Almost in the WTO

But not quite yet. Valeriy Piatnitskiy, vice Minister of economy of Ukraine, tells commerce what is delaying Ukraine's entry into the World Trade Organization.

In the absence of a force majeure situation, Ukraine will join this authoritative organization in 2006.  Preparation for accession has been carried out in two directions, both internally and externally.  The first is an external process, in which we are reconciling our position with the WTO: we are holding bilateral negotiations, preparing the necessary documents, in particular the final report of the Working Group, which will then have to be approved by the WTO General Assembly.  After approval, the next stage is ratification by Ukraine's Parliament.  Parliament needs to ratify the protocol as an international agreement, and then pass a number of legal documents as well.  We have some time for this, since an applicant is given at least three months to ratify membership.  Ratification is an internal process, and will be subject to the peculiarities of the political situation in Ukraine.  The parliamentary elections will be held in March after which various coalitions will be formed and the new Speaker of the Verkhovna Rada will be elected.  The new Rada will likely commence acting only in autumn.

I do not think that membership will be ratified instantly.  Ukraine is not the country it was in 1994, when the Partnership and Cooperation Agreement with the European Union was signed.  That agreement was ratified almost immediately after its signing.  At the time, Ukraine was a young State and needed recognition in the world.  We looked for the agreements then.  Now, 11 years later, the situation is somewhat different.  Ukraine is a well-known State and, therefore, I do not think membership will be ratified right away.  Necessary procedures will take some time to complete.

WTO accession envisages the approval of a large package of documents, which will include the consolidated outcome of tariff talks, results from negotiations over the services market, and the commitments specified in the Working Group report.  These require implementation, the adoption of new laws and by-laws, etc.  I want to emphasize that accession is a process.  Joining the WTO does not imply that you join it one day and you have everything fulfilled the next.  Of course, the lion’s share of necessary rules and norms has already been incorporated into the legal framework and we comply with them.  Yet, many measures still need to be taken.  The World Trade Organization is a living body where members negotiate constantly.

What is the ratio of what has been done and what needs to be done in order for Ukraine to join the WTO?

In term of adopting legislation, the majority of the work has been done already.  As of today, a number of issues have not been solved, particularly regulations on exports.   Undoubtedly, we need to pass legislation that will regulate export duties. But I believe that we can work out a formula where we set commitments in the Working Group report, and after accession we make necessary changes to the law.

In the services sector the situation is similar.  In the Law on Insurance we defined a certain five year transition period.  Before foreign companies come to Ukraine, local insurance companies have time to build their muscles.  Even today, before Ukraine joins the WTO, domestic insurers have to start working on laws and by-laws that will be in effect when company branches.

Coming back to your question, I would say that more has been done than there is left to do.  The position of WTO member-states is very clearly articulated.  Ukraine is on the threshold of actually joining.

As of now, Ukraine has completed negotiations with forty countries.  Talks are still being held with some other countries in the Working Group.  When will they be completed?

The talks with the United States are very dynamic.  Protocols have not been signed with some other countries as well.  I am convinced that we will find common ground in the dialogue with Australia, which has been pushing for Ukraine to reduce quotas on the import of Australian sugar.  Hopefully, all bilateral negotiations will be completed before the next Working Group meeting in March.

As a person working 'inside' the process, what benefits would say WTO accession bring to Ukraine?  What negative consequences?

Cooperation with any international organization opens up opportunities and brings risks. The World Trade Organization is not a charitable organization, but a system of rules created by its members.  I would say that a 'supremacy of rules' is at work at the WTO, rather than the 'supremacy of law'. For instance, take the cross-border movement of goods, particularly customs valuation and border-crossing rules. WTO members agreed on the way they will value goods and define their origin. The bottom line is the establishment of competitive environment.

We are leaving the shadow zone and entering the light one, where every country plays by the same rules. For example, if the Russian Federation joins the WTO we will shake off the currently widespread political rhetoric about our common history within a single country that we are brothers, etc. We already know what this ideology means in practice. If we agree to a contract that clearly defines the obligations of both parties, as is done in the WTO, there will be less misunderstanding. If agreements are broken, there is a system to adjudicate disputes within the World Trade Organization, a civilized tool to solve disputes. It is a 'quasi-court', where the whole system protects rights or compels the fulfillment of duties. The balance between large and small economies is thus maintained.

Another advantage of the WTO is that it is a constantly evolving system. Its member countries have to adjust to the most up-to-date technologies, at least within the frame-work of international agreements.

On the other hand, there are risks concerning competition. There are weak industries, but we should consider whether we are properly developing certain industries. For example, the agricultural sector is not ready to complete. But it could be, if local standards are brought in line with international ones. Our honey meets international standards, and so we have begun exporting it. We are thus able to compete successfully.

Russia, our neighbor, is also interested in joining the WTO as soon as possible. What country will be the first to join, Ukraine of Russia?

I do not think that there will be a large time gap between Ukraine's and Russia's accessions. However, I believe that Ukraine will join the WTO earlier than Russia, outpacing it just a bit. We were the first to sign the EU-Ukraine Partnership and Cooperation Agreement, but that is not the most important point. The most important point is how well we have fulfilled the agreement.

*USAID I BIZPRO is part of the U. S. Agency for International Development's effort to improve the economic development of Ukraine, Moldova, and Belarus (www.bizpro.org.ua).

Commerce

January/February 2006