April 14, 08

NEWS / Former Soviet States Taking Tough Actions to Open Economies

Washington -- Over the last decade, more than half of the former members of the Soviet Union have joined the World Trade Organization (WTO). Russia is now poised to join this
international body, which is charged with developing a common set of rules for governing global trade.

Ukraine’s parliament ratified WTO accession agreements April 10. The country will become a formal member within 30 days of notifying the WTO that the accession is complete. Meanwhile, President Bush pledged at his recent meeting with President Putin to work with Russia to finalize a WTO accession agreement in 2008.

Other former Soviet states that are already WTO members include Estonia, Latvia, Lithuania, Georgia, Armenia, Moldova and the Kyrgyz Republic.

To gain membership, these countries have had to agree to end decades of state control over the daily operation of their economies and to drastically lower tariffs and nontariff barriers to trade in goods and services.

Ukraine provides a good example. Europe’s second-largest country by area, with a population of about 47 million, it is dominated by agriculture and heavy industry. In 2007, the value of U.S. goods exported to Ukraine jumped more than 77 percent, to $1.3 billion, from the 2006 level. Most of the increase occurred in automobile parts and poultry.

To gain WTO membership, Ukraine had to agree to cap duties on agricultural products at just over 10 percent and on industrial goods at 4.6 percent. Some of these duties will be phased down through 2013. Higher tariffs may remain on some economically sensitive goods, such as sugar and sunflower seed oil.

But tariffs on most other goods will be even lower and eventually eliminated, including on civil aircraft, auto parts, construction equipment, distilled spirits, certain types of fish, pharmaceuticals, certain chemicals, steel, medical equipment, wood, paper, furniture and toys.

By January 1, 2010, Ukraine also will join the Information Technology Agreement, requiring it to eliminate tariffs on computers, semiconductors and other information technology products.

Like other WTO countries, Ukraine no longer will be allowed to employ sanitary and phytosanitary requirements for other than health and safety reasons. While the country recently has implemented several regulatory and legislative measures to reduce barriers to food imports, U.S. pork, beef and poultry still face import restrictions, according to a report issued by the Office of the U.S. Trade Representative (USTR) in late March.

Ukraine has further agreed to stop subsidizing exports and to limit domestic supports to its farmers, except for programs that have no or minimal impact on trade.

In its report, USTR also indicates that Ukraine needs to do more to liberalize trade in food and feed grains. Ukraine is the sixth-largest wheat exporter in the world but since September 2006 has placed highly restrictive quotas that have served as a near ban on exports of wheat, barley, corn and rye, arguing that the restrictions are needed to combat rising food prices. The result of these quotas is that a large quantity of grain is rotting in storage at ports.

One major task ahead for Ukraine is to ensure that its still numerous state-owned and state-controlled enterprises make purchases based on commercial considerations rather than operate to protect local companies from international competition. USTR noted that there have been few new privatizations since the privatization rush in 2004, and those that did take place in 2007 were marked by controversy. In August 2007, the long-awaited privatization of one of Ukraine’s largest chemical producers, Odesa Portside Plant, was canceled.

And Ukraine must do more to strengthen its intellectual property protections, according to USTR. Piracy of copyrighted goods is still widespread, it said, and Internet piracy is a growing problem. It noted some progress in action by the courts to enforce IPR protections.

Now that it has signed the WTO accession agreements, Ukraine must also eliminate all industrial subsidies and measures that discriminate against foreign investment. Soon, foreign banking, security, insurance, legal service, business-related services, and distribution services will gain full access to the Ukrainian market.
By Jonathan Schaffer
Staff Writer

Sources: http://www.america.gov/st/econ-english/2008/April/20080411183216fjreffahcs6.124514e-02.html?CP.rss=true

Tags: foreign investment,