on foreign goods gone after joining the WTO, the volume of imports in Ukraine will skyrocket by UAH 5-6 billion. Simultaneously, any restrictions on Ukrainian exports to the world’s richest markets will also be lifted, with most of the current anti-dumping investigations against Ukrainian producers of steel and textiles quashed.
“The benefits for Ukraine from joining the WTO outweigh the likely losses, as the WTO share in world trade is 93%. These markets can be open to us,” says Andriy Honcharuk. In his opinion, lack of tough competition from foreign companies curtails the chances of the Ukrainian economy in many branches. “We can seal our domestic markets to advanced foreign businesses, but it will not help us to move ahead,” he argues. As he admitted, recently he had to deal with a compensation claim to one Ukrainian insurance company and concluded that protecting domestic producers from foreign competition leads Ukrainian companies to lose motivation.
The week before last, Andriy Honcharuk held bilateral talks in Geneva with representatives of the WTO Ukrainian group of states. Only by settling all trade claims with these countries can Ukraine expect its application for WTO membership to be considered. The deputy foreign minister stated that the claims of Bulgaria, Hungary, India, Argentina, and Lithuania have been settled. Meanwhile, Turkey has come up with new claims, but Mr. Honcharuk did not specify what they were. Moldova, a recent newcomer to the WTO, also held talks with Ukraine. Ukrainian diplomats do not rule out that Moldova may put forward its claims as to the wine trade against Ukraine. However, it is widely believed that a candidate country gets a real chance of accession to the WTO primarily if it solves all trade problems with the Big Four, the USA, European Union, Canada, and Japan. While Ukraine does not seem to have any major problems with Canada and Japan, Washington and Brussels could raise with Kyiv a host of questions.
It was in Geneva that the United States made its first official protest about the so-called anti-piracy law passed by Verkhovna Rada to curb production of bootleg CDs. The Americans claimed that the law did not provide guarantees against the illegal production of CDs. “We must demonstrate that the licensing and control envisioned by the law are truly effective,” the deputy economy minister maintained. He said the United States had taken a tough stand which, however, did not stop it from expressing hope that Ukraine will get WTO membership soon, perhaps in the immediate future and prior to the May session of the Ukrainian group of countries, Kyiv will initiate rigid measures against optical media goods pirates to send a signal to Washington that it wants to put things in order in this sector. Already only two of the former fourteen CD plants continue production.
In its turn, the European Union expects Kyiv to cancel its restrictions on the import of vehicles and export of metal scrap. The Ukrainian government has already submitted its proposals to Brussels on how to solve the car import issue, and the answer is expected any time. “We propose replacing tax breaks for domestic car producers with a 15% import duty,” Mr. Honcharuk stated. Judging by his words, the competition for the Zaporizhzhia-based auto plant is likely to increase soon. The issue of metal scrap may eventually be short-lived as there is little of it left in Ukraine. Faced with shortages of inputs for its steel plants, the authorities in Donetsk, Dnipropetrovsk, and Zaporizhzhia oblasts have already imposed tough restrictions on its export. Even this will not save the steel industry from the need to import such inputs or implement dangerous projects involving metal scrap from areas affected by Chornobyl.
In sum, the claims of all WTO member countries relate to trade in sugar, sunflower oil, grain, and fish. The present import restrictions on these goods are quite effective, the Economy Ministry says, resulting in the fact that 93% of all food sold in Ukraine is domestically made, a unique indicator in the world economy. If the WTO guidelines are met, this share will probably decline, but Ukrainians are unlikely to change their preferences for buying local food. According to Andriy Honcharuk, in its negotiations with the WTO Ukraine is sticking to its guns on many issues, trying to reach compromises with the countries that are putting forward claims.
President Kuchma instructed the government to get a jump on Russia joining the WTO as Ukraine has a special advantage in doing so. If Kyiv beats Russia to WTO membership, it could become a member of the Russian group and put forward its trade claims to Russia as a WTO member country, securing, in so doing, proper trading terms for itself with its major economic partner. By contrast, if Moscow gets the jump on Ukraine, it could condition Ukraine’s entry by tougher and more lucrative terms for itself. On February 18, Ukraine and Russia held talks in Kyiv on creating a free trade zone, with Russia insisting on exempting twenty-eight goods from the free trade agreement, oil, gas, and gasoline included. But once Ukraine is in the WTO such exemptions will be out of the question.
