Without pomp or ceremony, Ukraine became the 152nd member of the World Trade Organization (WTO) on May 16 and the largest post-Soviet nation to join.
Without pomp or ceremony,Ukraine became the 152 and member of the World Trade Organization (WTO) on May 16 and the largest postSoviet nation to join, following in the footsteps of Armenia, Georgia, Kyrgyzstan and the Baltic states.
Ukraine’s membership arrives after 14 years of efforts, which were fought by Ukraine’s Socialists and Communists, but stridently supported by Ukraine’s probusiness interests.
“This date will go down in our country’s history as a day when Ukraine was acknowledged by the international public as a fullfledged member of the world economic community,” Ukrainian President Viktor Yushchenko said May 16.
Ukraine’s economy will benefit from WTO membership and its Gross Domestic Product, estimated by the World Bank at $106 billion in 2007, will grow, said Bohdan Danylyshyn, Ukraine’s Minister of Economics.
“Ukraine’s WTO entry will help GDP growth, due to an increase in exports of domestic products of at least $1.5 to $2 billion, and on favorable terms — up to $4 billion,” he said.
Due to the long amount of time it has taken Ukraine to prepare for WTO entry, no sharp changes will affect the country’s economy, said Veronika Movchan, head of the Center of Economic Development at the Institute for Economic Research and Policy Consulting (IER), a think tank cofunded by the Ukrainian and German governments.
Ukraine’s GDP will increase by 3 percent in the next five to seven years, and membership will improve access to overseas markets for domestic commodity producers and restructure the Ukrainian economy, Movchan said.
Some industries will benefit while others will suffer, observers said.
Exportoriented industries, such as metals and chemicals, will benefit the most because of improved access to markets, she said.
Those industries already meeting domestic demand will be able to step up production for export, like coke and other nonenergy producing minerals found in abundance in Ukraine.
However imports will rise quicker than exports and Ukraine’s trade deficit will multiply, Movchan said.
The success of Ukraine’s economy and its domestic businesses under WTO membership is still under question because of the low quality of government regulation, said Kostiantyn Kuznetsov, an analyst at the Razumkov Center for Political and Economic Studies. “Even the best reforms adopted by the government should be observed in the terms of the shady and corrupt schemes present here.”
Under the most risk after WTO entry are the agriculture, food retail and car manufacturing sectors, which need to substantially improve their production technologies to compete, Movchan said.
Government subsidies to the agroindustrial sector will slowly diminish and eventually stop, she said.
“State support will be canceled, some privileges will be lessened and there will be a decrease in import duties by 25 to 30 percent,” Movchan said. “Thus cheaper foreign products will come to Ukraine.”
Addressing his fellow Yulia Tymoshenko Bloc members at a May 19 forum at the European Bank for Reconstruction and Development, Ukraine’s biggest automobile magnate, Tariel Vasadze, criticized them for supporting Ukraine’s WTO entry under conditions that will hurt Ukraine’s industry and his business.
Both Vasadze and auto seller Petro Poroshenko have spent years lobbying the government to impose tariffs and duties on auto imports so that their factories could remain productive and sales could remain brisk.
The labor market will experience an increase in demand for both skilled and unskilled labor, the most in metallurgy (industrial sector) and at hotels and restaurants (service sector), according to a Jan. 26 report published by the government’s working group on Ukraine’s WTO entry.
Since Ukraine beat Russia to WTO membership, now Russian officials will have to conduct bilateral negotiations with their Ukrainian counterparts, who have leverage in setting trade terms.
Ukraine may use its WTO membership as a tool of economic leverage over its trade deals with the Russian Federation, said Kuznetsov.
“Setting ultimatums for Russia will make it lose something, but Ukraine will lose more,” he said. “By using threats with Russia, we won’t accomplish an effective dialogue. Our task is to watch Russia and rapidly integrate into the EU.”
Earlier this year, Ukraine’s Premier Yulia Tymoshenko attempted to assuage fears that Ukraine would use its WTO membership as a weapon against Russia, stressing that it would serve merely as a mechanism for reform and transparency, which includes moving ahead with her plans to get rid of intermediaries in the natural gas trade.
Ukraine’s WTO membership requires an annual membership fee of $350,000 for 2008.
