Ukraine is unwilling to learn from its mistakes
"Smart people learn from mistakes of others, while fools don't even learn from their own mistakes." This proverb comes to mind every time when we observe national peculiarities of "integration into the global economy" of "Eastern Switzerland." Peculiar features of the Ukrainian version of this fascinating process are presented in the scenario "Ukraine's accession to the WTO."
Of course, there are situations when the result is not as important as participation. It so happens that one does not think of consequences, fully absorbed by the process. This is typical for teenage environment, but Is this behavior acceptable among mature statesmen?
Ukraine officially joined the WTO in 2008, when both the President and the Prime Minister were the main characters of the Maidan, Viktor Yushchenko and Yulia Tymoshenko. The Orange Team, of course, presented the event as a singular achievement of the "team of like-minded individuals."
The desire to become a member of the WTO at any cost to beat Russia to it was so great that the Ukrainian negotiators agreed to a zero duty for a variety of products sensitive for the domestic economy. Regions Party was in opposition, and could have easily blamed the Orange team of subversion, and it would not have been an exaggeration. Instead, the party declared that they also contributed to the successful long-term negotiations, which transformed the largest opposition force of the landmark achievements into partners of the Orange Team. It is significant that the impact of this accomplishment became apparent very quickly.
When the seriousness of the situation was finally realized at the top, the Ukrainian authorities have tried to hit the rewind button. Kiev has officially addressed the WTO to demand the revision of the tariffs for 371 (!) trading positions. This made an indelible impression on all trading partners of Ukraine in general and the European ones in particular. Even normally reserved European officials were not shy in their statements.
In March, "UNIAN" Agency, referring to the "EU - plus" said that during the EU-Ukraine summit the EU Commissioner for Trade Karel De Gucht gave President Viktor Yanukovich an official request to revoke a notification to the WTO.
"At first we thought that the causes of the notification - were political, because it was filed on the eve of parliamentary elections in Ukraine, but since then we have not received any information that would explain such a move," shared his opinion with "EU - plus" another European diplomat dealing with the issues of EU foreign policy. He was also surprised by Ukrainian media reports that 30-40 WTO members supported the Ukrainian request.
"At a recent meeting chaired by Japan, the chairman asked everyone who wanted to speak in support of Ukraine's application to raise hands. Nobody responded. 120 countries were clearly against it," stated the European functionary. He also said that Ukraine's proposal was unacceptable for the EU particularly due to the fact that it could create a negative precedent when the obligations incurred by a Member State in the introductory period could be reviewed in a few years after the accession.
Kiev did not heed the warnings and took a number of practical actions to protect the domestic market, which led to an extremely nervous reaction of its trading partners. The agenda of the meeting of the WTO Goods Council held in July contained three items with the claims of other countries to Ukraine. Japan, in particular, made a statement regarding the introduction of import duties on cars by Kiev. The EU and the U.S. have made a request for the imposition of import quotas for Ukraine coking coal.
Besides, Kiev had to answer the claims of a group of countries in connection with the above mentioned intention to review 371 tariff lines under Article XXVIII GATT 1994. These statements were submitted, in particular, by the European Union, Australia, Canada, Chile, Egypt, Guatemala, China and Hong Kong, Iceland, Israel, Japan, Korea, Mexico, New Zealand, Norway, Turkey and the United States.
Turkey did not limit itself to a reprimand and decided to apply trade sanctions against Ukraine. In particular, Ankara assessed the damage from discrimination in the Turkish automotive industry at $6.2 million and agreed to offset this amount by the introduction of 23 percent duty on imports of walnuts from Ukraine.
It would seem that this has been an invaluable experience that taught Kiev something, but this was not the case. If the Association Agreement with the EU in November is signed by both parties (and this, unfortunately for Ukraine, is likely to happen), it would be another step towards the increased integration of Ukraine into the global economy.
The Association Agreement with the European Union contains provisions on protection of Ukrainian producers, said Prime Minister Mykola Azarov opening a government meeting last Wednesday. "During the preparation of the draft agreement we were largely able to protect the interests of the real sector of the national economy. During the talks, compromise solutions were found that are acceptable to both sides," Azarov assured the members of the government.
"According to the agreement, trade liberalization covers over 97 percent of tariff lines, or over 95 percent of the volume of bilateral trade," Ukrainian Prime Minister reported. "The average rate of duty for goods from the EU will be reduced two-fold - from 4.95 to 2.45 percent. The average rate of the European Union duty for Ukrainian goods will be decreased 15 times, from 7.6 to 0.5per cent, almost to zero,"- boasted head of the Ukrainian government.
Mykola Azarov clarified that simplification will be applied to 99 percent of the Ukrainian goods supplied to the EU, and it will happen in the first year of the agreement, before the ratification of the agreement by the countries - EU members. "The duty on goods from the EU to Ukraine will be reduced gradually, over four years. Thus Ukrainian producers will get a temporary advantage and a chance to increase the competitiveness of their products on the EU market," stated head of the Ukrainian government.
In all honesty, Mykola Azarov has an unenviable role. In his line of duty, he has to know the real situation in the economy and the inevitable consequences of the creation of a "comprehensive free trade area between Ukraine and the EU." The prime minister cannot but know that the level of duties in trade with the European Union is a minor matter. The European Union will take exactly as much products from Ukraine as it needs. The role of protective duties in the EU is played by such things as licensing, certification, and compliance. From experience we know that breaking this barrier without the goodwill of European officials is virtually impossible.
Apparently, under the impression of the triumphant speech of the head of the Ukrainian government, the EU ambassador to Ukraine Ian Tombinsky considered it his duty to make a statement. He said that the government of Ukraine asked him about the application of the preliminary agreement on a common trade. He said that Ukrainian products will not come to the European market without adaptation, and there is standardization work that needs to be done, concluded Tombinsky.
The warning of the European ambassador is not news for Azarov. The latter is a hostage of his position and a high-level political decision. His main task now is to make things desired appear real. He will have to convince the population that the losses from reduced trade with the countries of the Customs Union will be compensated by the conquest of the European market and hide from the electorate the approaching inevitable disaster.