The Chamber of Commerce and Industry in Kyiv recently hosted public hearings on Ukraine’s WTO membership. The cabinet wants it accomplished by 2005 and is likely to manage it, all things considered. Thirteen bilateral protocols have been signed with Mexico, Uruguay, New Zealand, Canada, South Korea, Slovenia, Latvia, Georgia, India, Hungary, the Czech Republic, Slovakia, and the EU). Talks with Turkey, Cuba, Japan, Poland, Norway, and other countries are nearing completion. Meanwhile, the question whether WTO membership is the best choice for countries with transition economies is still to be answered. The cabinet has taken care of the theory — free trade, liberalization of tariffs, support of competition, and other WTO principles are very likely to become Ukraine’s obligations in 2004. In addition, Ukraine’s WTO orientation is connected with its Euro-Atlantic strategy. Foreign Ministry State Secretary Oleksandr Chaly said not so long ago in Kyiv that, unless Ukraine becomes a WTO member, it “might not only fail to make any progress in the European integration process, but also veer off the course of integration.” At this stage we have to figure out the pros and cons of WTO membership — precisely what the CCI public hearings tried to do.
WE HAVE TO MOVE FORTH
Serhiy SKRYPCHENKO, CCI president:
The WTO has a practically worldwide membership, so we’d prefer that Ukraine joined it in 2004. We know that they plan to work out new world trade parameters the following year. After that, WTO membership will be a bigger problem for Ukraine, and the admission procedures could be drawn out indefinitely. Numerous experts believe that WTO membership in 2004 is a rash decision and that it might have negative consequences. It should be noted that, by joining this organization, Ukraine could face a number of factors that would have a negative effect on certain sectors of the economy. Getting our national producers adjusted to the new rules of trade will take some time.
In order to at least partially cushion this negative impact, we should make the best use of the time left before admission. Our ministries, agencies, state structures, and volunteer organizations need to do their best. We must defend Ukrainian positions and certain temporary privileges while negotiating our WTO membership, proceeding from the actual status of our economy and foreign trade relationships. Yet even these efforts will not solve the global problem of our products becoming competitive. Becoming competitive is the only way we can protect the domestic market and enhance our own export potential.
I see a solution to this problem in a national program aimed at increasing this competitiveness adjusted to WTO requirements. This task cannot be solved within limited competition. This is another aspect in favor of WTO membership. I would like to mention only several of many factors involved in such a program. First, the need to upgrade capital assets and bring them into conformity with the unwritten international standards by introducing progressive technologies. We all know the situation. Most enterprises have equipment, which is more than obsolete; their capital assets are depreciated by 30-90%. The only remedy is investment, along with stable legislation and a stimulating tax structure. Second, we must concentrate on advanced personnel training, primarily in the machine-building industry. The Verkhovna Rada hearings show that the situation is critical there. Third, we have to protect intellectual property...
I could spend a long time listing these factors, but the main thing is to determine the place of Ukraine on the open world market. Here we also have a lot of factors, and they are all important. CCI business committees dealing with the light industry, medium and small business, and agribusiness sectors held meetings to discuss possible WTO membership consequences. Proposals were worked out and submitted to the cabinet, aimed at not only inspecting but also jointly resolving other matters. Take but one example: footwear imports currently surpass domestic output eight times and they continue to increase (103 million pairs in 2002 against 53 million in 2001 and 29 million in 2000). A pair of imported shoes was levied $0.59 customs duty in 2000 and $0.38 in 2002. The only explanation, of course, is the absence of proper customs control over such imports, tax evasion, and so on. The same is true of household appliances and a number of other goods. It’s no use talking about developing the nation’s output and competitiveness of Ukrainian commodities under the circumstances.
There are a great many other issues: Ukrainian business being informed about WTO rules, arbitration, and so on. CCI is willing to cope with such matters; in fact, we are working on a number of them, but we are mostly concerned about certification and quality control in keeping with international standards. We all know that an industry quickly loses competitiveness without this. It is also true, however, that standardization is very expensive. Note that in several countries businesses are aided by the state. In Hungary, ISO-900-type quality control systems are introduced at 400,000 enterprises (compared to about 300 in Ukraine) and certification allows the state to reimburse 50% of expenses involved in the introduction of such quality control. We have submitted recommendations to this effect to the government...
GETTING THERE BY FOOT OR ON THE MOVING WALKWAY?
Valery KHOROSHKOVSKY, Minister of the Economy and European Integration:
Frankly speaking, the Ministry of the Economy [and European Integration] regards the terms and conditions of WTO membership primarily as a tool of domestic transformations. The latest presentation on the subject [by Yaroslav Zhalilo — Author] could be summed up something like I’d love to, but the circumstances prevent me from doing it. Of course, no one opposes capitalization, preparing the economy for WTO membership, and enhancing the competitiveness of our products. People dealing with the economy consider this to be the highest priority. Somehow, over the past decade little if anything has been actually done about it. WTO membership is certainly not an end in itself, but we must make sure that we join it on the same terms as the other 145 countries, lest we find ourselves on the sidelines of world economic process. Speaking of terms, we do insist on joining WTO in 2005, for by that time the new WTO trade rules and standards will have been actually worked out. Participating in this process and remaining an observer is much better for this country. We hear that the macroeconomic and social consequences of WTO membership are still to be determined and everybody wants statistics from the MEEI. What statistics can we present when we openly admit that 50% of the national economy is in the shadow sector? How can one expect such statistics to be accurate, considering that the budget process still remains to be made transparent and that we can’t assess the budget appropriations received by noncompetitive sectors? What statistics can we provide if we can’t figure out how much is smuggled into this country as illicit imports, actually ruining the domestic market? In this sense the problem of contraband takes precedence over that of tariffs.
Therefore, we consider all the arguments about holding back WTO membership until such computations are made as attempts to avoid membership in principle. Those who fly abroad know that passengers boarding flights are assisted by moving walkways (in big airports like Chicago’s O’Hare — Ed.). I mean they can walk or ride those belts. The WTO is like those moving walkways. We must always remember that the WTO is a tool that can be used both ways, to do oneself good or ill. Damage will be done only if we fail to carry out domestic reforms. In that case our WTO membership and our economy, maladjusted to the civilized rules of the game, will have negative consequences.
However, let’s take a sober look at our actual condition. We say that such-and-such enterprises must be prepared for WTO membership — in other words, they have to be rendered competitive. This means that we must finance these enterprise today, renovate their capital assets... This immediately makes one wonder how and with what money. There are three options: bank loans, foreign capital, and authorized capital stock. Question number two: How can one expect to receive such investments? Answer: On WTO terms and conditions. What we must do next is restrict preferences. That’s normal competition, and we won’t be able to break the rules only when we are inside the WTO. The government will then be able to influence the processes only to a limited degree, and we will be able provide conditions in which the businesspeople will decide what’s best for them.
To sum up, we have determined our WTO strategy, but once again, only as a tool for making changes at home. We will actively pursue a policy aimed at making our economy competitive. As for budgetary influence, our stand is clear; we are against budgetary appropriations for all noncompetitive industries. We are for the rational application of the bankruptcy laws. We want our economy to be transparent, because it’s the only way to increase the GDP and foster our own progress...
