General formula

[b]In early October, the Ukrainian PM, Nikolay Azarov, paid an official visit to Belarus and met President Alexander Lukashenko and PM Mikhail Myasnikovich. A package of Ukrainian-Belarusian documents was signed, including a road map of bilateral co-operation for development in 2013-2015.[/b]
In early October, the Ukrainian PM, Nikolay Azarov, paid an official visit to Belarus and met President Alexander Lukashenko and PM Mikhail Myasnikovich. A package of Ukrainian-Belarusian documents was signed, including a road map of bilateral co-operation for development in 2013-2015.

Apart from its economic significance, the Ukrainian PM’s visit to Minsk is of great political importance — taking place immediately after Ukraine approved a draft agreement on association and establishment of a free trade zone with the EU. At the same time, Ukraine is working hard to increase co-operation with the Customs Union member states and, during his participation in the Astana session of the Customs Union’s Supreme Council, Mr. Azarov confirmed that his country is ready to collaborate with the Customs Union states as an observer. With this in mind, a key political issue — discussed in Minsk — focused on the possibilities of such co-operation (under the condition of Ukraine’s interaction with two major integration blocks: the EU and the Customs Union).
On meeting Mr. Azarov, the Belarusian President noted that he sees no problems in Ukraine’s agreement with the EU. Mr. Lukashenko believes that a formula for Ukraine’s co-operation with the Customs Union would be found, “It’s always necessary to proceed from reality. Ukraine’s signing of an agreement with the EU is actually a reality — if we are to believe the reports from Brussels and Kiev. Accordingly, we also need to view this fact in the following way: Ukraine is a sovereign and independent state which has chosen this path and decided to conclude this agreement.”
According to Mr. Lukashenko, it is vital to ensure that this agreement on association doesn’t hamper Ukraine’s co-operation with the Single Economic Space and the Customs Union. “If the Customs Union feels satisfied with Ukrainian proposals, then we’ll move forward. In turn, neither Russia, Kazakhstan, or Belarus would act this way if a shift towards the EU is observed. Our states would possibly act then only before receiving certain compromises,” he said.
Mr. Lukashenko stressed that our three states would love Ukraine to take part in all integration processes and, with this in mind, the Customs Union member states would soon pass a long path of finding ways to establish normal co-operation with Ukraine. Speaking of the bilateral Belarusian-Ukrainian relations, the President expressed his assurance that our states would find a solution to all issues.
In his talk to the Belarus magazine reporter, Nikolai Azarov spoke of Ukraine’s view on the compromise in participating in two separate integration associations.

Mr. Prime Minister, your visit confirms the high dynamics of the Ukrainian-Belarusian relations which are now approaching a new level. As seen from our presidents’ meeting during Alexander Lukashenko’s trip to Kiev, our countries are ready to intensify their interaction. However, this co-operation could hardly be viewed in isolation from the Customs Union (of which Belarus is a member) whose efficiency would have drastically increased, as many believe, if Ukraine has joined. Our Belarus magazine readers are interested in your opinion on the situation.

Actually, the Customs Union was established recently, and has been functioning for a short period of time. Therefore, it’s too early to draw conclusions on its efficiency and I shall speak in general terms as a result. Of course, it’s extremely important that a range of trade barriers between Kazakhstan, Belarus and Russia were lifted. The restitution of former co-operative ties is supposed to yield a positive effect. However, speaking of figures, we need to recollect that the idea was realised in times when the three states were recovering from the crisis. We do observe a growth in the turnover but we would have been able to make more precise conclusions if that progress took place in normal times.
I’d love to repeat my view: I advocate foreign trade liberalisation. Fencing and creation of trade barriers for commodity and services (which affect capital and the workforce in a wide sense) would eventually result in an uncompetitive economy. With this in mind, we attentively study the Customs Union’s experience of work. The three states have been negotiating for a decade. Taking into consideration their national features, they agreed, creating certain trading regimes and technical regulations. About 120 legal agreements have been signed, all passing ratification and inter-state procedures. Naturally, we lack such integration experience.
We’ll study all these agreements and decide which of them we would be able to join. If they satisfy us, then we are ready to join the Customs Union. During a recent governmental session, we made a decision that our country would possibly join a technical agreement. The Government is soon to launch the procedure. We’ll need to talk to our partners seriously and we hope they are ready for this.
The formula, proposed by President Viktor Yanukovych, was eventually realised after a meeting of our four states (envisaging Ukraine’s ‘observer’ status). We take part in the work of the three states’ Supreme Economic Council (as observers) and plan to further participate in the work of your Customs Union’s inter-state bodies.

Mr. Azarov, the Ukrainian Cabinet of Ministers has recently approved a draft agreement on association and establishment of an overall free trading zone with the EU. With this in mind, many questions arise on how this move would affect co-operation with Belarus. Some assert that this would be profitable for our country — taking into consideration the Ukrainian-Belarusian industrial co-operation and our plans for a joint entry to third states’ markets. Does such intensification of Belarusian-Ukrainian relations mean that your state has no plans to focus on the EU exclusively, but aims to establish long term co-operation with the EU, the Customs Union and Belarus (as a Customs Union member)?

You’ve actually answered your own question. Of course, Ukraine does not merely aim to establish collaboration with the EU and the Customs Union. It is actually obliged to this co-operation. Having a large border, we neighbour many states. Our geographical position dictates our action in this respect. Moreover, we shared a single ‘umbrella’ with Belarus for many years and Ukraine feels much sympathy and enthusiasm in observing Belarus’ progress. Any of your difficulties are our problems as well. They immediately affect our turnover and economic ties. In turn, your successes help us develop. Everything is interdependent.
We are very much thankful to the Belarusian authorities for their deliberate and calm assessment of our decision to sign the aforementioned agreement with the EU. The reasonable apprehension, as seen in Belarusian leaders’ minds, including during my recent meeting with PM Myasnikovich, indicates that Belarus views this complicated process in a constructive way, whilst making reasonable conclusions. I’d behave in the same way if I were in Minsk’s position; i.e. if a neighbour makes a certain decision, then it would be wise to think of what is necessary to be done for both of us, and also our partners, to our benefit. In this respect, we are ready for supreme co-operation.
As well as governmental heads, who are responsible for economic issues, I’ve also brought a large team of businessmen to Belarus. We hope to develop joint projects in the future. My visit to Belarus indicates that we must be extremely sincere with our partners, openly voicing our position. We hope the Belarusian authorities would manage to inform their other partners, including the Russians, on our position.
Meanwhile, there are fears that the Ukraine-EU agreement on association would create additional barriers on the path of our countries’ economic liaisons.
This primarily depends on the position of the Customs Union and the Belarusian authorities. Russia tells us openly: ‘We will complicate your life’. I wonder why it needs to make our life more difficult. Rather, it should be full of joy and happiness. No barriers should appear as there are no grounds for them. I love an example which is truly indicative. The CIS has existed for over two decades. We’ve managed to create a free trade zone which was actually a large move, bringing our economies closer. A free trade zone is primarily a possibility for our economies to develop.
However, there is an opinion that if Ukraine signs a free trade zone agreement with the EU, all other CIS member states would cease their free trade regime with us. Why should this happen? A free trade regime is based on the WTO principles. Russia has free trade zones with other states and Ukraine also boasts two dozen of them. I’d like to remind you that we enjoyed a free trade regime with all our neighbours, such as Slovakia, Bulgaria, the Czech Republic and Estonia, before they joined the EU. Our ties did not hamper us to trade with Russia, Belarus or other states. Accordingly, we hope that Ukraine’s signing of a free trade zone with the EU would create huge possibilities, including for the Customs Union member states. I see no reasons to create barriers.

Mr. Azarov, numerous Belarusian-Ukrainian joint ventures operate in Ukraine and we are interested in the further growth of our mutual turnover. Won’t it suffer as a result of European produce flowing freely into Ukraine?

We have great plans dealing with the enhancement of our trade with Belarus. In respect to my visit to Minsk, I’d love to note that I’ve always visited your country with pleasure as, on coming here, only positive changes are evident. When I see this, I cannot but think of what my own country lacks. I see order and well decorated, tidy cities, which is very positive. I see that you’ve managed to preserve the most complicated industries, high-tech production facilities like MAZ. Much is being done in the field of high-tech development. The Head of our Ukroboronprom is accompanying me on this trip, and we wish our contacts to develop in this field. Actually, we have many plans which enable us to jointly develop our economies, primarily in the field of machine building and agriculture. You’ve managed, not merely to preserve your former assets, but also develop high-tech harvesters. Meanwhile, this year, Ukraine has collected the richest crop — 60m tonnes of grain. We plan to further develop our agricultural production to increase output further. It’s a true challenge for us, as we lack our own ability to produce combine harvesters and other machinery. With this in mind, we plan to join Belarus in establishing a venture on our territory to manufacture a range of agricultural equipment. Belarusian experience will be definitely useful in this field.

As seen from your comments, while signing an associated membership agreement with the EU, Ukraine does not oppose Eurasian integration. However, did you succeed in convincing your European partners that no barriers should be applied in your co-operation? European Commissar, ¦tefan Fьle, warned that your agreement with the EU does not envisage Ukraine’s collaboration with the Customs Union. What’s the way out of this contradiction?

There is no need to view the European Union as a single entity. It unites 28 states, and their positions differ. The same applies to European politicians’ opinions. On signing an agreement with the EU, Ukraine does not lose its sovereignty or its rights to make independent decisions. According to one of the articles of this document (officially approved by the EU), we are not prohibited to join any associations or conclude agreements on free trade zones and customs unions. This is our sovereign right. If Ukraine comes to a conclusion that participation in the Customs Union is feasible, then a legal referendum would be organised. Ukrainians will then be able to express their opinion, a decision will be made and nobody would be able to ever hamper us in its realisation.
Moreover, our signing an associated membership agreement does not envisage joining the EU. It will take a long time before this document comes into full force. A ten-year transition period is required for us to gradually shift to European standards and norms. I’d like to point out that Belarus, Russia and other states are likely to develop along this avenue. The globally advanced states’ experience is truly positive, from the point of view of technical norms and regulations. Our people understand this well. Accordingly, a desire to bring our economy, law and life standards closer to those observed in Europe is natural for any state figure.
However, we have a different mentality, history and culture. Nobody aims to break them. In turn, we plan to learn the best while developing in our own way. We wish the same to all our partners. I’d not oppose the Eurasian Economic Union to the European Union. We have little idea of what would happen in a decade. Anyway, we need to use the best global practices to ensure these achievements take root in our country.

You are right in saying that a free trade zone opens possibilities. However, this also envisages competition. Would a new agreement result in large scale cuts of Ukrainian production and, accordingly, affect your Belarusian partners? Is Ukraine ready to join Belarus in enhancing their joint manufacture, while conquering the European market?

This is a very complicated question. In the past we were members of the USSR. The Soviet economy was closed, with barriers against the rest of the world. It created ‘greenhouse’ conditions for its industry and economic activity. As a result, imports were truly ‘magic’ for us. We had no wish to buy domestic products, but were eager to purchase foreign produce. Our manufacturing processes were not modernised for two decades and, as a result, our competitiveness was lost. If the Soviet Union had no gas and oil deposits, it would have lost its turnover with the rest of the world.
Another system is observed now — the open economy. Any producer can join and, as a result, domestic manufacturers could lose their position if they fail to prepare. Ukraine is a good example of this. During Soviet times, the country fully satisfied its own needs with light industry products and also exports. However, markets are open now, and the situation has changed. China and Turkey have forced out light industry out of the country. Accordingly, we need to find a reasonable compromise between domestic interests and the conditions under which our manufacturers have a possibility to develop, modernise and compete. The tax regime, which our country applies, contributes to this, as does a certain level of trade protection and foreign barriers. Ukraine is now planning to sign an agreement with the EU, envisaging a ten year transitory period for our enterprises. Protective rates (which we are cutting slowly, while the EU is to zero immediately after signing) would be operational for five years. The Ukrainian Government aims to create the conditions for our producers to be able to modernise their facilities. If they fail because they spend money on different purposes, rather than modernisation, then bankruptcy is inevitable.
I think this won’t happen, as all those who’ve invested money are interested in their companies’ development and the conquering of new markets. Of course, some risk exists, we understand this well. However, it’s impossible to create a competitive industry without risks.

Are you convinced that our joint Belarusian-Ukrainian produce would be sold in the EU and rival local manufacture?

Of course. When our talks on the establishing of a free trade zone began, certain conditions were placed upon us. Our agricultural produce exports to Europe were limited by quotas. However, no quotas are applied now in exporting several million of such produce to the EU. Customers have become convinced of its high quality and, as a result, our products have become competitive. With this in mind, I have no doubts that our traditional produce would enjoy demand in the EU. Many Europeans, who come across us, buy Belarusian food as they highly appreciate its quality.

I have one final question for you. President Lukashenko has mentioned many times that Belarus and Ukraine have several key areas where our national interests coincide. What are they, in your view?

There are plenty of them. I’m happy to say that Mr. Lukashenko is a wide politician. He clearly outlines the fundamentals of our bilateral relations. This is a very correct understanding. What are Belarus’ national interests in Ukraine and what are our interests in Belarus? But if these contradict each other, let’s get round the negotiation table and bring them closer. Where they coincide, let’s strengthen them. Actually, we have many points where our interests coincide, and my visit to Belarus aims to assess this coincidence of interests. We are to discuss the uniting matters, to ensure they benefit Belarus and Ukraine.

Thank you for your time!

by Nina Romanova
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