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Ukraine Poised for Economic Change

The Geneva-based World Trade Organization recently accepted Ukraine's membership bid. The agreement must now be ratified by the Ukrainian parliament, or Rada, before Kyiv officially becomes the WTO's 152nd member.

The World Trade Organization, or WTO, is the international agency overseeing the rules of international trade. It was founded in 1995, replacing the organization known as the General Agreement on Tariffs and Trade, or GATT.

David Hartridge, a former senior official at the WTO, says that in addition to providing the legal framework for the conduct of almost all world trade, the WTO plays another very important role.

"It provides an extremely efficient disputes settlement system in which disagreements which arise between governments -- and they very often do because trade is a difficult and contentious area -- they provide a means by which these differences can be resolved peacefully, legally, without resort to big power politics," says Hartridge. "So it's extremely valuable to the world that we can settle even the most difficult disputes between governments about trade without resort to retaliation and other measures that merely damage everybody."

Membership and Conditions

After 14 years of negotiations, the 151 members of the World Trade Organization accepted Ukraine's bid to join the world body. Experts say 14 years is an unusually long wait for a nation to become a member.

Bob Onyschuk, Director of the Canadian-Ukrainian Chamber of Commerce, says the main reason for the long timeframe, is that Ukrainians had to change many of their economic and trade laws to make them conform to international standards.

"When they became an independent nation in 1991-'92, they basically only had Soviet fiats, Soviet rules and regulations which, of course, are nothing like that which exists in the West between modern countries. So it really took them quite a bit of time to get their laws up to scratch. And, of course, they would work on it sometimes very keenly when there was a pro-Western government and at other times would drop right back and just not go forward with it whenever there was a pro-Eastern [i.e., pro-Russian] leaning government in power in Kyiv," says Onyschuk.

Former WTO senior official David Hartridge says in addition, Ukraine had to accept the WTO's so-called "covered agreements" and that took time. He says one such accord fixes the tariff levels governments can impose on various goods. "Then you have the agreement on trade in services which applies similar principles to the whole enormous universe of services trade. That's relatively new. Then you have an agreement on the protection of intellectual property," says Hartridge. "And you have a whole range of agreements on specific subjects like subsidies on goods, anti-dumping measures against dumped imports, measures affecting investment in the production of goods. I won't go through them all, but there are 29 'covered agreements' and Ukraine has accepted all of them."

Time to Compete

Experts, such as David Marples from the University of Alberta, say Ukraine's membership in the WTO will boost the country's economy by stimulating various sectors, including steel production. "It would just mean that it was possible for Ukraine to export steel to Europe much more so than before. And in the past, Ukrainian industry has been somewhat limited in how much steel it could export. Now the import tariffs from the other countries will be lowered, so it would be easier for Ukraine to export stuff. So in a sector of the economy where Ukraine has perhaps been struggling in recent years, it opens up new opportunities for industries like steel and possibly chemicals, where Ukraine has been a major player for a number of years," says Marples.

Analysts also say WTO membership will force many Ukrainian companies to become more competitive if they participate in the expanded market opportunities now available to them. Experts say those companies unable to adjust to the new trade environment will go out of business.

Adrian Sliwotzky, a Ukraine expert at Oliver Weiman consulting, says Ukraine will benefit in another way by becoming a WTO member. "One of the most important aspects of the WTO admission is that it is very likely to lead to a significant increase in foreign direct investment which is important for two reasons -- one is just the availability of capital to fund growth industries, but I think far more important is the bringing of technology and of managerial expertise to modernize many of the industrial sectors in Ukraine," says Sliwotzky.

Regional Issues

With the admission of Ukraine, Russia and Iran are the two largest countries outside the World Trade Organization. Russia began its membership drive at the same time Ukraine did, but there are still some outstanding issues to be resolved, such as the Russian government's agricultural subsidies program.

David Marples from the University of Alberta says Ukraine will not block Russia's membership. "Because if they were both members, the key ares of dispute right now which are mainly the export of gas and oil from Russia to Ukraine and pipelines throughout Ukraine to Europe, could be resolved within the administrative structure of the WTO, rather than bilaterally. And I think Russia is definitely disappointed, in a way, to be left so far behind. It looks now like it will be another year before they get to join," says Marples.

As for Ukraine's membership, it must now be submitted to the country's parliament, or Rada, which has until July 4 to ratify the accord. Experts say ratification should come fairly easily since WTO membership -- unlike admission to the North Atlantic Treaty Organization, or NATO -- is not a controversial issue among Ukrainian legislators.

This story was first broadcast on the English news program, VOA News Now. For other Focus reports click here.