Publication: Eurasia Daily Monitor Volume: 3 Issue: 203

Ukraine is an inch from joining the World Trade Organization (WTO), which President Viktor Yushchenko has proclaimed to be his strategic goal. This feat would be the only legacy of his first term, which expires in January 2010, at least regarding efforts to join Western institutions. Yushchenko’s intention to join NATO in 2008 faced a major uphill challenge, as he underestimated Moscow’s ability to undermine domestic support for this plan. Ukraine also is very far from European Union membership. However, Yushchenko views WTO accession as a very important step towards eventual EU accession, and European Commission President Jose Manuel Barroso assured him at their meeting on October 27 that the EU would be prepared to talk about setting up a free-trade zone with Ukraine after Kyiv joins the WTO.

Ukraine should join the WTO by the end of 2006, according to the National Unity Declaration that Yushchenko signed with all main political players (except the opposition Yulia Tymoshenko Bloc) this past August. Ukraine’s WTO entry has been postponed several times since the turn of the century because of the opposition of various industrial lobbies and a lack of political will in Kyiv. By now, however, Ukraine has managed to reach accords on the terms of WTO entry with all but two WTO members and adopted most of the laws needed to qualify for membership.

Kyrgyzstan and Taiwan have not yet given their green lights to Ukraine’s accession. Kyiv, however, does not view these obstacles as serious. Speaking at a press conference on October 30, Ukrainian Economics Minister Volodymyr Makukha dismissed Kyrgyzstan’s claim that Ukraine should pay Bishkek a $27 million Soviet-era debt before joining the WTO — this is the main condition from Kyrgyzstan — and said that only technical issues remain to be settled with Taiwan. “The ball is now on our side,” said Makukha’s deputy Valery Pyatnytsky, speaking at the same press conference. He explained that WTO membership now depends only on parliament’s adoption of some 20 WTO-related bills by parliament, which is not guaranteed.

Meeting in Geneva on October 27, the WTO group on Ukraine’s membership gave Kyiv three weeks to pass the bills. In this case, an official meeting of the group on December 21 may approve Kyiv, and Yushchenko hopes that his plan to join the WTO before 2007 may materialize. If this does not happen, Ukraine’s accession will be postponed until late 2007, and Ukraine may face tougher conditions, said Volodymyr Baluta, who represents Ukraine at the WTO headquarters in Geneva.

The process of pushing the remaining WTO bills through parliament will not be easy. Analysts fear that if Ukraine lifts certain trade restrictions, as the WTO requires, agriculture, metals and mining, and the banking sector will suffer. When Ukraine joins the WTO, warns the popular daily Segodnya, which is close to Prime Minister Viktor Yanukovych’s camp, “Our farmers will have a hard time because of competition from German, Polish, and U.S. producers.” If Ukraine drops its prohibitive export duty on scrap metal, steel tycoons in Yanukovych’s home Donetsk Region will lose a cheap source of raw materials. And the Association of Ukrainian Banks — a powerful lobbying group — has urged parliament to reject a bill that would make it easier for foreign banks to open branches in Ukraine.

Yushchenko’s task is complicated by the fact that the lobbying groups of the industries least interested in fast WTO accession are especially influential with the government coalition parties. Steel makers are prominent in both Yanukovych’s Party of Regions and the Socialist Party, and the Socialists are essentially a party of central Ukrainian agricultural workers. The third member of the coalition — the Communist Party — traditionally views the WTO and the interests that it represents as an ideological foe.

Yushchenko submitted 16 WTO-related bills to parliament on October 19, urging their adoption by mid-November. Several days later, Yanukovych’s cabinet submitted to parliament its own versions of the bills. This unnecessary competition will further complicate Kyiv’s road to the WTO, as parliament will need more time to consider the rival sets of bills.

Another possible complication is the position of Moscow, which regards Kyiv’s WTO accession process with suspicion, as Kyiv’s earlier accession may complicate Moscow’s own WTO entry. Visiting Russian Prime Minister Mikhail Fradkov suggested on October 24 that Kyiv should synchronize its WTO accession with Moscow. It has remained unclear what he meant exactly, but Yushchenko’s Our Ukraine reacted angrily in its statement on the same day, describing his remark as “inappropriate” and accusing him of pressuring Ukraine.

Parliament is scheduled to discuss the first seven bills today, November 2. There is little optimism that the process will be smooth, and Yushchenko’s goal of joining the WTO this year is widely viewed as too optimistic. Yanukovych has pledged to do his best to ensure WTO entry by February 2007. Economics Minister Makukha, however, believes that WTO membership before the end of February is unrealistic.

(UNIAN, October 19; Ukrayinska pravda, October 24; Channel 5, October 27, 30; Ekonomicheskiye izvestiya, Segodnya, Delovaya stolitsa, October 30; Kommersant-Ukraine, October 31; 1 + 1 TV, November 1)