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Russia may revise free-market trade with Ukraine without breaking WTO regulations

July 01, 2014, 8:28 UTC+3 MOSCOW
Deputy Foreign Minister Vasily Nebenzya says Russia may revise the regime of free trade with Ukraine by raising the import duties to a level typical of trade with the most favored nations
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© EPA/PHOTO KEYSTONE/Laurent Gillieron

MOSCOW, July 01. /ITAR-TASS/. Russia may revise the regime of free trade with Ukraine by raising the import duties to a level typical of trade with partners having the most favored nation status, and this will be done in full compliance with the regulations of the World Trade Organization (WTO), Deputy Foreign Minister Vasily Nebenzya said in an interview published by Izvestia daily.

“Pursuant to the Association Agreement between the EU and Ukraine, the Ukrainian market will now be open to a long list of agricultural products from the EU countries where the farming sector enjoys far bigger state subsidies than in Ukraine,” Nebenzya said.

“A question arises then on where the surpluses of the Ukrainian agricultural produce will flow,” he went on. “Quite clearly, they will mostly flow to the markets of neighboring countries, or more precisely, the countries of the CIS Customs Union (Belarus, Kazakhstan and Russia).”

“Appendix 6 to the Agreement on the CIS Free Trade Area makes a provision for a scenario, under which imports may begin to pose a threat to domestic producers, and it allows Russia to revise the free-market trade regime with Ukraine by raising the import fees to the level of duties offered to the most favored nations, with full observance of WTO regulations at the same time,” Nebenzya said.

 

Re-exports of substandard agricultural produce to the CIS

Apart from that, a big risk springs up of half-legal re-exports of agricultural produce not meeting Russian standards from Ukraine to Russia.

“That’s a very sensitive problem in our relations with the EU,” Nebenzya said. “Russian customs offices quite regularly arrest impressive consignments of farming products from the EU that have a substandard quality.”

After the signing of the EU-Ukraine AA, “unscrupulous European exporters of every description will have a big temptation to try and penetrate the Russian market via the Ukrainian channels,” Nebenzya said.

He believes that the decision-makers in Kiev have the conviction their country will be able “to sit on two chairs at a time” without any problem and to be included in free trade regimes with the CIS and the EU.

“However, this is impossible because the treaty on the CIS free trade area says Ukraine can participate in other free trade association, but it is expected to fulfill all of its obligations to the CIS anyway,” Nebenzya said. “The AA contains a similar provision with the only difference that Ukraine’s obligations to the EU must have supremacy over other agreements on free trade.”

“It is clear as daylight there will be no opportunity to observe the terms of both treaties simultaneously,” he said.

In this connection, there are weighty reasons for getting prepared to a situation where “the volumes of Ukraine’s economic cooperation with Russia, Kiev’s traditional trade partner number one, will shrink considerably” after Ukraine begins to implement the provisions of the AA.

In 2013, Russia accounted for 24% of Ukraine’s exports.

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