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FTA between Ukraine and the EU: Effective only after 2015?

The Day, Ukraine

FTA between Ukraine and the EU: Effective only after 2015?

Ukrainian government, while joining WTO’s GPA, wants to pull off a stunt contrary to arrangements with EU

By Alla Dubrovyk

4 September 2012

The Ministry of Economic Development and Trade (Minekonomiky) is initiating Ukraine’s accession to the WTO Government Procurement Agreement (GPA). This will provide Ukrainian manufacturers simplified access to WTO procurement tenders involving 43 countries, including 27 EU members and the European Free Trade Association (Iceland, Liechtenstein, Norway, and Switzerland whose legislation is very close to that of the European Union). North America is represented by the United States and Canada; Asia, by Israel, Japan, and four newly industrialized countries – Hong Kong, [South] Korea, Singapore, and Taiwan; South America, by Aruba. On September 15, 2011, Armenia became the first EU Eastern Partnership and CIS country to join the GPA. Another 22 countries (including Ukraine) are observers.

Several days ago Economic Development and Trade Minister Petro Poroshenko declared: “I have initiated Ukraine’s accession to the GPA. There are 43 member countries and this will allow the Ukrainian manufacturer to use simplified procedures to take part in the government procurement tenders with these countries.”

However, the interesting aspect is that the Ukrainian government, while practicing these simplified government procurement procedures, intends to complicate its own (considering that Ukraine’s government procurements have increased twofold in the past six months). Bill No. 111000, tabled at the Verkhovna Rada, reads that a business entity wishing to take part in a procurement tender must have production or service facilities in Ukraine, and that this clause will be in effect until the end of 2015.

Apparently, the Cabinet wants not only to stimulate direct foreign inland investments, but also protect the domestic manufacturer against the rivals. After Ukraine joins the GPA, on the Minekonomiky’s initiative, its businesses will be able to compete with 43 WTO countries in terms of government procurements, and there doubtlessly will appear foreign companies interested in Ukrainian tenders. After making appropriate changes in the pertinent laws (which changes will not run counter to Ukraine’s commitments to the WTO), the government will be able to place the domestic manufacturer in a favorable competitive environment. Experts note that the Cabinet’s proposal will considerably complicate the nonresidents’ participation in such tenders. Also, foreign companies will not be allowed to put in bids for commodities, such as food.

Sounds good, but the government’s initiative contradicts the arrangements with the European Union. Equal terms for domestic and foreign companies when bidding for government procurements are laid down in the FTA with the EU, initialed by Ukraine several months ago, although the timing of ratification and subsequent entry into force remains to be determined. This may happen in 2015, not earlier, for this explains the presence, in Bill No. 111000, of a clause with enhanced requirements to the government procurement bidders that will be effective until the year 2015.