Sergey PONOMARYOV, reporter

West European economies are now booming after the memorable 1997-1998 crisis, when the world was staggered with financial breakdowns in Eastern Asia, Russia, and Brazil. The European Commission estimates that the rates of economic growth will reach 3% in 2000, though the January-February performance shows that this figure is likely to come to 3.5%.

In the European Union member-states manufacturing of consumer goods and civil engineering are rapidly developing, while capital investments are increasing. It is anticipated that exports from EU states will be up by 6% in 2000. Certain EU member-states have favorable balances of payments, while in the others the gap in the balance of payments fluctuates within an acceptable range. Devaluation of the national European currencies goes without exceeding permissible limits. Moreover, the slump in the exchange rate of EURO against the US dollar appears advantageous for the EURO-zone countries.

In such a favorable macroeconomic situation, the Western European metal market is also on the upswing. Metal consumption is going up fostered by improved financial health of major consumers, namely construction companies, automotive plants, tube manufacturers, and electrical engineering plants.

Another factor, which characterizes the situation on the European metal market on the verge of centuries, is a 65% reduction in imports from Asia in the fourth quarter of 1999, after the EU countries applied a series of antidumping penalties. At a meeting of the Coal and Steel Subcommittee with the Committee for Cooperation between Ukraine and the European Union, Gordon Moffa, chairman of Euroferro, said that, "the main Asian producers have left the European market and now the market is gradually returning back to us".

In these conditions, prospects of Ukrainian metal exports on the European market are becoming more rosy than not. They match a particular general recovery that has been taking place in Ukrainian metalmaking since the beginning of 2000. As it was mentioned by Sergey Grishchenko, deputy chairman with the State Committee for Industrial Policy of Ukraine, in the first 2 months of 2000 output of ferrous metals gained 15.7% compared to the respective period of 1999.

According to him, the first signs of the upsurge are traced on the domestic market for ferrous metals. In 1999 selected machine-building sectors, such as aircraft construction, shipbuilding, tractor manufacturing, and machine-tool making, boosted manufacturing outputs. These facts might alter export orientation of the Ukraine ferrous metallurgy, which took shape in the mid-1990s due to significant recession in demand for metal on the domestic market of Ukraine.

Along with that, growth in Europe-bound exports of Ukrainian ferrous metals (as high as +24% in 1999) is restrained by the level of quotas imposed in accordance with the Partnership and Cooperation Agreement between Ukraine and the EU. The 2000 quota on Ukrainian metal exports to the EU has been fixed at 257,000 metric tons (this is only 1.7% of the total metal exports from Ukraine per year). According to Vladimir Tereshchenko, CEO with the Ukrainian Association of Ferrous Metallurgical Enterprises, Ukrainian companies had already exported more than a half of this volume by the end of March 2000. This gives a message that quotas need to be enlarged urgently, since Ukrainian exports of steel alone have already totaled 1.5 million metric tons.

Unfortunately, notwithstanding the general diplomatic words of the Europeans about “positive presence of Ukraine on the European metal market” and about their general consent to consider the issue of increasing export quotas for Ukrainian metal, so far there has been not much enthusiasm with regard to expansion of Ukrainian exports to the highly competitive European market. According to Gordon Moffa, large import turnovers make the European metal market volatile and now it is a wrong time for revision of the Ukrainian export quota.

Along with that, the Europeans are eager to share their recommendations with Ukraine, such as “you should have done…”, etc. For example, Mr. Moffa believes that Ukraine could have had more revenues from metal exports to the EU, should Ukrainian producers work without intermediaries.

Though this observation is very true and correct, it looks like the topic of discussion has been purposefully changed.

The delegation of the European Commission brought to Kiev-based negotiations a whole bunch of claims and reproaches as regards the barriers for European goods on the Ukrainian market and other infringements of trade regime by the Ukrainian part. The delegates mentioned the unheard-of preferences granted to AvtoZAZ-Daewoo company, enormous fees imposed against European medicine producers by ex-top officials with the Ministry of Health Care, insufficient protection of intellectual property rights in Ukraine, etc. All this, unfortunately, did take place. However, it seems like intentional attraction of attention to these matters is aimed at forcing Ukraine to justify itself. So, no enlargement of quotas on Ukrainian metal could even be mentioned in this context.

Nonetheless, during discussions on Ukrainian scrap exports to EU member-states, it has become apparent how the Europeans view Ukraine as nothing but a source of raw materials. Concerns of the members of the European delegation regarding Ukraine’s intention to impose (oh my god, without prior agreement of the EU!) quotas on scrap exports (“even the rumors on this can drive the scrap prices up in Europe” said Gordon Moffa) have shown their strive to make Ukraine play a one-sided game. Certain experts have even mentioned a “cartel agreement” of Ukrainian and Russian ferrous scrap exporters to boost prices for this commodity in Europe.

Of course, it is easy to understand the anxiety of the Europeans in respect to losses that their steel industries may incur in case Ukrainian scrap exports are cut and prices for this commodity go up. However, foreign trade bodies of the Ukrainian government have to do a lot to make Europe get used to existence of the Ukrainian economic interest besides that of Europe and the USA.

In the meantime, Sergey Grishchenko says that possible imposition of quotas on ferrous scrap "is a local issue, which has been artificially exaggerated by the mass media and some businessmen". The government has only declared the right of the Ukrainian Association of Metal Scrap (UAMS) to impose such quotas. Along with that, in 1999 Ukrainian scrap exports increased 43% and amounted to 4 million metric tons. In January – February 2000 Ukraine exported 661,000 metric tons of scrap, 41% greater than in the respective period of 1999.

In general, according to Valentin Kulichenko, president of the UAMS, Ukraine is the only country in the world where scrap exports exceed domestic consumption. Since 1995 Ukrainian scrap exports have soared fifteenfold.

Along with that, Sergey Grishchenko believes that, as the world prices for scrap are decreasing, Ukraine gets less export revenues from outbound scrap, even if export turnovers are high. Therefore, in case the domestic prices are more advantageous, the market rules will hold scrap in Ukraine and neither the Ukraine’s Cabinet of Ministers, nor the European Union can cancel this effect.

The principles of market economy provide for equal rights and mutually beneficial cooperation of all the business partners. However, Ukrainian experts in the field of foreign trade can not avoid ascertaining “asymmetrical opening of domestic markets” by Ukraine and the European Union. In Ukraine they hope that the EU will give more space to such “vulnerable” commodities as steel, textiles, and clothes.

According to Vladimir Ignashchenko, head of the Department for International Development and European Integration with the Ukraine’s Ministry of Economy, acceleration of Ukraine’s integration into the EU is one of the four top priorities of the new Program for Ukrainian executive authorities. Now, the government’s attention will shift from political declarations to practical activities.

In particular, the Cabinet has determined itself to complete the process of Ukraine’s accession to the World Trade Organization within a year or year and a half (in fact, this accession has been a pending issue without any noticeable results for four years now). At present the new government is preparing the Plan of measures to harmonize national laws in compliance with rules and requirements of the WTO, which will enable swift settling of this incomplete task of the Ukraine’s former Cabinets.

During the recent negotiations, the government of Ukraine demonstrated a laudable flexibility having agreed on the majority of remarks made by the European delegation. The Ukrainian authorities promised to cancel restrictions of imports of European cars to Ukraine, to lift barriers for European medicines, and abolish quotas on scrap exports. They have already reported their “new senior brothers” on acceleration of adaptation of the national technical control system to the European standards and particularly on transition from obligatory pre-market certification of goods to efficient market control.

It seems that the Ukrainian party has managed to convince its partners that reduction in trade turnover between Ukraine and the EU was caused by objective reasons, such as presidential elections, economic crisis, shaping recovery from the economic crisis, etc., but in no way by protective measures of the government (for which we are sometimes blamed by the Europeans – alas, without any ground at all!).

Now, it would be good to learn from Europe how to protect the Ukrainian domestic market in a civilized way and to obtain Europe’s recognition of Ukraine as of a market economy. The latter can award Ukraine with a series of preferences in trade relations with Europe, and, what is more important, will lead to more equal trade relations between Ukraine and Europe. In particular, the number of antidumping inquiries, which are carried out by the Europeans in respect to Ukrainian commodities exported to Western Europe, should be reduced.

As a reward for loyal behavior, the European delegation promised the Ukrainian party to speed up consideration of the question of Ukraine’s status in the Boards of Directorate with the European Commission.

the Metal