EU: Ukraine Has to Fulfill Six More Conditions in Business Sphere until Vilnius Summit

KYIV, Ukraine, October 21, 2013 /PRNewswire/ --

How the economic version of the Füle list looks like

The agreement on Ukraine's association with the EU has already been translated to the languages of all the EU countries and is ready for signing, said Karel De Gucht, European Commissioner for Trade, at the meeting with journalists in Kiev. But the EU wants Ukraine to fulfill a number of conditions in the economic sphere prior to this.

Answering the question if there is an economic analogue of the Füle list, i.e. of the political and legal conditions which shall be fulfilled by Kiev for signing the agreement with EU, De Gucht said "yes." "My message [to the government of Ukraine] here [was as follows]: you have to agree with not only the political conditions but also the economic ones [for signing the free trade zone agreement], - the European Commissioner said. - In the context of signing [the agreement] in Vilnius you still have to make a few things."

The De Gucht List

The list of the European Union's wishes De Gucht referred to includes at least six items:

1. Solving a problem of the utilization duty on vehicles introduced in Ukraine on 1 September 2013. Ukraine has right to introduce this duty, but it should not discriminate anyone including European carmakers.
2. Cancellation of protective duties for import of vehicles in Ukraine adopted in April 2013. "We ask to solve this issue, as Ukraine did not have causes to introduce them against the European Union, because there was no growth of volume of vehicles imported by the EU," - De Gucht said.
3. Cancellation of limitations for coal and coke import. Since the 1 June, the import quota is in effect in Ukraine: 10.2 million of coking coal, when the market demand amounts to 13 million tons (according to the estimation by the Federation of Metallurgists).
4. Cancellation of the local content requirement (a requirements related to the share of Ukrainian goods, services and assets used in the renewal power generation projects). Currently, the local content shall amount to 30% in compliance with the Green tariff law, and, starting 1 January 2014, it shall be 50%. If the local content share is not achieved, the operator of a wind or solar power plant or any other renewable power project cannot count on using the Green tariff. The EU thinks that this requirement discriminates the producers of equipment for Green projects in the Ukrainian market.
5. Review of trade conditions within the framework of WTO. Ukraine has filed an application for review of 371 tariffs. The partner countries insist on partial or full withdrawal of this application.
6. Steps toward improvement of the business climate. "The most important thing is that you [Ukraine] plan to do for improving the business climate, I mean the certain steps," De Gucht said. In the last year, according to his data, the conditions for making business in Ukraine got worse.

Nothing to look at

The key requirement of the EU is that it wants to see how Ukraine works on these problems. "We try to be flexible, but there are some problems which are unacceptable and should be solved," states De Gucht.

Now the EU does not see this work. For instance, in July 2013, Igor Prasolov, the Minister of Economic Development and Trade, promised at the negotiations with the EU to submit a scenario of cancellation of the protective duties for vehicles by 10 August; by late August the government should have adopted all required documents. But the promise was not fulfilled. "We have not received any Ukrainian proposals yet," told Forbes the high ranked officer of the European Commission.

We (Forbes) did not succeed to connect Prasolov yesterday night: he did not pick up, and the Ministry's press service did not work as it was too late. But Oleg Nazarenko, Head of All-Ukrainian Association of Car Importers and Dealers, agrees with the European Commission's conclusions: "According to my information, Leonid Kozhara, the Minister of Foreign Affairs, connected the Inter-Agency Commission for International Trade which had introduced the duties, and asked to cancel them for solving the problem with the EU before the summit. But his request was ignored."

The same situation, as the Forbes sources said, is with the remaining items of the agenda, for instance, with the utilization duty. "We see some Ukrainian officials' and lobbyists' obvious sabotage of the President's orders and of the politics of cooperation with the EU. For example, the order by Victor Yanukovich to cancel the norm discrediting the car importers against national manufacturers has not been fulfilled for recent for two months. On the contrary, some documents contradicting this order are being prepared."

The situation with imported coke and coking coal is different. In late September, the Ministry of Fuel and Energy suggested to expand quotas for imported coal for 2013: from 10.2 to 11.2 million tons. But this is a half-measure, a temporary step, says the source in the European Commission.

Yesterday representatives of the EU did not receive any Ukrainian proposals. But De Gucht and Prasolov agreed that by late October the Ukrainians will present their view on solution of these problems and the terms of the solution. But no one says that all these measures shall be taken until the summit in Vilnius. "We can agree with the fact that it is impossible to solve all the problems immediately, but we should come to an agreement on timeline of these problems' solution."

Oleg Malsky, Partner of AstapovLawyers, who is specialized in trade law, thinks that the Ukrainian Cabinet of Ministers can make progress in solving these issues within a few weeks. "Most of these problems are regulated by certain laws, for instance, by the utilization duty law. The Cabinet of Ministers can prepare all necessary amendments to the legislation very quickly, - he assures. - The only exception is the business climate, it is required to take a complex of measures to improve it."

Another issue is if the Cabinet of Ministers, including the Ministry of Economics, really wants to solve these problems. "While some issues are still unsolved, there is leverage in the negotiations and a possible method of bargaining of Ukraine with the European party. For instance, they may negotiate about transitional periods, financial aid provided by the EU etc. It is possible that Kiev relies on this logic."