From today, a market economy has been introduced in Ukraine

international trade

Today the decision of the Council of Ministers of the European Union to assign Ukraine the status of a market economy country within the framework of EU anti-dumping legislation comes into force. Thus, next year Ukraine has a real chance to win anti-dumping investigations by the European Union and even achieve a review of the amount of protective duties and quotas currently in force on the export of its goods. This will allow the largest Ukrainian exporters - metallurgists and chemists - to regain lost European markets. At the same time, experts believe that the new status will fundamentally change the rules of the game for Ukrainian companies on the European market and will provoke a new wave of anti-dumping investigations.

According to the decision of the Council of Ministers # 2117/2005, which Kommersant has, as of today Ukraine is excluded from the list of countries with non-market economies within the framework of the anti-dumping legislation of the European Union. This means that Ukrainian exporting enterprises become full participants in anti-dumping processes that the European Commission (EC) will initiate against them after December 30, 2005. Let us recall that the political decision to assign market status to Ukraine was made on December 1 in Kyiv at the Ukraine-EU summit (see Kommersant on December 2). And on December 21, the European Commission finally excluded Ukraine from the list of “non-market” countries.

The market approach to investigations completely changes the formula by which the dumping margin (an addition to the price for dumping) or the import quota for products is determined. Now the EC will determine the fact of price dumping as a result of comparing the export price of Ukrainian products with domestic prices in Ukraine, and not with prices in the so-called “surrogate” countries (countries that produce similar products and have market status, in particular, the USA, Canada, Brazil), as it was before. The previous calculation method made it possible to find signs of price dumping in Ukrainian exports, because domestic prices in Ukraine are lower than in many countries with market economies. “New investigations will end with a margin that will not be prohibitive in nature,” Sergei Kryuchkov, head of the Ukrainian mission to the EU, told Kommersant. “Now we practically cannot import our products - chemicals and seamless pipes - to Europe, since the dumping margin is very high.” . “After receiving the status, decisions to introduce trade restrictions will no longer concern the country as a whole, but only individual producers,” Oleg Ryabokon, managing partner of the Magister and Partners company, told Kommersant.

The EU's protective measures against the products of the main Ukrainian exporters - metallurgical and chemical enterprises (see information) - were the result of investigations that began before 2000. The decision of the Council of Ministers of the EC on October 12, 2000 to extend to Ukraine the “special market economy regime in anti-dumping investigations” removed some of the discriminatory restrictions. Ukraine was able to prevent the introduction of duties on the import of ferrochrome and ferrosilicon, and two chemical enterprises - Stirol Concern OJSC and Azot OJSC - received individual market status. “Consumers of Ukrainian chemicals were interested in having tough competition in the market and getting cheaper products,” Mr. Ryabokon told Kommersant. “Accordingly, they seriously lobbied their interests in the European Commission.”

Similar investigations against the Ukrainian metallurgy resulted in Ukrainian enterprises voluntarily restricting supplies to Europe. As determined by the Partnership and Cooperation Agreement, which came into force in 1998, imports of metal products were limited to an annual quota in exchange for European companies refusing to initiate new anti-dumping investigations. “Currently there is an agreement for 980 thousand tons, in 2006 the quota will be increased to 1.0045 million tons,” Dmitry Belokurov, general director of the Ukrainian Association of Ferrous Metallurgy Enterprises, told Kommersant. “Almost all iron and steel plants operate within the framework of this quota.”

European Commission officials argue that Ukraine's acquisition of market status will not be able to abolish the current duties and quotas, which are typically set for five years. However, Ukrainian experts are confident that international legislation will allow Ukrainian companies to initiate their revision every year. “Already now, some chemical enterprises in Ukraine are preparing to revise the dumping duty in 2006,” explains Mr. Ryabokon. In addition, the Ministry of Economy told Kommersant that a revision of trade restrictions is possible if new exporters from Ukraine enter the European market.

At the same time, experts warn that after being assigned market status, Ukrainian companies will face new restrictions in Europe, and European manufacturers will begin counter anti-dumping investigations, protecting themselves from cheap Ukrainian products. “When Ukraine joins the WTO, all restrictions on the import of metal products will be lifted, and then new investigations can begin. Such information has already passed on the market,” says Mr. Belokurov. Thus, along with the weakening of the trade regime, Ukrainian exporters will face new rules of the game that may complicate their expansion into European markets. “As soon as Ukraine begins to have a more or less significant presence on someone’s market - this is more than two percent of the total imports of any country, the threat of new investigations will immediately appear,” Mr. Ryabokon is sure.

EKATERINA Kommersant-GLAZKOVA, VYACHESLAV Kommersant-SADOVNICHY

Market status vs status market