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19 March, 2013 08:00   ▪  

Financial Times: new Ukrainian car tax protects local oligarchs

New car duties on car imports protect Ukrainian oligarchs but risk infuriating fellow WTO members, FT writes.

On 14 March, the Ukrainian government's commission on international trade in the notice published in the official gazette said the government will impose tariffs of 6.5 to 13 percent on imports of passenger cars besides already existing 10% import duties. The changes would affect passenger cars with engine capacities of 1,000 to 2,200 cubic centimeters, will come into effect in 30 days time and remain in place for three years.

“In slapping fresh import duties on car imports, Kiev may achieve its short-term goal of partially reducing Ukraine’s trade deficit while simultaneously providing a boost to slumping domestic car output,” notes Financial Times` journalist Roman Olearchyk. “But the protectionist move — announced on Thursday by a cash-strapped government in talks with the IMF on a $15bn bailout — could carry costlier long-term consequences. It may infuriate fellow WTO member countries already shocked by Ukraine’s plans announced in September to renegotiate 371 tariffs just five years after becoming a member of the international trade organization,” writes FT.

READ ALSO: Please the Oligarchs

An alternative to protectionist moves of Ukrainian government would be to improve Ukraine’s investment climate to allow strategic investors to bring full-scale automobile production to the country, the Financial Times argues. “Azarov made it clear who the new duties were designed to protect, saying: “They could not handle the competition from cheaper automobile imports.”

“It’s no surprise to see Kiev’s oligarchs stifling competition again to boost their own profits, although many blue-collar jobs are also on the line…But is it really worth putting up such a fight to protect limited assembly schemes whose raison d’être is to bypass import duties? An alternative, surely, would be to improve Ukraine’s investment climate to allow strategic investors to bring full-scale automobile production to the country and take advantage of its lower-cost labour, geographic proximity to markets and ample raw materials?”, FT wonders.

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