Publication: Monitor Volume: 3 Issue: 170

Led by Prime Minister Valery Pustovoytenko, a Ukrainian delegation to the Central European Free Trade Association’s joint meeting in Portorozh, Slovakia, on September 12-14 secured an agreement on a framework for Ukrainian accession to CEFTA. (Ukrainian agencies, September 12, 14) Accession would mark an important point in Ukraine’s relations with her Western neighbors, and in the evolution of CEFTA as well.

CEFTA was established in March, 1993, by Poland, Hungary, the Czech Republic, and Slovakia, which were at that time trying to stem the declines in mutual trade that had followed the 1990-1991 collapse of the Soviet bloc. CEFTA was therefore intended to ensure that regional trade occurred on terms no-less-preferential than those applying to trade between these countries and the European Union. It was likewise intended to forestall the diversion of regional trade to EU countries following the Central European countries’ 1991 EU association agreements. Slovenia and Romania joined CEFTA in mid-1996 and mid-1997, respectively, once they had become members in the World Trade Organization (the four original CEFTA countries had become WTO members in 1995) and had themselves concluded EU association agreements.

CEFTA therefore became something of an EU antechamber, where transition economies could polish their free-trade and good-neighbor credentials while waiting for the EU to voice an official opinion on their membership applications. In the meanwhile, CEFTA trade underwent liberalization, so that roughly 90 percent of trade in manufactured goods is now duty free. The rapid growth rates posted by Poland, Slovakia, and the Czech Republic during 1995-1996 made CEFTA one of the international economy’s more dynamic trading areas, and elicited membership applications from Bulgaria, Estonia, Lithuania, and Latvia.

Joining CEFTA would help Kyiv consolidate good relations with its Western neighbors, further distance Ukraine from Russia and the CIS, and underscore Ukraine’s commitment to trade liberalization. In order to join CEFTA, Ukraine must become a WTO member, conclude individual free-trade agreements with all current CEFTA countries, and conclude an associate membership agreement with the EU. Ukraine is expected to be admitted to the WTO later this year; and the prime ministers of Poland, Slovakia, and Slovenia told Pustovoytenko in Portorozh that their countries will conclude free-trade agreements with Ukraine by early 1998 at the latest. Ukraine’s prospects for securing an association agreement with the EU would seem more problematic, however.

Ukraine’s decision formally to pursue membership comes at a critical time in CEFTA’s evolution. The European Commission’s July 1997 invitation — to Poland, Hungary, the Czech Republic, Slovenia, and Estonia — to begin EU membership negotiations probably means the eventual end of CEFTA, since its wealthiest and most dynamic members would presumably leave the association upon accession to the EU. If (as seems likely) Ukraine were to be a CEFTA country by this time, it would undoubtedly play a major role in the organization — and might even dominate it — once Poland, Hungary, and the Czech Republic have departed.

Kazakhstan Preparing $500 Million in New Eurobond Issues.