A sensible balance sought
"We urgently need law in the area of international trade to be reformed as a way of making Ukrainian business feel confident in the domestic market"ANZHELA MAKHINOVA, SAYENKO KHARENKO PARTNER, BELIEVES
— What trends prevail now in the area of international trade? How do they affect the Ukrainian business sector?
— International trade is going through a turbulent period. It all began in March of this year, when the United States unilaterally imposed import duties on steel and aluminum at a rate of 25% and 10%, respectively, citing national security. Since, historically, metallurgical engineering is one of the most striking examples of industries with significant global overproduction, it is natural that the EU, EEU, Turkey, and Canada initiated safeguard investigations regarding steel imports. Some countries even introduced preliminary safeguard measures.
Certainly, these measures could not bypass Ukraine, whose metallurgical engineering has historically been one of the world leaders in the production and export of steel. In particular, metallurgical engineering has already felt the foreclosure of foreign markets. All import flows, for which the markets of the United States, the European Union, Canada, Turkey are already foreclosed and the EAEU market will soon be foreclosed as well, are beginning to cross over, including to Ukraine as well. And this situation is observed not only in metallurgical engineering.
— What is happening now in the WTO? What ways out of the crisis are there?
— Today, everybody talks about the crisis in the WTO. In fact, it is down to two main manifestations. First, the WTO has ceased to be a platform for efficient negotiations between member states. The Doha Round, which began in 2001 and did not lead to systemic changes in international trade rules, is a good example of that. The new rules are necessary because a number of questions that were not on the agenda in 1995 arise every day. Second, the entire WTO dispute resolution system is under threat because the USA has for years now blocked the appointment of members to the Appellate Body of the WTO. If this continues then the Appeals Body will cease to function by the end of 2019, since there will be only one legitimate judge out of the seven judges.
Now it is hard to even guess how the crisis situation in the WTO will be resolved. Different models are discussed. For example, instead of multilateral agreements to which all WTO members are parties, plurilateral agreements can be agreed upon to which WTO members which have agreed to certain rules will be the parties. Arbitration proceedings can be an alternative to the existing dispute resolution system (at least on a temporary basis). At the same time, it is obvious that all this is an issue for negotiations between WTO members. The grave concern of many WTO members over the current situation and their intention to reform the organization are positive signs. The EU and Canada have already made appropriate proposals. Moreover, in late October, a meeting was held in Canada devoted to reform of the WTO, within which the main areas for reform were voiced.
— How successful is Ukraine in upholding the interests of national business in foreign markets?
— In the past few years, Ukraine has stepped up the use of existing international trade tools, and this should be given proper respect. For example, our country refers to the WTO dispute resolution system, raises problematic issues at WTO committees, endeavors to conclude free trade agreements aimed at improving access for Ukrainian business to third markets.
At the same time, there are many unresolved issues, and the main issue is that Ukrainian business is, to a small extent, involved in all these processes. This results in the fact that when we joined the WTO, we completely canceled duties, even for our traditionally strong groups of goods. For example, metallurgical engineering; we agreed in the free trade agreements tariff quotas, which we will exhaust in the first ten days of January; we have joined the Government Procurement Agreement as for many industries it is critically important to have at least some preferences, for example, in the area of public procurement. In order to prevent such situations, it is necessary to adopt an appropriate regulation, and constantly train business in existing opportunities.
— How successful is Ukraine in protecting the domestic market?
— In this regard, first of all, we should talk about trade protection tools such as anti-dumping, countervailing and special measures. Ukraine is quite active in this area since the number of investigations keeps growing (as of October 31, 2018, 11 investigations and reconsiderations were being conducted). The increasing number of industries apply such measures and the increasing number of countries are subjected to them (while earlier it was generally about protecting the country from imports from Russia, now these countries include Moldova, Belarus, Poland, India, Turkey, China and Uzbekistan). Also, the fact that in the past five years there were no investigations that ended without the taking of appropriate measures can be considered a formal measure of success.
However, this does not mean that everything is fine. Quite often, the measures do not become efficient because they are not applied to the necessary extent; in practice, many measures do not work: foreign manufacturers and importers find different loopholes and bypass them. For example, they change the description of goods, use other UKTZED (Ukrainian Commodity Coding System) codes, etc. Unfortunately, outdated legislation does not enable the aforementioned issues to be dealt with successfully.
We urgently need law in the area of international trade to be reformed as a way of making Ukrainian business feel confident in the domestic market. This is especially important under the conditions of increasing global protectionist practices when all imports will overwhelm unprotected markets.
— What are the most frequently asked questions?
— Our clients come to us to receive innovative solutions, and no matter whether they are Ukrainian manufacturers who want to protect the domestic market, or foreign companies or consumers who want to prove that there are no grounds for introducing measures. The fact is that not only has the number of investigations changed, so has their quality. Processes have become significantly more complicated due to the fact that now there are more stakeholders involved in the investigations. As a rule, we are talking about the end consumers of the goods for which measures are planned to be implemented (the issue can be about 10-15 consumers in one investigation). The line of reasoning and evidence base have also become complicated. While previously the issue of the identity of goods might not have been raised at all, now comprehensive opinions by experts are submitted following almost each investigation. When calculating the margin, various adjustments are applied. We are ready to provide our clients with solutions based on years of experience working in Ukraine and abroad, on our knowledge of WTO rules and practices, on our ability to do all the economic calculations, on our application of the advanced approaches of other WTO members and otherwise.
— What is your forecast on the development of international trade and legal practice in this area?
— I suppose that next year will also pass under the guise of protectionist practices, so we should expect more various procedures, one way or another aimed at protecting domestic markets, including Ukraine’s. There is every likelihood that this will be not only about traditional trade protection measures, but about more veiled ones (for example, technical barriers, sanctions, certain prohibitions). This means that lawyers specializing in international law will have even more work.