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Ukraine to start free-trade talks with EU next year

Bloomberg, October 8, 2005

Ukraine to Start Free-Trade Talks With EU Next Year (Update1)

Oct. 8 (Bloomberg) — Ukraine expects to win market-economy status from the European Union in December and plans to start negotiating a free-trade regime with the bloc early next year, Prime Minister Yuriy Yekhanurov said.

Both measures would help increase exports to the EU, said Yekhanurov, who completed two days of talks with EU officials in Brussels yesterday. Exports including shipments of grains, metals and chemicals make up 60 percent of Ukraine’s $60 billion economy.

``We expect that the European Union will grant market-economy status to Ukraine at the EU-Ukraine summit in Kiev on Dec. 1,’’ Yekhanurov said in an interview at the Ukrainian embassy in Brussels yesterday. ``The talks over a free-trade zone with the EU will begin in the first quarter of next year.’’

President Viktor Yushchenko, who won elections last year on promises to increase living standards, guarantee human rights and win EU membership, appointed Yekhanurov prime minister on Sept. 8 after dismissing the previous government amid allegations of corruption.

``The main thing is that we speak a common language’’ with EU partners, said Yekhanurov, a member of Yushchenko’s Our Ukraine political party. ``We do understand well that Ukraine’s integration into Europe depends first of all on Ukraine. We have a long way to go.’’

Living Standards

Ukraine, a country of 47 million people that borders the EU and Russia, must ``significantly’’ increase living standards before planning membership talks with the EU, he said.

Recognition as a market economy would give Ukrainian exporters a break by reducing the size of any ``anti-dumping’’ duties that Europe imposes on the country for violating fair-trade rules. The market status would require the EU to accept Ukraine’s data when deciding on dumping duties.

Yekhanurov said he expects that pro-presidential parties will form a majority in the country’s new parliament, to be elected in March, making it easier to approve laws drafted by Yushchenko’s administration and the government. Yekhanurov expects his cabinet ``will be in place for sure longer than the previous cabinet, at least through next June.’’

Ukraine’s gross domestic product declined for the first time in August since the fourth quarter of 1999 after the country received 75 percent less foreign investment in the first half of the year and the currency, the hryvnia, strengthened to 5.05 per dollar from as low as 5.6 per dollar last November. A stronger currency makes exports more expensive and imports cheaper, cutting demand for domestic goods.

Ukraine may post its first full-year trade deficit in a decade this year after it lifted some import fees and the hryvnia strengthened, boosting demand for imports, Oleksandr Osaulenko, head of the State Statistics Committee, said on Sept. 20. Imports rose 27 percent in the first half, almost three times faster than exports.

 source: Bloomberg