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29 July, 2013 18:11   ▪  

The EU realizes that Ukraine’s government “improves” business climate in words

Brussels criticizes Ukrainian government for replacing real actions with “promises of further bilateral discussions” after the first round of the Ukraine-EU Business Climate Dialogue

The first Ukraine-EU Business Climate Dialogue took place on July 25. The parties plan to discuss the most important issues, first and foremost Ukraine’s steps to support its automotive industry (protective import duty and plans to introduce the vehicle utilization fee), quotas on the imports of coke, and Kyiv’s plans to revise the terms of its membership in the WTO, as well as problems European companies face when operating in Ukraine. The European and Ukrainian delegations are chaired by Deputy Peter Balas, Deputy Director General of DG Trade of the European Commission, and Ihor Prasolov, Minister of Economic Development and Trade of Ukraine, respectively, reports Kommersant-Ukraine. 

The parties announced the results of the first round on July 26. The Ministry of Economic Development declared extremely positive outcome of the meeting. Among other things, Prasolov spoke of “obviousprogress” in the solution of problematic issues and expressed confidence that the talks would “facilitate bilateral trade”. The EU’s statement had the opposite tone. While the European party admitted insignificant improvement in the legislative area, it highlighted “serious concerns … about the deteriorating business climate” in Ukraine. “The EU… had hoped that the Informal Business Climate Dialogue would lead to solving the existing trade irritants. However, these expectations could not be realized: the Ukrainian side was not in a position to offer complete solution to any of the EU's concerns,” says the press-release on the website of the Delegation of the EU to Ukraine. The European diplomatic mission has not been so critical since summer 2012 when chaired by Jan Tombinski. His predecessor, Jose Manuel

Pinto Teixeira, had mostly been critical regarding the Ukrainian government over the past few years in this office. 
Meanwhile, several participants of the meeting said that some results were achieved. “We were clearly reassured that Ukraine is ready to discuss the cut or even cancellation of the special duty on car imports. An option under discussion is to gradually cut it to zero in three years,” a European Commission representative commented.

Also, positive expectations concern vehicle utilization fee. The law to introduce it is awaiting to be signed by the President. However, the European Commission expects that the document will not come into effect because Ukraine has joined consultations regarding a similar step by Russia. “We are happy that Ukraine supported this joint call. Essentially, this means that it admitted the fee illegitimate. Meanwhile, we have not been given direct promises to veto the law,” the European Commission representative added. 

The date of the next round of the talks is not yet set but the schedule of consultations between the rounds is agreed upon. By August 5, Ukraine is expected to submit proposals on elimination of discrimination of car importers, while the EU will send its version to Ukraine by August 20. “We would like to see declarations and intentions grow into specific decisions that will come into effect by the end of September. But the problem is that we hear Kyiv’s promises and declarations of intentions without further actions too often. We have no confidence that everything will be different this time,” the European official said. Diplomats stressed out that postponing the negotiations would be impossible. According to the EU, solving the car imports conflict is a necessary prerequisite to the signing of the Association Agreement, and Brussels will be deciding on this in October. 

Ukraine’s Ministry of Economic Development explained that there are no deals to cut or cancel the duty, while the government is no longer competent to negotiate on the utilization fee because the issues is now “in the competence of the President, and the Government cannot take over his powers.” 

According to Oleh Nazarenko, Director General of the Ukrainian Association of Car Importers and Dealers, the negative impact of the new duty forces the Ukrainian government to seek a compromise. “The advocates of the duty have strong lobbyists but financial results hardly play in their hands. Despite their expectations, increased imports duties have not encouraged Ukrainians to buy more local automobiles. Moreover, the duty has triggered a steep decline of exports which hit the budget hard,” he comments.

READ ALSO: Import Duty as Geopolitics

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