The last bastion has fallen on the road to Ukraine’s recognition as a market economy. Although the United States issued this recognition on Friday, Feb. 17, the European Union recognized Ukraine as a market economy on Dec. 21, 2005.
Ukraine’s president Viktor Yushchenko believes that this event is important primarily as proof that “the world, our partners are aware of changes in Ukraine and that the reforms that have begun are irreversible.” He adds that this decision indicates the high level of strategic partnership between Ukraine and the US, and that it will boost economic contacts and trade between the two countries, particularly by allowing Ukrainian goods access to one of the world’s largest markets. Prime Minister Yuriy Yekhanurov is more restrained. In his opinion, market status will help Ukraine’s accession to the WTO.
Ukraine’s foreign minister Borys Tarasiuk was right on the mark when he said that after obtaining this status Ukraine can expect better loan ratings and hence an influx of investments. However, the main thing is that the long-awaited status will ease the activity of Ukrainian business people with regard to antidumping investigations. According to Tarasiuk, they cost our businesses 300 million dollars a year. The only thing left to do is to sign a bilateral agreement with the US concerning mutual access to commodity and services markets. David A. Sampson, Deputy Secretary of the US Department of Commerce, announced that the American government plans to sign it in the next couple of weeks, and that Ukraine has proved that the market model has defeated the planned administrative one. In the eyes of the US, Ukraine’s guarantors are the World Bank, IMF, OECD, and EBRD. As a result, all antidumping proceedings against Ukraine will be considered on the basis of its new status as of Feb. 1, 2006.
However, Oleh Riabokon, executive partner in the law firm Mahistr & Partners (he represented Ukraine in the US in this matter), says that Ukraine obtained market status through the concerted action on the part of the government, leading metallurgical enterprises of Ukraine, and law firms. He says that the Ukrainian government was more concerned about the political aspect, overlooking the legal component. As a result, the Ukrainian state adopted the required laws but did not determine who would be protecting its interests. Meanwhile, they had to work with leading lawyers from various US corporations. As a result, Ukraine’s legal expenses were paid for by its metallurgical combines for whom the antidumping investigations were a terrible thorn in their side.
Riabokon noted that US recognition of Ukraine as a market economy will have a positive effect primarily on metallurgical and chemical enterprises, for now they will be able to increase supplies of their products to the US. As reported earlier by The Day, the bulk of products falling under antidumping investigations come from these two industries. Now all previous investigations can be revised. As a result the antidumping duties imposed on imported Ukrainian goods (from 42 percent to 168 percent) can be changed. The usual 10 percent import tax cannot be compared to this, of course. In order to have these duties revised, Ukrainian businessmen will have to apply to the US Department of Commerce. According to Riabokon, the US did not automatically lift restrictions on Ukrainian supplies.
Dmytro Bilokurov, director general of the Ukrainian Association of Ferrous Metallurgical Enterprises, believes that the revision procedures will be applied first to the Illich Metallurgical Combine of Mariupil (Donetsk oblast), Zaporizhstal, and Mittal Steel Kryvyi Rih (formely Kryvorizhstal). He added that “the revision procedures will be applied to all metallurgical combines whose products were subjected to restrictions.” Obviously, this will not be done free of charge. Riabokon noted that the cost of a single restriction revision procedure in the US costs “several hundred thousand US dollars” and that it takes about 12 months. But this question is definitely worth the effort. Bilokurov noted that 80 percent of metallurgical products are for export. However, whereas in 2004 only 200,000 out of 674,000 tons of mining and metallurgical products exported to the United States were semi-finished products, in 2005 such products made up half of Ukrainian exports. Bilokurov said that antidumping investigations resulted in exports shifting toward raw materials, which are not research intensive. The new status is expected to cardinally change the situation.
Metallurgists are also hoping that the revision of restrictions will allow them to increase their exports and thus raise the profitability level, which is important in the context of the new gas prices. These hopes are encouraged by Riabokon, who states convincingly that a level playing field will give Ukrainian business an extra option.
However, he also says that market economy status does not mean that there will never be any more antidumping investigations. The new status only removes quotas. But if the antidumping measures that were applied to Ukraine in the past “used artificial price indices established by the US Department of Commerce proceeding from data on Third World countries, not all investigations will be conducted exclusively according to prime cost and set prices of specific Ukrainian manufacturers.” Therefore, this lawyer notes, it will be very difficult to prove that Ukraine is dumping. The main thing is for business people not to assume that market economy status is a green light for dumping.
In any case, there are preconditions for such assumptions. Business people note some negative aspects of the new status, but agree that there are more pluses. So far, though, they are virtual. Everything will depend on whether our lawyers can win disputes concerning specific enterprises.
