In 2010 a number of foreign trade issues were making headlines in Ukraine. One of the most important was that for the first time in its history Ukraine initiated a WTO dispute settlement procedure before the WTO Dispute Settlement Body against discriminatory taxation in Armenia. Secondly, Ukraine signed the Free Trade Agreement (FTA) with EFTA and took a step forward to sign the FTA with the European Union. Finally, Ukrainian authorities launched several landmark safeguard and antidumping investigations. This article focuses on these major developments in more detail.

Opening up Foreign Markets: Ukraine Takes case to WTO

After the WTO accession and making of a number of "painful" concessions, the Ukrainian Government became more active in using the opportunities of the WTO for the benefit of Ukrainian producers in foreign markets.

In particular, in 2009 the Ukrainian Government, following requests from domestic producers initiated informal consultations with Georgia with regard to the discriminatory excise duty on imported tobacco products and successfully solved this problem, meaning better market access for Ukrainian companies.

Furthermore, in July 2010 the Ukrainian Government, once again based on requests from domestic industry, appealed to the WTO dispute settlement system with regard to discriminatory taxes in Armenia imposed on imported tobacco products and alcoholic beverages. Following the unsuccessful request for official consultations with the Government of Armenia pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) and Article XXII of the General Agreement on Tariffs and Trade 1994 submitted on 20 July 2010, in September Ukraine requested, pursuant to Article 6 of the DSU, that the Dispute Settlement Body (DSB) establish a Panel to consider discriminatory taxation measures in Armenia.

Following Ukraine's request, the DSB considered the request on 25 October 2010. As a result of the DSB meeting the Panel was not established due to Armenia's negative vote. Armenia used its one-time right to delay proceedings and for that reason it will not be an obstacle for the establishment of a Panel in the future. According to the DSU, at the second request by Ukraine the Panel is to be established even though Armenia votes against it.

On 23 November 2010 Ukraine's request for the establishment of a Panel was on the agenda of the DSB meeting. However, following communication from the Ukrainian delegation, the DSB did not consider the request for the establishment of a Panel Pursuant to publicly available information, Armenia and Ukraine are currently conducting bilateral consultations and for that reason Ukraine sought delay in the proceedings. Such practice is quite common for the dispute settlement procedures in the WTO. Furthermore, it is worth mentioning that the WTO dispute settlement rules permit simultaneous bilateral consultations and solving the issue in an amicable way.

Notably the Armenian Parliament, by referring to the necessity of bringing its laws into compliance with the WTO rules, has already adopted in the second reading new draft legislation (not in force yet) which would gradually phase out discriminatory taxation. Moreover, the new draft laws do not eliminate discrimination with respect to all commodity items for alcoholic beverages, and for tobacco products provide for the full phasing out of discrimination only in 2014.

It goes without saying that the latter clearly demonstrates that after its thorny path of the WTO accession, Ukraine successfully started using all and any available modern means of solving trade disputes for opening up markets abroad for Ukrainian producers and to secure the predictability of their market access. This is a positive sign both for Ukrainian industry and foreign investors.

But how many more things could the Ukrainian government do to protect national businesses if they signal that problems exist...

Liberalizing Trade at Regional Level

Today, free trade agreements (FTAs) are among pillars of international trade and modern trade facilitation. It is well known that free-trade areas and customs unions facilitate free movement of goods, boost attraction of investments, exchange of technologies and are the "corner stones" of trade liberalization. The liberalization of trade at regional level means not only the cutting of tariffs, but the establishment of other mechanisms aimed at trade facilitation among trading partners, namely bilateral trade remedies, simplification of customs procedures, establishment of common rules of origin, etc. Hence, conclusion of bilateral FTAs provides new opportunities for business entities as it increase market access and allows application of protective bilateral measures.

Ukraine is a party to a number of bilateral free trade agreements i.e. 13 FTAs1 mainly with former CIS countries. Following the worldwide trend Ukraine is moving firmly towards further deeper cooperation at regional level and there is already certain success in this area, in particular the signing of the FTA with the European Free Trade Association (EFTA)2 and the breakthrough in negotiations with the European Union on the Deep and Comprehensive FTA (DCFTA). In addition, Ukraine is currently at different stages of the FTAs negotiating process with Singapore, Syria and Canada.

The FTA with EFTA is a significant step in a commercial sense for Ukrainian producers because it simplifies and increases market access for Ukrainian goods to EFTA countries. The EFTAUkraine FTA covers both trade in goods and services, investment, protection of intellectual property rights, trade facilitation, competition, and government procurement. It is worth noting that the FTA with the EFTA is currently going through the ratification process both in Ukraine and EFTA member states, and there is still some way to go in order for Ukrainian industries to fully benefit from this FTA.

Another long-hoped FTA is the DCFTA, negotiations about which with the EU were marked by a breakthrough at the end of this year. It was reported that Ukraine and the EU had agreed on number of principal chapters. However, both Ukrainian and EU negotiators were quick to say that despite the emergence of some encouraging trends, none of the DCFTA issues currently under discussion may be regarded as agreed and closed until the whole DCFTA is finally approved. In other words, there remains plenty of room for negotiation.

Generally, the DCFTA will result in eliminating or substantial decrease of most tariffs, which allows better market access for Ukrainian exporters to the EU market and more competition for domestic producers. Clearly the implications could be far-reaching and long-term in their impact, so perhaps it is high time for Ukrainian industry to pay more attention to this issue and become more proactive in representing and supporting their position before the Ukrainian government.

Protecting the Internal Market

The global economic crisis affected not only most Ukrainian industries, but also the choice of trade protection instruments by the Ukrainian authorities. In particular, during 2010 Ukrainian authorities initiated and conducted three safeguard and two anti-dumping investigations3.

The general trend shows that trade remedies requested by the Ukrainian industries if applied will not be in conformity with their objectives as provided both by the national legislation and the WTO Agreements. In particular for antidumping measures — preventing unfair trade practice such as dumping of imports and for safeguards — protecting domestic producers from the surge of imports resulting from unforeseen developments. Ukrainian industries apply for trade remedies merely to restrict imports and provide more favorable treatment for some national producers instead of the achieving the set objectives. A positive sign is that the Ukrainian authorities try to find a balance while protecting national industries and at least formally apply the WTO Agreements while conducting investigations. However, they still do not take into account the WTO jurisprudence.

Notably after Ukraine's accession to the WTO, trade remedies are no longer an issue of pure national policy. The application of trade remedies by the Ukrainian authorities naturally affects the sales of foreign producers and, consequently, harms their interests. Thus, foreign authorities may act reciprocally and undertake similar measures to Ukrainian products exported into their markets. Moreover, Ukraine by itself may become a "defendant" within the WTO dispute settlement procedures related to the inconsistency of the practice of Ukrainian authorities with the WTO rules and established practice. This can in turn, influence Ukraine's international reputation as a reliable trading partner


2010 was notable for several major events that affected international trade involving Ukrainian companies, which made or can make a difference for foreign trade transactions involving Ukrainian counterparties and/or goods.

All things considered demonstrate that international trade regulation influence or shall influence the domestic decision taking of Ukrainian authorities. And this is probably only the beginning, as deeper and more comprehensive cooperation at the regional level evolves and this in turn will definitely lead to further limitation of the policy space for Ukraine. International regulation of trade crossed the national border and any action taken by the Ukrainian government in the sphere of foreign trade has, or may have, a potentially international impact and, therefore, is and will be monitored by foreign trade partners.

In its turn the Ukrainian Government shall also closely monitor the actions of foreign governments that may potentially influence Ukrainian companies and follow its proactive approach of using all available tools to protect the interests of domestic industry in foreign markets. However, the initiative is in the hands of Ukrainian producers and they have to put effort, time and resources into initial monitoring of any barriers in foreign markets, demonstrating their problems and substantiating their position to the Government and further supporting its actions.


1 Including CIS FTA, but excluding FTA with the European Free Trade Association as it is not ratified yet.

2 The EFTA is a free trade organization between Iceland, Norway, Switzerland (of which Norway and Switzerland are the only remaining founding members).

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