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  • 06.05.2014

    Ukraine's WTO Membership: Institutional and Economic Effects

    ISBN: 978-617-7161-10-2

    The present study aims at analyzing the impact of Ukraine’s accession to the World Trade Organization on the national economy, primarily on manufacturing. Such an analysis is important for development of the country’s short- and long-term trade policy strategies.

    The implementation of the study is not trivial as, on the one hand, the accession of Ukraine to the WTO was not a momentary event and, on the other hand, WTO membership was granted when the world was already entering a financial and economic crisis.

    Ukraine became a WTO member in May 2008 as a result of an almost fourteen-year negotiation process.

    Over those years, the country fulfilled the majority of its commitments on liberalization of import duties and harmonization of domestic laws with the WTO rules and requirements. Accordingly, in order to determine the impact of the WTO membership on the economy of Ukraine, one should not simply compare the performance of the economy before and after May 2008, but rather analyze the effects of trade regime liberalization in the years prior to obtaining a formal membership.

    Ukraine’s WTO membership nearly coincided with the onset of the 2008-2009 global financial and economic crisis, which was accompanied by a dramatic drop in foreign trade volumes, the national currency devaluation, a banking crisis etc. The crisis called forth substantial institutional and structural changes in the country, and those changes complicated the assessment of the WTO accession impact significantly.

    Both quantitative and qualitative techniques were employed in the present work in order to perform the analysis. A total factor productivity model was used to analyze the impact of the WTO accession on the domestic manufacturing sector. It is a regression model, the best suitable for a study of ex-post effects. Moreover, that methodology allows for assessment of the impact of trade liberalization on the production side of the economy, in contrast, for instance, to the gravity model, which shows the impact of trade regime changes on trade flows.

    The general equilibrium model was instrumental in the analysis of expected changes in trade regime after the anticipated establishment of a Deep and Comprehensive Free Trade Area with the EU. That model is the most popular tool for ex-ante analysis of trade policy changes.

    In addition, the Institute for Economic Research and Policy Consulting conducted a survey of business managers to determine their opinion about the impact of the WTO accession.

    The study analyses also specific institutional effects of the country’s WTO accession, in particular, observance of the transparency principle, use of the dispute settlement mechanism, possibility of participation in the Doha round etc.

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