there were a large number of state-owned enterprises that were barely
uncontrolled by the authorities and fully governed by management;

labour costs were low;

the Ukrainian market lacked stable national currency;

there emerged numbers of private firms that were engaged in the
export/import business owing to liberalisation of foreign trade;

there was no stable demand on domestic market and traditional foreign
markets;

large volumes of barter sales significantly influenced the overall
pricing policies.

Western Europe, the USA, Latin America and Southeast Asia
turned into the chief markets for cheap goods from Ukraine. Quite a few producers in these
countries were severely damaged by dumped sales of Ukrainian goods and commodities at
prices 50 to 80% lower than local rates for the like products. Domestic consumers
preferred cheap Ukrainian goods.

Furthermore, two more factors make it much easier to
initiate antidumping inquiries against Ukraine. Firstly, most countries still treat
Ukraine as a non-market economy, thus making Ukrainian producers more vulnerable to
antidumping investigations that result in heavy penalties.

Secondly, Ukraine is not a member of the WTO. So, even if
local law is violated, the investigating authorities know that Ukraine cannot appeal to
this international institution.

This leads to a surge of antidumping and special
investigations against Ukraine.

- Would you please identify the key differences between
antidumping investigation methods practised in the USA and in Europe?

- Altogether, both US and European methods meet the common
GATT/WTO Rules, though there are certain differences. Let’s explore the differences that
impact imposition of antidumping duties.

Although the WTO Rules spell the minimum conditions
required for imposition of antidumping measures, the EU law has two liberal provisions
applicable to WTO member-states. These provisions are commonly known as “determination
of the Community interest” and “the rule of lower duty rate”.

Even if injurious dumping is proven, antidumping duty may
not be introduced if the Community interest requires so. Pursuant to Article 21 of Council
Regulation (EC) No.384/96:

“A determination as to whether the Community interest
calls for intervention shall be based on an appreciation of all the various interests
taken as a whole, including the interests of the domestic industry and users and
consumers… Measures, as determined on the basis of the dumping and injury found, may not
be applied where the authorities, on the basis of all the information submitted, can
clearly conclude that it is not the Community interest to apply such measures…”

European executive authorities do not impose duties should
they determine that this measure fails to correspond to the Community interest. This is an
extremely weighty point that exerts pressure on the Commission and EU member-states.
However, as there is a presumption of Community industry’s interests, European
authorities frequently refrain from duties simply because this measures is not the
Community interest.

The lower duty principle means that the duty imposed shall
not exceed the dumping margin and shall eliminate the consequences of injurious dumping.
As a result, European authorities consider both the dumping margin and the difference
between prices for dumped imports and domestic prices, i.e. the so-called injury margin.
If the injury margin is lower than the dumping margin, the authorities should impose
duties at the lower injury margin rates.

- What main lessons are there to learn from antidumping
investigations? Is there any difference between the attitude towards Ukrainian producers
as far back as in 1997 (during the first investigations) and today?

- Having analysed the statistics of antidumping inquiries
against Ukraine, we conclude that non-market economy status of Ukraine is among the chief
reasons for outrageously high antidumping duties imposed, e.g. up to 150 to 200% and over.

The non-market economy status cripples Ukrainian
enterprises’ opportunities to protect their interest. To be more specific, being treated
as non-market economy, Ukraine-based companies have not a single chance to disprove the
allegations of dumped imports. For example, Ukraine was viewed as a non-market economy in
the steel plate case in the USA. As a result, an 81 to 237% dumping duty was imposed
against Ukrainian mills. The dumping margin was fixed at 123% in the EU investigation
involving seamless tubes and pipes. There are plenty more examples. Apparently, such
decisions close up the market for Ukrainian companies.

To the contrary, when Ukrainian companies were treated as
market economy entities, the dumping margins hardly exceeded 10%, e.g. 9% in Chile and
only 4.5% in Taiwan. This is a clear example showing that Ukrainian interests may be
protected in antidumping investigations.

Naturally, the bare change in the economy status of Ukraine
will not solve the dumping problem. However, in case of the market economy status, each
enterprise responds for its own actions separately, while management becomes more
interested in better marketing policies, protection of own interests on foreign market,
attentive monitoring of prices and conditions of trade abroad.

In 1999 the Ukrainian authorities took first serious steps
to convince foreign countries to recognise Ukraine as a market economy. Naturally, it is a
joy for Ukrainian producers who have been rendering all possible assistance to the
authorities’ initiative.

On October 9, 2000 the EU Council issued Regulation (EC)
No.2238/2000 amending Regulation (EC) No.384/96 recognising that the process of reform in
Ukraine has fundamentally altered the economy of the country and that market-economy
conditions prevail in the country now. Therefore, the European base antidumping law
granted a special treatment to Ukraine-based firms.

That special treatment is an intermediate approach of the
EU to the group of countries that fail to fully comply with the market economy status but
have moved away from the economic circumstances which inspired the use of the
analogue-country method.

Pursuant to that amendment, Ukraine’s economy is treated
as non-market no more. Yet, this does not mean that Ukrainian enterprises can fully enjoy
the market-economy status. The amendment allows a flexible approach to each particular
case of determining whether market economy conditions prevail for certain enterprises or
not. Also, it introduces a more systematic approach to application of individual
treatment. In compliance with Article 1 of Council Regulation (EC) No. 384/96 "On
protection against dumped imports from countries not members of the European
Community", an enterprise has to provide evidence to the following points in order to
prove that it is a market economy:

decisions of firms regarding prices, costs and inputs, including for
instance raw materials, cost of technology and labour, output, sales and investment, are
made in response to market signals reflecting supply and demand, and without significant
State interference in this regard, and cost of major inputs substantially reflect market
values;

firms have one clear set of basic accounting records which are
independently audited in line with International Accounting Standards and are applied for
all purposes;

the production costs and financial situation of firms are not subject to
significant distortions carried over from the former non-market economy system, in
particular in relation to depreciation of assets, other write-offs, barter trade and
payment via compensation of debts;

the firms concerned are subject to bankruptcy and property laws which
guarantee legal certainty and stability for the operation of firms, and

exchange rate conversions are carried out at the market rate.

Practically, the special treatment is a mixed approach.
Should Ukrainian exporters prove that they operate under market economy conditions, they
are subject to the same rules as market-economy firms. If Ukrainian companies do not wish
to prove that for any particular reason, they are treated as non-market-economy.
Therefore, the decision acknowledging the market-economy status of Ukraine is only a
partial solution to the problem as it neither recognises Ukraine as a complete market
economy nor provides for favourable trade treatment of Ukraine.

- Does accession to the WTO mean good or bad news for
Ukrainian traders? Can we fail to protect domestic market from imports while trying to
lobby the interests of export-oriented traders? How mature is the Ukrainian legislation to
protect the domestic market?

- This is an extremely difficult issue that requires deep
analysis.

- The USA is setting up an organisation to monitor
supplies and prices on the market. Do we need a similar service in Ukraine?

- Monitoring of market and prices is important for both
private firms and the State that obviously requires information for its export/import
policy. As long as the State lacks funds, we believe this undertaking shall be financed
privately.

Without any doubt, an opportunity to stand for national
interests in international trade disputes using timely and valid information is very
important to Ukraine. To sustain a more co-ordinated trade policy, Ukraine needs an agency
that would have the necessary authority to define the foreign trade policy (e.g.
preferential treatment, trade penalties, etc.), like the US Trade Representative Office or
Department of Foreign Trade under the EU Commission.

- Do you think it was possible to avoid a special
inquiry on tubes and pipes in Russia?

- I believe that the Russians had no grounds to initiate a
special investigation against Ukraine back in March 2000. Per Russian law, a special
inquiry can only be instituted on non-discriminative basis, i.e. against all countries
together and only in case the imports grow and injure domestic manufacturers.

So, Russia has no right to initiate a special inquiry
against Ukraine alone, but against all countries. Respectively, growing supplies and
damage should be proven with respect to cumulative imports.

Meanwhile, the Russian statistics data evidence exactly the
opposite (see information published by the State Statistics Committee of Russia and the
Metal Expert magazine, issue 2 (59), February 2001).

Taking 1997 as the base year, one may notice that Russian
imports of tubes and pipes from countries worldwide plunged. For instance, cumulative
imports lost 32% in 1998 and 24% in 1999 compared to 1997. Although the 2000 import
increased against two previous years, it still fell short of reaching the year 1997
figures.

Ratios also show that the portion of cumulative import has
been reducing. Russia’s ratio of imports over domestic output was 31.2% in 1997, 26% in
1998, 25.4% in 1998 and barely 22.9% in 2000.

Throughout the base period, the ratio of imports over
consumption of steel tubes in Russia has been constantly declining. The ratio of imports
of total consumption of steel tubes made 25.4% in 1997, 22.5% in 1998, 22.3% in 1999 and
just some 21% in 2000.

Initiation of special investigation against Ukraine is a
breach of Russian laws. At the same time, it is impossible to prove injury to the Russian
tube industry even if Ukraine’s exports are examined separately. Russian imports of
steel tubes from Ukraine have been lowering from year to year. According to official
Russian statistics, imports of steel tubes from Ukraine lost 29% in 1998 against 1997 and
44% in 1999 against 1997. Despite an increase in 2000, imports failed to reach the year
1997 level being 7% below Russia’s imports at that year.

In 1997-1999 Russia’s import of steel tubes from Ukraine
was constantly reducing at rather material rates of over 20% per annum.

Meanwhile, Russia’s domestic output was on the rise.
According to statistics, the 1998 financial crisis slashed Russia’s output by 18.2% in
1998 against 1997. Nonetheless, production of steel tubes recovered significantly in 1999
and surpassed the 1997 output by 33.7% in 2000.

The year 2001 is even better for Russian manufacturers that
the previous period. In February 2001, the 7 largest tube mills of Russia manufactured
331,300 tons of steel tubes and pipes, 3% ahead of output in January 2001. In January
through February 2001 Russian tube mills manufactured 21% more tubes than in the first two
months of 2000. Russia’s average daily output of steel tubes amounted to 14,600 tons per
day, a record high for many years. Moreover, all Russia-based large tube mills have
augmented their daily outputs.

Having examined the stats, one may state that the growing
import of steel tubes causes no injury to Russian producers; thus, initiation of the
investigation is groundless. In this circumstances, initiation of a special inquiry
against Ukrainian steel tubes may be nothing but a concealed attempt of Russian tube mills
to monopolise their domestic market by getting rid of the major competitor. Meanwhile, the
Russian authorities ignore their own laws and facilitate establishment of such a monopoly.

- What advice would you give to Ukrainian exporters?

- Now when Ukraine faces a critical situation with domestic
debt, physical exports and export revenues are becoming crucial. Therefore, I would like
to advice Ukrainian exporters to take an active stand in competition for foreign markets.

In the course of trade disputes, an enterprise should
design a defence strategy for itself depending on the stage of investigation, e.g.:

the inquiry has been initiated recently;

trade penalties have been imposed and revision is needed;

a domestic company is entering new markets and examines potential trade
barriers.

As it usually happens in developed countries, information
on the coming inquiry becomes public (e.g. leakage from unofficial sources) a couple of
months before a complaint is filed. As soon as you get information that an inquiry has
been brought against you company, you should start examining the situation and search for
ways to settle the dispute, e.g. negotiate the case with the plaintiff out of court or use
some political influence.

While analysing the situation, an enterprise should start
preparing to the investigation and examine its sales over the period under investigation.
The company should also start collecting information regarding potential injury caused to
the plaintiffs.

If the enterprise is prepared, it will be ready for defence
by the time the investigation commences, i.e. it gets the same odds as the plaintiff.

There have been several cases when Ukrainian companies
managed to protect their interests successfully. For instance, Chile lowered the duty from
20% to 9%, Indonesia and EU entered into a quota agreement, while Thailand and Taiwan
suspended inquiry without applying any quotas.

Certain countries have erected trade barriers. In this
case, the company has to surpass those.

To do so, the enterprise has to develop a strategy of
entering the markets. The strategy may embrace:

identification of entities that are interested/not interested in trade
penalties with respect to Ukrainian enterprises;

defining an action plan;

execution of preliminary actions both in Ukraine and in the country of
inquiry.

For example, owing to participation of Ukrainian
enterprises in revision of antidumping duties against titanium sponge and ferrosilicon in
the USA, the duties that used to equal 83% and 104% were cancelled completely. As a result
of active protection of interests of Ukraine-based companies since 1998, the EU cancelled
duties on Ukrainian ferrosilicon in March 2001.

In case of entering new markets, the enterprise should
collect information on potential trade penalties and precautions to be made in order to
avoid trade conflicts. Analysis should be given to the local market, prices, economic
performance of local manufacturers, commercial law and court decisions in this area. In
addition, this means a need to monitor the conditions when application of trade penalties
is unavoidable.

Interviewed by Lyubov SHINGUR