WTO Membership

Economic News

22 Jul 2010
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This week, the issue of Ukraine's WTO accession is once again in the spotlight with a decision expected from the Verkhovna Rada on the necessary legislation for entry. The decision as to whether the country will join the WTO will be determined at the organisation's meeting on December 21.

The Verkhovna Rada will consider 13 legislative bills, 10 at the first reading and three at the second. The bills cover necessary preconditions for the entry of Ukraine with a number of issues remaining unresolved, including changes to the system of taxation for agricultural enterprises and curtailment of the list of commodities subject to mandatory certification. The adoption of these laws would see local industries facing unprecedented competition.

The WTO recently gave Ukraine a three-week period in which it must enact legislation governing regulation of the following: agricultural value added tax (VAT), milk and meat, support for the agricultural complex, export duties on iron and steel and non-ferrous scrap, live cattle and raw stock, cancellation of the age limits on the import of cars and the veterinary industry.

Both President Viktor Yushchenko and Prime Minister Viktor Yanukovych have stated that they consider the bills will pass and that this last hurdle to entry will be overcome. When it comes to predicting when entry might occur, however, they are less of the same mind. At a business forum, Yushchenko expressed confidence that entry is imminent. He said, "I am convinced the working group will present a positive report on Ukraine's WTO accession on December 21." Yanukovych on the other hand stated this week, "We will keep to the schedule of the WTO accession. We are planning that the issue of Ukraine's membership in the WTO will be put on the agenda of the WTO General Council next year in February," the local press reported.

The endorsement on November 15 by President Bush of Russian entry to the WTO has once again raised the spectre of a possible synchronised entry of the two countries. Many observers believe that Russia has a number of objections to the possibility of Ukraine joining the WTO first. Primary among these concerns is the influence that Ukraine may have on determining the terms of entry for Russia. Ksenia Lyapina, the chair of the subcommittee of the Supreme Rada for regulatory policy and entrepreneurship, which works on the issue of entry noted, "If Ukraine joins the WTO earlier than Russia it will be able to get in the working group for Russia's joining the WTO and articulate relevant requirements toward its northern neighbour, which is not at all liked by Russia."

The issue is also a matter of prestige for Russia, which would prefer to lead rather than follow the former satellite into the WTO. Entry to the WTO would reduce the leverage Russia has over Ukraine.

Ukraine may need to sign a joint agreement with Russia stipulating that it will not attach additional preconditions to a Russian entry in order to drive the talks forward. Many observers expect that membership of the WTO for both countries would put an end to frequent trade wars between them, for example the banning by Russia of meat and dairy imports from Ukraine.

In an article in the local press on November 9, Andriy Honcharuk, an advisor to Yanukovych, predicted that Ukraine could expect to see up to a 10% increase in GDP when it joins the WTO. He believes that the metallurgical industries will see immediate benefits, with a predicted 22% increase in industrial output in the long-term period after becoming a signatory, with similar growth anticipated for the chemicals industry.

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