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Ukraine and the WTO: a politico-economic coup

On February 5, Ukraine received the welcome news that after 14 years of often tortuous negotiations its membership of the World Trade Organization had finally been approved by the international trade body’s general council.

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The Verkhovna Rada, the Ukrainian parliament, has to ratify the deal by July 4, with Ukraine becoming an official WTO member 30 days thereafter.

Admission to the WTO is widely expected to have a significant impact on Ukraine, whose economy is highly geared towards international trade. "WTO membership involves some financial and economic adjustment costs," says Oleksandr Klymchuk, an economist at Concorde Capital in Kiev, but adds: "However, the tools that Ukraine gets in terms of its developmental impact will definitely pay off, similar to previously acceding countries."

Among the clear benefits of WTO membership is Most Favoured Nation status, which guarantees equal and non-discriminatory access to the markets of the 151 WTO members, which accounted for around 58% of the country’s exports last year.

Under the principle of MFN status, Ukrainian exporters will have a level playing field in terms of tariff charges and trade benefits and Ukrainian goods will no longer be subject to import quotas from WTO member state.

Vitaly Vavryschuk, economist at Dragon Capital in Kiev, says that while accession to the WTO is projected to add just 1% to annual economic growth rates, the more intangible benefits stemming from an improved investment climate, an enhanced competitive environment and a subsequent increase in foreign direct investment could add another 2% to 3% to GDP growth in the long term.

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