05 June 2004 16:49
Ukraine needs to focus on joining WTO - expert
Russia is stealing a march on Ukraine in moves to the EU and WTO, a Ukrainian economics expert has said. He
contrasted Ukraine's uncertainty over in which direction to move with Russia's determination to join the WTO
first. Whichever joins first will have big advantages in future regional leadership, the article said. The Moscow-backed
Single Economic Space, an economic union of Russia, Ukraine, Belarus, and Kazakhstan, is only slowing down
Ukraine's progress towards WTO membership, the expert said. The following is the text of the article by Volodymyr
Hranovskyy, the general director of AHT Consulting, entitled "Ukraine's WTO membership gaining geopolitical
nature", published in the heavyweight Ukrainian weekly Zerkalo Nedeli on 29 May; subheadings have been inserted
editorially:
In order to determine the prospects for Ukraine's accession to the WTO, one needs to return to the actual
paradigm of the foreign policy conducted by our country over the past 10 years. The often criticized policy of a
multi-vector approach arose not by accident and was based on completely objective factors. From the very first days of
birth at the level of ideological considerations, it was proclaimed that our course was towards the European Union and
was unchanging. The only question was the method and speed of entry.
But the reality was different. First, there was the psychological uncertainty of the president [Leonid Kuchma] and
the leaders of political parties and financial groups about the correctness of the European choice. All those people in
charge of running the country ([former President Leonid Kravchuk], Kuchma, [former prime ministers] [Valeriy]
Pustovoytenko, [Anatoliy] Kinakh, [Pavlo] Lazarenko, [former parliament speakers] [Leonid] Plyushch, [Oleksandr]
Tkachenko, [Oleksandr] Moroz and others) were the best and conscious managers of the Soviet school and way of life. And
their uncertainty was not without foundation. They did not understand the language that people were speaking to them in,
but they knew exactly that their qualifications and level of preparation was so low that they would not cope with a
European choice project, and waited for help.
Ukrainian dithering
And help came, only not from the EU, but from the nascent Ukrainian business, which was already absolutely sure that
Europe meant competition that they would not survive. Business easily discovered the weak point of the former Soviet
elite - all those former officials were poor. And all their former activity was based on the principle of always
proceeding in compliance with the declared course, but never taking on higher obligations. Just as they destroyed the
USSR, so they destroyed Ukraine's European choice. I don't know if they understood, but I am sure that in the
West they certainly understood that without a systemic programme aimed specifically at Ukraine (for example like the
Marshal Plan to restore Europe after World War II), Ukraine would not be able to travel the road that countries of
Central and Eastern Europe had trodden.
The success of the transformation of the countries of Central Europe was 50 per cent connected with the interest in
those countries of the actual EU itself, and 50 per cent with the efforts of the countries. We had neither the one nor
the other. From that point of view, accusations both from Ukraine and from the EU, in the absence of evident
manifestations of mutual interest, are logical and based on a lack of mutual trust.
Second, this is all the economic aspect. At present the level of economic and institutional development of Ukraine is
such that Ukraine needs to drive itself not for political achievements but to defend quite specific interests of the
Ukrainian economy, which will not withstand competition from European producers and financial institutions. The idea
that Ukraine should become an EU member without solving the question of WTO membership and creating a free-trade zone
with the EU is a Utopia that the country's leadership and the Foreign Ministry have foisted on society.
In the Russian vector of Ukraine's foreign policy, the situation is somewhat different. However, from the
viewpoint of grounds for uncertainty, it is sufficiently similar to the European vector. The economies of Ukraine and
Russia are of the same type, parts of what was once a single whole. That is, the structure of production, price level
for labour, capital and land are identical. There is a difference in prices only for such an important production factor
as energy sources. Therefore it would be difficult to believe that Russia would simply give it up and go for an
unrestricted free-trade zone with Ukraine. This has been confirmed by the history of our trade relations in the past 12
years, which have been more reminiscent of a state of cold war than a preferential trade system.
Having similar grounds for doubt about feasibility of the foreign policies being pursued, the Ukrainian leadership
tried to make some steps in both directions, gradually creating the image of an unreliable partner with an unformed
world view that has not determined its future. The multi-vector policy is a sign signifying the state of the uncertainty
of the country and its leadership in the first years of independence.
WTO - the key
In this case it is the WTO that was the key to the door leading to the world trade system and is the foundation stone
that can smash the dilemma facing Ukraine. It is precisely WTO membership that could have put a full stop at the end of
this impartial story of Ukraine's multi-vector policy. Because by joining a world rather than a regional trade
organization, the country is obliged to answer not "vector" questions, but what place it will occupy in the
world economic system. And that is an entirely different level of self-determination. But up to now, people responsible
for WTO accession are more like underground workers carrying out some sort of secret tasks in Geneva than public and
up-to-date managers in whose hands lies the future of the country's economy.
Until recently it was possible to say that the pace of Ukraine's negotiation process with the WTO was higher
than that of Russia. However, Russia's negotiating positions were more directed at protecting markets than the
Ukrainian position. This affected the pace of negotiations. At present, after the signing of a bilateral treaty on
reciprocal access of goods and services between Russia and the EU, the correlation of prospects for the entry of Ukraine
and Russia to the WTO considerably changed. Considering the fact that in negotiations with the EU, Ukraine, to all
appearances, was agreeing to more liberal rates of import duty, a campaign was periodically developed within the country
on the part of business and lobby groups to protect their interests through parliament. As a result, against the
background of obligations undertaken by Ukraine in the framework of the negotiation process with the WTO, in parallel
laws are being passed by parliament that cut across accords reached in Geneva. Considering the closeness of the
presidential elections in Ukraine [on 31 October] and the lack of clarity of the essence of the SES [Single Economic
Space - economic union between Ukraine, Russia, Belarus and Kazakhstan] for the outside world, it can be assumed that
there will be a slowdown in Ukraine of the negotiation process on entry to the WTO, while the negotiation process with
Russia will accelerate.
Russia does not at all intend to make a choice between the two strategies of joining the WTO proposed by [Russian
President Vladimir] Putin for SES member countries. The first of them proposes first WTO membership for the countries
and then the formation of a commercial union. The second proposes first the formation of a common customs territory and
then conducting a negotiation process with the WTO. Obviously, if the formation of the SES depends on the accession of
Belarus to the WTO, it will not be formed for the next 20 years. In exactly the same way, efforts by Russia to sign a
bilateral agreement shows that Russia will not postpone its WTO membership until the SES is formed.
Single Economic Space millstone for Ukraine
While Russia is discussing with Ukraine, Belarus and Kazakhstan what can be got from the SES - a free-trade zone, a
customs or currency union - it is pursuing one single strategy. Russia cannot allow Ukraine to join the WTO ahead of it.
Its aim is to join the WTO first in order to get its hands on that legal instrument for pressure in bilateral relations
with its neighbours. Russian leadership in the region most likely will be built on the basis of its integration into the
world space, since internal attempts like the SES are doomed to failure from the outset. Russia knows this. But Russia
is just as helpless before its challenges as Ukraine is before its. And so, full-speed entry to the WTO today is
virtually the only possible effective scenario for Russia. From the economic viewpoint, Russia does not believe in the
SES, but Russia needs indisputable advantages - that is its weight at the international level, and participation in the
work of international organizations. The WTO is one of them.
For Ukraine, being hooked by the SES means renouncing its obligations assumed in the WTO framework. And unlike the
practice of state cooperation in the post-Soviet space, the WTO is an organizational structure, non-fulfilment of whose
obligations has direct consequences in the form of trade sanctions. Even the USA and Europe are not exceptions to
this.
Loss of priority for Ukraine in the negotiation process on WTO membership may prove very costly for the Ukrainian
economy. Because if, against the background of the trade wars that we are going through in bilateral relations, Russia
becomes a member of the working group taking decisions on conditions and time frames for Ukraine's entry to the
WTO, it will use it as an instrument to solve problems in bilateral relations and strengthen its status as a regional
leader. However, such a strategy is also acceptable for Ukraine.
The present leadership of Ukraine has not taken up these challenges. If the next government does not take them up
either, then Ukraine's political weight in the world and the region will fall, although there are sufficient bases
for Ukraine to fight for its leadership.
[Zerkalo Nedeli] |
RUSSIA IN FACTS
