Alexander Okhrimenko

President of the Ukrainian Analytical Center, Ph.D. in Economics, on the economy and business, latest trends and forecasts.

Ukraine has purposefully imposed the utilization duty since September 1 2013 and by doing so drew critics on the part of the EU, which was heard in the European Commission report dedicated to trade barriers. But what could Ukraine have done? Since September 1 2012 Russia has introduced the utilization duty on its territory and in this way caused problems for Ukraine’s export of motor cars to Russia. The utilization duty basically placed Ukrainian cars in unfavorable competitive conditions compared with the same makes manufactured in Russia which were not deducted the utilization duty. All attempts to reach an agreement with Russia on the issue of the utilization duty deduction were crushed by the Russian leadership’s intractability. At the same time neither the EU nor the WTO managed to achieve the cancellation or the easing of the conditions of the utilization duty deduction in Russia. Russia simply took a firm stand and showed that it will not make concessions either to Ukraine or to the EU and will not fulfill the WTO’s requirements. In such conditions Ukraine had to make a countermove. In any case Ukraine gave Russia the whole calendar year to annul the discrimination of Ukrainian cars.

In fact the utilization duty on vehicles in Ukraine is a copy of the utilization law in Russia. Ukraine was not the first to begin these “trade military operations”; but the experience of the communication with Russian business has proven that Russians never give in to those who show weakness before them. It is only possible to negotiate with Russia from a position of strength. Ukraine resorted to exactly such measures to force Russia into compromising. And it yielded a positive result: a draft law liquidating favorable terms of the utilization duty deduction for Russian car assembly plants was registered in Russia. According to the draft law the utilization duty rate partially goes down but now all the Russian car manufacturers as well as foreign suppliers will have to pay it on equal terms. So, the main problem of the utilization duty in Russia was eliminated; but also due to the Ukrainian utilization duty.

If Russia sets an example and makes the appropriate amendments to the utilization duty law, Ukraine will also follow suit and make the appropriate amendments to the operating mechanism of the utilization duty deduction. To avoid creating problems for the relations between Ukraine, the EU and Russia, Ukrainian President Viktor Yanukovych commissioned the Ukrainian government to develop a draft law on the changing of the calculation and deduction mechanism of the utilization duty to avoid objections and criticism on the part of the EU.

Ukraine is determined in pursuing on the way towards European integration and interested in fair and honest relations with the EU. But Russia, in any case, constantly provokes us to engage ourselves in new turns of the trade war. That is why Ukraine has to defend itself using different means. But it is impossible to act with Russia in a different way. It is a very specific country with a peculiar understanding of the adherence to the WTO’s rules.


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