What awaits Ukraine from WTO accession?

What awaits Ukraine from WTO accession?

Ukraine should become some 10 per cent richer if it joins the WTO, Andriy Honcharuk, an adviser to Prime Minister Viktor Yanukovych, has said in an article.

Ukraine should become some 10 per cent richer if it joins the WTO, Andriy Honcharuk, an adviser to Prime Minister Viktor Yanukovych, has said in an article. Metallurgy will make big gains, but agriculture may lose initially, he predicted.

The following is the text of the article by Honcharuk entitled "What awaits Ukraine from WTO accession?" published in the Ukrainian daily Den on 9 November:

The process of Ukraine`s accession to the WTO is now in the concluding stage. And it is important for our citizens to realize what Ukraine will get from this step. The prime ministerial adviser and former minister of foreign economic relations and trade, Andriy Honcharuk, talks about this:

WTO membership will be a stimulus for the creation of stable legislation and an attractive investment climate. It will assist the implementation of structural modernization of the economy as a whole, taking it up to world level.

According to expert forecasts, the overall growth of prosperity from Ukraine`s joining the WTO will exceed 10 per cent of the volume of nationwide consumption. These calculations are confirmed by the experience of European countries that recently joined the WTO.

Let us examine what will happen to sectors of our economy after joining the WTO. Metallurgy will be a big winner, of course. It is not only an export oriented industry (its output accounts for over a third of Ukrainian exports). It also suffers more than any from commercial restrictive

measures.

There are currently 24 anti-dumping sanctions operating in 11 countries in relation to its output. Henceforth we will receive the possibility to defend the interests of our metallurgists more effectively.

As a consequence, in the assessment of experts, this Ukrainian industry will increase its overall output by 22 per cent in the long-term prospect after joining the WTO. The situation is virtually the same for the chemicals industry.

As far as the textiles industry is concerned, starting from 2001 it has already been working in conditions of a multilateral textiles agreement. This means that all the rates and norms operating in this area have been corresponding for five years now to the obligations that Ukraine is taking on when joining the WTO.

But we have to be prepared for the fact that domestic agriculture will be the most vulnerable in the new liberal conditions. After all, WTO membership requires full market reform of the agrarian sector to be carried out, and access to the market of agricultural produce to be liberalized.

An unfavourable factor here will also be the fact that the agricultural sector, which provides about 16 per cent of jobs and 14.5 per cent of the country`s GDP, is insufficiently reformed at the same time. And therefore global interventions in its work may be very painful at first.

However, those producers of agricultural goods who keep pace with time can feel calm. It is also not unimportant that after both Ukraine and Russia become members of the organization, the latter will no longer be able to apply restrictive measures to our dairy and meat exports.

Apart from that, nobody will make Ukraine reduce support for agriculture in such a way as to deal it irreplaceable losses. It is a matter only of ensuring that the level of support that our agriculture wants to receive is justified.

Thus, internal pricing support should be reduced over a period of five years by 20 per cent in comparison with the base period.

But here the reduction does not apply to funding scientific research,  teaching and marketing programmes, creation of state reserves for ensuring food security, insurance and guarantees of income security, payment of compensation for losses from natural disasters and so forth.

It is also important to consider that for a number of reasons, if only because our land, our black earth zones, are better and require less expenditure to produce output, Ukrainian produce, given comparative quality, will be cheaper than European produce, and hence it will be competitive.

An improvement in access to external markets will make it possible to increase exports by 40 per cent.

Apart from that, a balanced state policy, directed towards the modernization of agriculture and development of its infrastructure, will make it possible to provide our agricultural produce with the necessary competitiveness and protection.

Today it can also be said that after joining the WTO, state support for the coal industry will be regulated. However, whereas today we are incapable of controlling whether that support reaches every mine and every miner, under WTO rules in future it will be directed, targeted.

Moreover, WTO rules allow state support directed at improving a region`s environment and linked with the activity of harmful production.

This applies not only to the coal industry, but also to metallurgy, the chemicals industry and so on. State support is also allowed for tackling social questions in socially unfavourable regions of monoculture.

In other words, it is in effect not support directly for the coal industry, but support for coal regions directed at improving people`s standard of  living.

This news was monitored by the ArtUkraine Monitoring Service for the Action Ukraine Report.

COMMENTARY: By Andriy Honcharuk, Advisor

To Prime Minister Viktor Yanukovych

Den, Kiev, Ukraine, in Russian 9 Nov 06; p 5

BBC Monitoring Service, United Kingdom, Thu, Nov 9, 2006

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