A draft program of Ukraine’s membership in the European Union is to be discussed by the Cabinet of Ministers in upcoming sessions, revealed acting Minister of Economics Viktor Kalnyk. According to Mr. Kalnyk, the Ukrainian government is currently working on this document together with experts from the countries that are making or have made their way to the EU. Although this is an important first step, it is not expected that Ukraine will be able to join the European Union in the near future. The prospects of Ukrainian-European cooperation are assessed in an interview below with Valery Piatnytsky, international agreements and trade expert at the Ukrainian-European Policy and Legal Advice Center (UEPLAC).
“Ukraine has been assigned certain criteria which, if met, will bring the prospect of European integration closer: ensuring political stability and democracy, observing the rights and freedoms of individuals, and, naturally, the building of an effective economy. While the gross per capita domestic income in EU countries averages $15,000 per annum (though of course there are great differences between, say, Luxembourg and Portugal or Greece), any country that strives to become a full-fledged EU member should have at least 50-% of this index. The countries, which are soon to join the EU, may lower this hurdle somewhat, but in no way to the current Ukrainian level ($600 a year per capita — Ed.). To ensure the progressive development of Europe, one must be ready not only to take but also to contribute something. This in turn requires that a country should reach a certain level of economic development. EU membership is no panacea. Switzerland is not an EU member. Referendum results in Norway also tipped the scales against membership. As regards the Swiss, this is their peculiar egoism. They have always pursued a certain policy of isolation. But now they are so rich that they wonder why they should contribute money to the EU joint budget without taking anything from it. The same applies to Luxembourg and Denmark: their economic development is so successful that they are not recipients of the common European resources. And the weaker countries, such as Spain, Greece, and Portugal, rely on the aid of the richer EU members. Of course, the recipients of these resources bear great responsibility as far as their utilization is concerned.”
“What does the Partnership and Cooperation Agreement (PCA) mean for Ukraine?”
“The PCA is today the basic document setting out our relationship with the EU. Besides, it lays down the principles of international trade by which all countries of the world are guided. If we want to be part of the civilized world, we must also be guided by these principles. The PCA embraces the most important fields in which Ukraine must meet the requirements of European integration. This includes cooperation in politics, tax and customs regulation, culture, research, nuclear safety, etc. However, the PCA’s main purpose is to set a trade and economic pattern under EU standards. But this is not a preferential agreement, either on our part with respect to the EU or vice versa. The PCA lays down the most-favored-nation treatment rather than free trade. The document notes that the signatories may consider the possibility of concluding a free-trade agreement as the next step — but only if the level of our economic development reaches market-oriented targets which will allow us to conduct effective commerce in the mode of free trade.”
“Can Ukraine protect its domestic market without breaching PCA conditions?”
“There are three operators on the market: the state, enterprises, and the population. Very often, their interests coincide. The consumer aims to receive high-quality goods at a reasonable price, the state tries to ensure tax collection, execution of the budget, and economic development as a whole, while producers want to gain profits. But enterprises face a problem. They would like to get hold of cheap imports for their own production purposes on the one hand, and to protect themselves from imports on the other hand. This situation is reflected in our different trade practices with different states. We have free-trade agreements with CIS countries, i.e., zero customs duties are being imposed on practically all goods. Moreover, in the case of Russia, even VAT is not levied on the border. This practically means a free flow of goods, although the structure of goods, except for energy resources, is symmetrical. As for EU countries, there are certain tariffs. There should be an integrated approach to protection of the domestic market. We cannot set customs duties for EU and CIS countries, which provide for so many exceptions that practically all-whole trade must be carried out in the mode of exception. Making exceptions, we create non-competitive conditions for our producers. We grant privileges to some and withhold them from others. The element of protectionism should give our businesses an opportunity to grow. If we are unable to create conditions for healthy competition on our own market, it is impossible to talk about protecting the domestic market from outside influence.”
“There is so much talk now about not only European integration but also about further rapprochement with Russia...”
“Our relations with Russia should rest on the international principles of trade. Yes, there is a free-trade agreement. But there are also the world principles of such agreements. If there are common rules of indirect taxation, you can’t evade them. Today, Ukrainian- Russian relations are based on hushed-up deals, which in no way promotes the transparency of trade. We must build our cooperation on the foundations satisfying the principles of free trade.”
“What is the positive and negative experience in bringing Ukrainian legislation closer to EU standards?”
“We want to integrate in the EU, where there is a multitude of legislative norms, some of them being mandatory and some optional for the EU members. What is needed in this context is an analysis of our legislation, i.e., to what extent the latter differs today from the European one. This is a lengthy process, the more so with due account of our economic capabilities. This is why we talk about the rapprochement, rather than the harmonization, of legislation, the latter process being a higher degree of correspondence. We select the key elements of European law and strive to incorporate them in ours. But Ukraine’s major problem is not so much the preparation as the execution of a new legislation. For we have a large number of good laws which do not work in practice.”
“Now there is a host of public opinion polls showing that the population’s attitude to European integration is ambiguous...”
“It is easier for many Ukrainian citizens to accept rapprochement with Russia: there is no linguistic and educational barrier, and the economic structure is much the same. People are sure it is far simpler to find a job over there. Conversely, Europe requires a different language and different professional standards. We are fully aware that most of our people can only be employed as a low-paid workforce in Europe. But the European market is solvent and has a huge potential. And what Russia and we have in common is our reciprocal insolvency.”
“Viktor Kalnyk has confirmed Ukraine’s intention of joining the World Trade Organization as early as this year. How would you assess this step?”
“As is known, Ukraine faces a series of problems with regard to this. It was announced today that most of them have already been solved. But our chief problem is that we seem to be doing the housework, so to speak. We are solving something without changing the system itself. For instance, we have canceled minimal customs values, but this point has not been settled in terms of law. There should be a deeper and more systemic process of change.”
