Publication: Monitor Volume: 3 Issue: 151

Calls by U.S. ambassador William Green Miller and visiting Senator Mitch McConnell for greater progress in free market reforms during a meeting with Ukrainian prime minister Valery Pustovoytenko on August 15 occurred, ironically, against the backdrop of an anti-dumping investigation of Ukrainian metallurgical firms being conducted by the U.S. Department of Commerce (DoC). (Ukrainian agencies, August 15; Holos Ukrayiny, July 31) The investigation, which is scheduled to conclude on September 15, has imperiled sales of a key Ukrainian export in the U.S., and shows the difficulties posed by U.S. trade politics for Ukrainian and other manufacturing firms that do manage to break into American markets.

After spectacular export growth that saw Ukraine become one of the largest suppliers of steel products on the U.S. market, the Department of Commerce initiated an anti-dumping investigation in 1996. The investigation was launched at the behest of U.S. steel producers, who claimed that Ukrainian metallurgical plants in the Dnipropetrovsk and Donetsk regions were selling steel on the U.S. market at below-cost prices. On the basis of initial findings, the DoC in June imposed "preliminary" anti-dumping duties of 100 to 238 percent on Ukrainian steel products. This ruling reflected the DoC’s finding that Ukraine’s is a "non-market" economy, which keeps the costs of energy, raw materials, and labor artificially low. The anti-dumping ruling therefore reflected the DoC’s estimates of the "true" costs of Ukrainian steel production — which were based on comparing U.S. steel production costs to those of the Peruvian steel industry. The DoC apparently concluded that general economic indicators and the overall level of development in Peru — which is classified as a market economy — are sufficiently similar to Ukraine’s as to justify such a comparison. By contrast, while anti-dumping charges have also been brought against Ukrainian steel exports to the European Union, the EU does classify Ukraine as a market economy.

The DoC’s preliminary ruling has effectively closed the U.S. market to Ukrainian metallurgical firms. Since steel products account for about a third of Ukraine’s total export revenues, and since the U.S. market was one of Ukraine’s largest, this ruling (or, more precisely, the expectation that such a ruling will be forthcoming) is damaging prospects for recovery in one of Ukraine’s key industrial sectors. As in the other CIS countries, Ukrainian steel production has plummeted since the collapse of the USSR. Only the reorientation of production towards (more demanding) Western steel markets has allowed the Ukrainian industry to avoid complete collapse. As the Ukrainian press points out, at a time when Western governments and the IMF are calling for Ukraine to redouble its reform efforts, it may be well to remember that free market reform begins at home.

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