Ukraine gained admission into the World Trade Organization (WTO) on Feb. 5, earning approval from the 151-member body’s General Council.
After enduring a 14year marathon of stalling and negotiations, Ukraine gained admission into the World Trade Organization (WTO) on Feb. 5, earning approval from the 151-member body’s General Council.
Ukraine’s long-awaited entry, promised by politicians year after year, is a critical step in the nation’s attempt to improve living standards, integrate with the West, and secure a free trade agreement with the European Union, observers said.
“The terms of accession are substantial, forward-looking, and demonstrate Ukraine’s commitment to global trade based on market forces, transparency and the rule of law,” US Trade Representative Susan C. Schwab said in a Feb. 5 statement.
President Viktor Yushchenko traveled to Geneva, Switzerland to sign the accession protocols with WTO Director-General Pascal Lamy, bringing back to Ukraine the mandate for parliament to ratify the agreement by July 4. Parliament can ratify the WTO membership in the soonest days if it wanted to, said Yuriy Syrotiuk, a political expert with the Kyiv-based Open Society Foundation.
Only the Communist Party of Ukraine will oppose WTO membership, and it’s unlikely it will be able to recruit their ally, the Party of Regions of Ukraine, to the cause, he said.
“It’s not possible for the Regions to be against WTO ratification because party leader Viktor Yanukovych passed the most laws needed for WTO entry when they controlled government,” Syrotiuk said.
During the Geneva signing ceremony, Yushchenko said Ukraine’s WTO accession was “truly an historic moment and decisive milestone in the development of the country,” while Lamy said Ukraine will have “a stable and predictable trade environment that will boost its growth and prosperity.”
It was under Yushchenko’s Western-oriented leadership that negotiations accelerated in the last three years.
The Ukrainian president estimated WTO membership will add 1.7 percent to gross domestic product (GDP) growth and increase foreign direct investment by $3.5 billion annually.
Metals production will rise by 22 percent, the industry’s employment will increase 19 percent and metals exports will rise 26 percent.
Ukraine has already adopted WTO laws on import/export duties, experts said.
“Ukraine is already opened for import, and in 2008 the country’s economy may not feel the impact of WTO admission as lower export duties will not start until 2009,” said economist Oleksiy Blinov.
Formal EU-Ukraine free trade talks will begin in mid-February, EU officials said.
Gaining a seat on the WTO gives Ukraine leverage against the Russian Federation, which has used its energy resources to coerce Ukraine in the past.
Russia’s bid to join the WTO has stalled, largely due to barriers imposed by the US and EU.
Now Ukraine as member will have leverage against Moscow setting conditions for its bigger neighbor’s WTO bid.
However, Ukraine’s president and prime minister, Yulia Tymoshenko, assured the world community that Ukraine won’t use its WTO status against Russia.
WTO membership does not come without cost and will cause short-term economic hardship in a number of economic sectors, notably agriculture and the nascent auto-industry, experts said.
“Agriculture and food processing, which have long relied on the government on protectionist measures, are expected to experience the heaviest losses immediately after WTO accession,” Kyiv’s investment bank Dragon Capital stated in a January report. Agricultural firms will cut 2008 production by 3 percent year-on-year, while food processing will slow production to 5 percent year-on-year from eight percent the prior year.
Meanwhile, the export-oriented steel and chemical sectors will gain the most from WTO membership, Dragon Capital reported, with improved access to foreign markets.
Upon Ukraine’s accession, all current WTO members will apply the Most Favored Nation and National Treatment principles to products they import from Ukraine, ensuring stable and non-discriminatory access to markets, Dragon Capital reported.
“We therefore forecast Ukrainian steel and chemical producers to increase output and exports in 2008 despite weaker global demand,” the investment bank reported.
