WTO Victory Could Backfire for Ukraine

21 February 2008
The only advantage the Ukrainian politicians will have once their country enters WTO is to delay Russia's entry, but given the dangers of opening markets at a time of potential global recession, this might be a blessing in disguise for Moscow.
Although Ukraine is joining the World Trade Organization, Russia has not yet been accepted. In the ongoing competition between the two countries, Kiev has won the latest round. Now Russia will face the unpleasant prospect of having to negotiate with Ukraine on the same level as it negotiates with the other full-fledged WTO member countries. This is clearly a blow to Moscow's ego. Earlier, Moldova and Georgia had created the greatest obstacles for Russian negotiators, and now Ukraine can do the same. In the past, Ukrainian politicians had no way of answering Moscow's periodic threats to turn off the flow of gas to that country. But now Kiev can say, "If you turn off the gas, we will block your admittance to the WTO." The relative speed with which Ukraine was able to reach an agreement over the WTO is not necessarily due to the skill of the Ukrainian negotiators. On the contrary, the negotiations were not conducted very thoroughly at all. If the Russian negotiators tenaciously protected their own interests after weighing the potential negative impact WTO membership might have on their businesses, it appears that Ukrainian businesses do not fully appreciate the risks and challenges that WTO obligations would present in coming years. While there has been a heated debate in the Russian media on the pros and cons of WTO membership, nothing similar has been seen in Ukraine. Kiev has viewed the WTO as just another international organization that it needs to join if it wants to become a part of "civilized Europe." The thinking goes like this: "First we need to join the WTO and NATO, and then, if we behave ourselves, we'll be invited to join the European Union." To be sure, certain elements of Ukrainian society are opposed to NATO membership, but this element of anti-Western sentiment makes it all the more urgent to join the WTO now, while no there is no organized opposition or potential political fallout. Kiev's position is to get into the WTO as quickly as possible and at just about any price. Western member nations have also helped the process along by being much more lenient toward Ukraine than they have been toward Russia. For example, the WTO has demanded that Moscow meet all WTO requirements prior to admission, while Kiev has been told that it can deal with all these important trade issues after becoming a member. This indulgence for Ukraine, however, could lead to serious consequences down the road. It is highly unlikely that Ukraine will be able to meet WTO standards once it becomes a full member, which means that the country will be subjected to sanctions on a regular basis. For example, Ukraine violates intellectual property laws more than Russia; many of the pirated products flooding Moscow are actually manufactured in Ukraine. The WTO will likely crack down on Ukraine's piracy in a serious way after it becomes a member, and this will deal a blow to the country's economy. With the global economy going through a crisis, this is not the best time for Ukraine to open up its markets. Nor will it help Ukraine's economic development. The full impact of the international economic crisis has not reached Ukraine or Russia, but that only means that when it does hit them a bit later, the impact will be that much more severe. When this happens, Ukraine, as a weak WTO member with questionable credentials, may become a convenient target for allegations of international trade violations. The one thing that Ukrainian diplomats are definitely capable of doing is throwing a stick into Russia's spokes by delaying its acceptance into the WTO. But in the end, this might be a blessing in disguise for Moscow.
Boris Kagarlitsky, a fellow of the Transnational Institute, is a Director of the Institute of Globalization and Social Movements, Moscow. His latest book is Empire of the Periphery: Russia and the World System (2008)