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Ukraine in WTO means growth, influence over Russia PDF Print E-mail
Monday, 28 January 2008

Agence France-Presse . Kiev

Ukraine's accession to the World Trade Organisation, confirmed at a meeting in Geneva on Friday, will boost economic growth and foreign investment in this former Soviet republic, analysts said.

Membership of the 151-nation global trade body for Ukraine ahead of Russia will also give the country a key lever of influence over its eastern neighbour, with which it often has strained economic relations.

'Moscow is afraid that Kiev could put a spanner in the works' of Russia's own membership bid, which was launched in 1993, said Volodymyr Fesenko, an independent political analyst in Kiev. Ukraine also submitted its WTO membership application in 1993.

As a member of the WTO, Ukraine could ask to sign a separate bilateral trade agreement with Russia, imposing conditions for joining. Ukraine is the biggest country besides Iran and Russia outside the WTO. WTO officials in Geneva on Friday said an accession agreement for Ukraine has been struck and that the candidacy would now be put to the WTO's General Council meeting on February 5, followed by a six-month ratification process.

The General Council vote, due to be attended by Ukrainian President Viktor Yushchenko, is seen as a formality but ratification by Ukraine's parliament could be complicated as the ruling coalition holds a very slim majority. Accession to the WTO, whose members account for some 95 per cent of world trade, has been a key aim set by Yushchenko, the pro-Western leader who came to power in 2005 on a wave of popular protests.

Analysts said that membership would provide key benefits for the economy, particularly for the country's powerful steel industry, but could harm the food sector because of a lowering of import tariffs.

'It could give Ukraine an additional three per cent GDP growth... over around seven years,' said Veronika Movchan, an expert at the Institute for Economic Research and Policy Consulting in Kiev.

Olexander Klimchuk, an analyst at Ukraine Concorde Capital, an investment consultancy, said the main benefit of WTO membership would be to make Ukraine more attractive to foreign investors. 'We expect foreign direct investment to reach 10 billion dollars this year, compared to around nine billion in 2007, and we expect it will stay at the same level at least until 2010,' Klimchuk said.

After joining the WTO, Ukraine will have to limit import tariffs for industrial and food products and is expected to benefit in particular by the removal of steel export quotas by the European Union, analysts said.

The lifting of EU quotas could raise steel production by 14 per cent, as well as push up chemical production by five per cent and cereal exports by up to 15 per cent over the next few years, Movchan said.

But Ukraine's food sector, which has been protected by the state, could suffer 'the biggest shock' and decline by around 12 per cent in the medium term as food imports double, she added.

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