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No. 16 of 2014 

TUESDAY, MARCH 4, 2014     

 

   

Filed from Portland, Oregon   

     

Click here for last Thursday's TPP quote from New Zealand's Tim Groser. 
UKRAINE AND THE DEAL STILL ON THE TABLE

"If and when Ukraine is ready to sign the deal, then the European Union is ready sign the deal."

Karel De Gucht
February 28, 2014
CONTEXT
There was in informal meeting of the EU's Foreign Affairs Council in Athens last Friday.  After the meeting, Karel De Gucht, the EU Trade Commissioner, spoke to the press.  At roughly the same time, a foreign (Russian) military was making its presence felt in the Crimean capital of Simferopol.  This is a trade policy journal, and so we shall stick with Commissioner De Gucht's comments.  Here is the beginning of his statement to the press:

"The EU ministers and I today took time to discuss the latest developments in Ukraine with respect to the Association Agreement [between the EU and Ukraine] which remains on the table.

"As most of you who follow trade matters are aware, one of the sparks that led to the developments we have seen in the last days and weeks is in fact the Association Agreement between Europe and Ukraine - whereby about 90 percent of that agreement is in fact a 'trade deal'.

"That is what former President Yanukovich decided not to sign-up to last autumn.

"I myself - along with my colleagues - have been very clear on this in media interviews in the last days.

"If and when Ukraine is ready to sign the deal, then the European Union is ready to sign the deal.  The democratic future of Ukraine is for the Ukrainian people to decide including in respect of a future Association Agreement with the European Union.   ....

"But most importantly at this stage, we should recall why this deal will be beneficial for all Ukrainians. Let me recall a couple of key figures on the expected benefits of the Deep and Comprehensive Free Trade Agreement (DCFTA): Ukrainian exporters will save almost half a billion euros annually in total due to reduced EU import duties - to be more precise: €487 million."   [About $669 million.]

Of course, a lot has happened since then, and the situation is volatile and unpredictable.  U.S. Secretary of State John Kerry was in Kiev today, where he offered $1 billion in U.S. loan guarantees, and the IMF is working on a long term stabilization plan for the country.  And all this is happening in the midst of a military situation that remains, to say the least, tense.

COMMENT
Are the armed men in unmarked uniforms in the Crimea now Russian soldiers?  Or are they, as President Putin has said, simply "very well trained self-defense forces?"  You can decide that for yourself. 

On the trade front, as Commissioner De Gucht noted, it was a trade deal, the Accession Agreement with the EU, that provided at least one of the sparks for the current crisis.  Reflecting on that, we found ourselves wondering about some of the other trade controversies in which Ukraine has been caught up. 

The country is a relatively new member of the World Trade Organization - it joined in 2008.  And in 2012, Ukraine stunned virtually every other WTO member when it announced its intention to raise tariffs on some 371 items.  That would effectively mean a new trade negotiation with all of the other members of the organization.  None of that has happened yet.  Suffice it to say it was a development that got the world's attention.  It also begs the question of whether a country that feels that vulnerable on the import side is really ready for an FTA with the EU. 

That is a question, not an answer.  Indeed, our preference would be to see the Ukraine accept the deal with the EU, but the Article XXVIII action of 2012 - the notification of an intent to raise bound tariff rates - does leave some unanswered questions.

More immediately, there is Ukraine's safeguard action on cars.  Japan has sought to take Ukraine to dispute settlement over that.

And Ukraine is one of the countries challenging Australia's law requiring plain packaging of cigarettes. 

Those issues are hardly exhaustive of the contentious trade topics involving the Ukraine.  Indeed, they don't even include the really big one, namely, Ukraine's dependence on Russia for energy.  We will try to deal with some of these later, possibly in programs and certainly in these quotes.

For now the question is: How should one think about the crisis of these last few months.  We don't have an answer.  But if you are looking for one, Farah Stockman's column in today's Boston Globe isn't a bad place to start.  The headline is "Solomon's choice in Ukraine."   The early sentence that caught our attention was this: "Everybody has always known that forcing Ukraine to choose [between Europe and Russia] will split up the country."  She then goes on to cite several leaders who have argued against forcing any such choice.

Indeed she might have included Karel De Gucht in the list.  His remarks in Athens were, to some extent, bifurcated.  On the one hand, he did observe that, "technically," the proposed Association Agreement with the EU would not be compatible with Ukraine joining the customs union that now includes Russia, Belarus, and Kazakhstan. But Ukraine is not in that customs union.

On the other hand, putting the Ukraine picture in a larger frame, Commissioner De Gucht said, "For us, Russia is not an opponent - I think we better should be partners with respect to Ukraine."

As for the story from 1 Kings, in which Solomon decides which of two claimants is the rightful mother of an infant, we are undecided between Ms. Stockman's understanding of the tale and that of the runaway slave, Jim, in Mark Twain's Huckleberry Finn.  To be sure, Ms. Stockman's approving version is the standard one:  the rightful mother is willing to give up the child, thereby proving that the child is indeed hers.

Huck and Jim talked about the story one evening.  Huck propounded the standard version. Jim was having nothing of it.  As he put it to Huck:

"The dispute wasn't about a half a child, the dispute was about a whole child; and the man that thinks he can settle a dispute about a whole child with a half a child doesn't know enough to come in out of the rain."*

On balance we favor Jim's interpretation, because there is a flaw in the standard version.  With absolute faith in Solomon, we know that the child was never really in any danger.  That's not the case with the Ukraine.
SOURCES & LINKS
*Readers of Huckleberry Finn will know that the quotation above is in fact not a faithful one.  Mark Twain had Jim (and other characters) speak in dialect, and we have dispensed with that, translated it, in this rendering.

On the Table is a link to the text of Karel De Gucht's statement in Athens on February 28, which was the source for today's quote.

Kerry in Kiev takes you to a Washington Post report on the Secretary of State's visit to the Ukrainian capital.

Solomon Revisited is Farah Stockman's column in today's Boston Globe.

Putin Reserves His "Rights" is a link to a Washington Post story on the Russian President's view of the events unfolding in Ukraine.
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