Doctor of Economy, Prof.

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The contemporary features of development predetermine new descriptions of international economic relations as the special sphere of realization of the interests of man. The international cooperation went through numerous stages of evolution according to which it changed its quality (however, one would rather name them new qualities being added to already existing ones).

At first such cooperation provided access to commodities which can not be produced in a definite country due to realization of surplus or relatively surplus product. Later on it became the energizer of development thanks to specialization of production, a means of realization of factor advantages. Still a bit later this international cooperation became a multifunction instrument of development: a no-choice means of accumulation of resources (realization of large-scale projects, which-taking into account their cost, technological complexity or amount of man-hours-are not feasible in one country), balancing of economy (it was known earlier, but only in the second half of the 20th century it was used on the larger scale), realization of models of redistribution of functions in accordance with the levels of technological development, riches and military-political weight.

Finally, the international cooperation became an end in itself; at the end of the last century there appeared

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a situation, when the level of involvement into concrete integration unions meant both the presence of additional markets and possibility to use it as a locomotive of progress of more developed economies.

However, it was at the end of the 20th century, that the said scenario looked like the global determinants of progress. Then they triggered the mechanisms of integration, called the second wave of regionalism, which in future might well stand in the way of globalization. The most vivid displays of such regionalism include boosting of the Eurointegration processes of the 90s, especially after the Maastricht agreements, and certain practical steps in the direction of creation of free trade zone for "both Americas". Wherein we find sufficient consolidating centripetal force (that is on the European continent taken separately and for both Americas separately), the integration of equal entities is complemented by the new tendencies of "integration with leaders and outsiders", and sometimes by the union of potentials after the south- north vector, which was not simply present at times of the so called first wave, in the first decades after the WWII.

However, the dynamics of integration is not so good a determinant of natural and climatic or factorial and geographical (for example, of the type North - South) prerequisites, that is according to differences in relation to production possibilities and proper specialization, as with the similar, highly developed macro - and microeconomical systems, in particular in the form of integration processes within the framework of European Union, North American Free Trade Agreement, contacts of countries of the Asiatic-Pacific group etc. The "primitive-natural" distribution of factors in this sense becomes all the less influential; the value of that specialization, which came to be as a result of competitive activity of the last decades, is on the rise instead.

The more so such situation differs from that which was shaping on the turn of the 19th and 20th centuries, before the splash of contradictions, which, eventually transformed into the fire of First World War and put an end to the period of stability and piling up of potential of economic cooperation.

Then the system of specialization was not a "frontal" one, and was rather traditional to a great extent. However, even then they cherished plans of creation of the so called United States of Europe, a democratic federal state with the highly-integrated economic system.

Globalization and regionalization are the forms of socio-economic internationalization

Deepening and expansion of integration processes require the adequate institutional support (that is adoption of proper national and international normative acts, creation of

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specialized organizations), establishment of maximally reliable production-sale lines between countries, removal of obstacles on the way to international trade. These processes are ultimately intended for creation of the structural-functional systems according to certain goals and organizational-hierarchic criteria with participation of both people of the world as a whole and population of separate regions.

In order to more precisely and completely describe the aforesaid forms of socio- economic internationalization, we will have a closer look at the sense of basic terms now.

The globalization is the process of gradual formation of universal world environment of market activity owing to the decline and abolition by the countries of tariff and non-tariff regulators of foreign trade, liberalization of the factors of production range and development of transnational economic structures.

In accordance with the legal conformities of international division of labor and owing to the expansion of national specialization the globalization of economic life is to provide the increase of the combined world production and growth of efficiency of economic mechanisms which become the objects of integration. It is possible to explain it by the fact that physical expansion of economic space enables to optimize the processes of recreation, to better use the present economic resources. However, besides the objective preconditions of globalization, the important part is played by the conscious, purposeful policy of public administrations, especially of leading market economies, and international organizations, most of all of such organizations as the General Agreement on Tariffs and Trade, World Trade Organization, International Monetary Fund, and World Bank.

Within the scope of their competence the international organizations try to be instrumental and try to remove tariff and non-tariff limitations of foreign trade, obstacles to the factors of production range, above all things capitals induce separate countries to liberalize their trade exchange.

Acquirement by Ukraine of the status of the independent state in the aftermath of collapse of previous state structures and international economic groups within the framework of the so called "socialistic commonwealth" put on the agenda a number of important and difficult geopolitical and geoeconomical issues. There appeared the danger of autarkization of national economy, narrowing of possibilities to specialize in production of traditional products of industry and agriculture.

Obviously, such course of events could but lead to the radical worsening of terms of economic reproduction in the country, decline of the standard of living of population. Taking it into account, as early as in the first years of real national sovereignty the conception of multivector development was proclaimed which had to deal with the sphere of economic cooperation and foreign policy. It was

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also partially connected with the unwillingness of Ukraine to join any suprastate unions in the post-soviet space and no chances for it to quickly integrate into the European continental structures, the European Union in the first place. However, such neutrality contains the same dangers of autarkization. Remember, that even considerably more advanced economies of Europe feel large dependence on modern processes of unification on the continent. The same is true for the countries of North America.

Moreover, it should be noted that liberalization as the key instrument of globalization is not the guarantee of even distributing of benefits of cooperation, which would satisfy all its participants. What is more, even the fact of the increase of the volumes of gross world production does not mean the upturn in the economy of each country which takes part in the integration process. The wildcat market and principles of competitiveness are the primary causes of disproportionate distribution of acceleration of profit and integration advantages.

These natural laws of liberalization of the global economic relations and implementation of external economic regulations are primarily attractive for the leading economies with the most competitive production systems, and such states which were able to develop effective export-oriented industries. And vice versa, countries with noncompetitive production, as well as those which because of uneconomical, in particular because of political reasons hold back from liberalization of external economic relationships with the outer world, tend to preserve some kind of tariff and non-tariff limitations, protecting domestic market and national industries.

It is clear, that such limitations of globalization, and also the fact, that culturally and historically, economically or ethnically close nations feel disposition towards mutual rapprochement, motivate the tendencies of economic regionalization. The leaders here are the most advanced economies, which not only have similar socio-economic mechanisms and social institutions, but also have stable political systems and can coordinate sometimes contradictory interests of integration.

The regionalization is the process of progressive formation of common market and reproductive space of geographically, historically and culturally akin countries, which is accompanied by standardization of terms of trade and economic activity, curbing and abolition of mutual limitations with the purpose to improve economic efficiency and solution of global competition tasks.

The initial stages of regionalization are related to the mutual granting of national modes of trade and introduction of special modes of mutual trade among countries which join the integrated structures. These measures lower trade barriers and can be used as the instruments of standardization and complete liberalization of cooperation.

The regionalization is a form of

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globalization because it is instrumental in abolition of limitations of trade and other forms of international economic activity. However, to a certain extent it conflicts with the latter creating new scopes and limitations for the movement of goods, money- capital resources and labor force. In accordance with some futuristic estimations the future world will be determined not by modern globalization tendencies (in a narrow integration, liberalization context), but by regionalism which will result in global division into a few powerful regional formations.

But, however that may be, the current processes of regionalization "accompany" globalization, and the leading actors of international market tend to create big integration unions, which would allow to expand market space free from internal borders, custom and administrative control.

As a rule, the regional economic integration corresponds to the geographical division of the world into regions and sub-regions, embracing their peculiar segments. Conversely, sometimes integration processes tend to go beyond the scope of local territory. So, the overwhelming part of Western and Central Europe is pulled into the orbit of the European Union (all countries there either are members of the EU or tend to join this group). The projects of creation of the all-American free trade zone are designed to include both Americas.

Regionalism becomes a means of national policy and even global competitiveness. We can observe ever more active attempts to create big international integration unions which are important reference points for Ukraine and also examples of what the integration behavior is under conditions of chronic vagueness of geoeconomical prospects. The aforesaid structures arise up on the basis of common interests and existing market institutions of countries which belong not only to Western and Central Europe, but also to North America and Asian-Pacific Region (APR).

Indeed, during the second half of the 20th century there were unification processes under way not only on the European continent, but there were also integration waves in the New World and in Asian-Pacific Region which during the last decades geopolitically competed with the former. However, the 1997-1998 global financial crises, which can be considered Asian after its geographical localization, considerably hampered the integration efforts of the countries of Asian-Pacific Region. It is important to bear in mind that the temporal stagnation happened against the background of incessant centripetal movement of the members of the European Union, which at the turn of the centuries created a common and rather unified market environment with the free movement of goods, resources and factors of production, as well as common currency and suprastate institutes of money emission and bank-credit regulation.

Those were the successes which stimulated the countries of North America to energize their integration

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processes, which at first included the United States, Canada and Mexico. But today there is a task to create the Transamerica group together with the countries to the south of Mexico, including all of South America. The core concept of the project will be the creation of American free trade zone in 2005.

Historical aspects of socio-economic internationalization

Processes of regionalization show how during the social development one pre- conditions of integration come to be realized in practice, while other-no. The reasons of this cannot always be explained by economic logic and are connected with the sphere of ethnic and cultural values, political, and psychological reasons.

Partly it explains the complexity of choice of models of regionalization or geoeconomical vectors of integration in Ukraine. Some historical arguments-political and trade realities of Great-Princes times of Pre-Mongol Kyivan Rus-can be used to prove that Ukraine is an inalienable part of Europe; consequently it has to take its place in the European Union only. The same history choice is supported by the aspiration to be included in dynamic and highly developed market and socio- economic space of the European Union, which can improve the standard of living in the country, its basic macroeconomic indexes.

For example, at one time such thing happened with Portugal which joined the commonwealth of the most developed countries of the continent as one of the poorest states in Europe and whose experience is especially meaningful for Ukraine. Before this unification in 1986 the level of incomings in Portugal made about 53% of the common Western European, while in a decade it already made 73%. And there is no wonder: within a few years the rates of economic development of Portugal were either the greatest or among the greatest in the region; recently the leadership of this country in the dynamics of development has been especially noticeable. It is not only the confirmation of one of the basic options of the European Union in relation to smoothing of terms of socio-economic development, helping the backward economies to pull up with the rest of the countries and regions with front-rank indexes, but also the evidence of the fact, that initial impetus may create structural pre-conditions for the rapid advancement in future.

At the same time, speaking about the alternatives of strategy of regionalization for Ukraine, one should recall the logic of the so called "renewal of severed relations", that is restoration of the trade-and-cooperation mechanisms within the space of CIS.

Nonetheless, the task of restoration as such one cannot consider realistic. The centralized administrative models of economy, which brought former soviet republics together and

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made a unified economic complex, have already given way to the market mechanisms with their interests and priorities. That is why now one can speak only about utterly new mechanisms of integration. And here we have the problem of geopolitical choice between given and other international economic vectors.

The latest on Portugal and selected countries of the euro and dollar area

Portugal - Annual inflation fell to 3.7% in April from 3.9% in March. The decline was attributed to lower prices in "transport" and "alcoholic beverages and tobacco".

In the first quarter of 2003, the unemployment rate climbed to 6.4% from 6.2% in the last quarter of 2002, as the economic downturn led to job shedding in retail and manufacturing sectors.

The information update according to:

AMCM/GEE International Economic Review, Vol. 3, No. 6, June 8, 2003

Under conditions of transitional economy of Ukraine, where decentralization of economic policy have already taken place and the process of privatization and restructuring of property is still under way, the estimation of market situation from the point of view of the director's corps in both sectors of economy-privatized and unprivatized-is the important criterion of making economic decisions. That is, position of leaders of domestic enterprises is a model and meaningful subjective factor which affects the quality characteristics and dynamics of the perspective model of regional integration of Ukraine. Properly speaking, the director's corps is the part of society, which is responsible for practical decisions in the field of international economic activity and integration processes in particular.

The greater interest to cooperation and subsequent rapprochement with the European Union taking place against the background of certain decline of pro-Russian accents and disappointment in the potentially important, but thus far unrealized ideas of creation of the new integration projects is rather indicative. This disappointment is foremost related to the projects of cooperation between the countries of the Black-Sea Basin, that, as was earlier expected, could be a nucleus of further integration. The plans to create the so called Baltics-Black-Sea Arc with common mechanisms of custom, and international trade regulation proved to be a failure. As well as in the previous case, the potential participants of cooperation felt powerful gravitation influencing them from the side of other centers of integration attraction,

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first of all from the European Union.

At the same time, if we omit the prevailing particulars, we will be able to state that the modern development of the processes of regionalization (and to a certain extent it is connected with the globalization as well) generates such original phenomenon as gradual fading away of the object or substance of foreign economic activity. Those economic and trade contacts, which earlier were considered instruments of international regulation, are now reckoned to be the object of interaction inside the definite blocs, groups or common modes. Consequently, the source of regulation moves up to an intergovernmental or even suprastate level. It takes place because the national states voluntarily renounce the definite part of their sovereignty (above all things in economic sphere), namely, from a number of instruments of regulation (such as custom penalties, quantitative limitations of foreign trade to name a few). As far as certain rights and duties are passed over (delegated) to joint administrations alongside with actual liquidation of borders, the former external economic relations change their character and in point of fact become internal economic relations within the framework of common market space.

The regionalization to a certain extent conflicts with the globalization, because it needs special restrictive mode in relation to countries which take no part in integration projects. For example, such was the case when standardization of foreign trade modes of countries of the European Union and transition to common system of the tariff and non-tariff regulation sometimes resulted in partial impairing of trade terms for the third countries. It happened, when previous national trade tariffs were lower and general procedures more liberal than the new ones.

It can be exemplified by the situation, which appeared after between Russia and Byelorussia had signed the agreement about creation of customs union hitting Ukrainian producers that specialized in the export to Byelorussia. The thing is that the Russian customs policy which tried to obtain the status of the union policy is considerably harder than Byelorussian one and sometimes was not instrumental in trade with Ukraine. (By the way, such situation conflicts with the regulations of GATT/WTO, which contains a clause that members of new customs unions grant the third country such mode of trade, which had been most advantageous for it in the bilateral trade with one of countries of the union prior to its creation.)

In general, the leading integration groups of the world (EU, NAFTA, ASEAN etc.) during the 70s to 90s of the 20th century were characterized by the rising constituent of the intra-regional trade. Thence the rule that in accordance with the number of experts (in particular specialists of the UNO staff which presented their report to the secretariat of the UNCTAD still in September

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1993) beginning from the end of the 80s the tendency of regionalization even prevailed.

At the same time the regionalization can be considered an original locomotive of globalization, its catalyst and accelerator, because regionalization means the aggregate increase of volumes of interstate trade, removal of numerous national limitations, reduction of the number of institutions regulating the foreign economic activity. And it fully meets the parameters of globalization and is its practical instrument.

That is why it is possible to establish duality and sometimes contradiction of modern integration processes. However, it is possible to notice certain common traits. The main thing here is the increase of absolute volumes of world trade and movement of capital and relative indexes of international exchange in relation to gross production in the world over. Consequently, the economies grow more open and sectors of production and consumption of separate countries, which take part in international exchange, start to climb. That is the ever greater part of goods is exported alongside with greater commodities import.

Regional integration as the factor of new reality in the present international economic activity of Ukraine

The study of general global trends of international economic activity or typical models of evolution of the mechanisms of open economy of separate countries can not give the complete objective picture of reality of the contemporary international economic activity. For many countries of the world the concrete terms of international cooperation are determined by the features of regionalization; however, sometimes the reverse is true and leads to disintegration and social entropy. Moreover, the latter phenomena sometimes can change the very concept of what in particular can be classified as international in the economic activity of separate countries. It happens, for example, in the case of radical changes in the character of economic relations between the subjects of commercial activity, which belong to different economies.

Characterizing the measure of modern integration processes, it should be noted that the relations among countries which should have been regulated by corresponding international agreements among them, other sources of international law, grow into "internal" ones that is such which are carried out within the limits of interstate union of certain degree of integration. And vice versa: the stable production-trade contacts which existed among partners of the same nationality get the signs of internationalization, as it happened, for example in former Soviet and Yugoslavian republics-newly independent states.

That is, actually, the group of states Ukraine belongs to, and the problems related to the regional integration

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processes are especially critical for it. Therefore, the estimation of the tendencies of regionalization, which can radically affect the terms of international economic activity of the country, is of practical importance. For example, there are practical complications for it, especially for the Ukrainian producers-exporters, in connection with the loss of relatively favorable trade status, in particular of the free trade mode with the countries which are soon to become integrated into the EU, because Ukraine has no such regulations with the European Union.

The determination of regional priorities of cooperation with other countries is the important condition of forming of the effective system of international economic activity of Ukraine. Obviously, that the border integration processes are of special interest.

Consequently, another aspect of problem is the choice of original centers of gravitation, that is integration systems which are the most promising from the point of view of forming of own geoeconomical model. For the prospects of Ukrainian international economic activity the critical question is as follows: which geographically neighboring system is more attractive-the EU or CIS. Nevertheless, we will consider the practical aspect of this problem later on.

On the one hand, certain international integration processes turned out to be unattainable for Ukraine, and on the other, even such, that really complicate its position. Here are some examples which directly affected the interests of Ukraine. The creation of common European market was accompanied by complications for the Ukrainian producers aspiring to enter markets of some Western European countries which earlier had lower custom rates and non-tariff barriers, than those that were introduced with formation of the common European market. Formation of customs union between Russia and Byelorussia also resulted in worsening of term-of-trades with the latter, because she applied Russian regulations, which were more restrictive in relation to Ukraine.

Summing up everything said here about participation of Ukraine in the regional international economic processes, the competent participant of which she is or aspires to become, it is possible to conclude that, unfortunately, our state has failed so far to secure a place for itself in the international integration which could match its goals in relation to the volume of trade, in-depth specialization and integrative contacts. To our mind, signing of the agreement about the creation of Common economic space (CES) is an attempt to wiggle out of the situation, to make the best of the eastern situation providing for luckier regional integration with three other post-soviet countries, if relationships with the European Union go on stagnating.

Border cooperation in Ukraine

The border regions often have

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specific status and serve as energizers of the process of international cooperation. Both integration practice of intergovernmental groups (for example, such as the EU, NAFTA) and cooperation of countries which did not formalize their relations in the sense of possible integration prove that it is true. The thing is that border territories as separate political subdivisions, corresponding administrations may be a specific subject of international economic activity.

The border cooperation can be defined as a complex of forms and instruments of co- operation among partners which carry out cooperation in the spheres of industry, agriculture, transport and communications, recreation and environmental control, trade and can be investors and recipients of capital and realize other forms of mutually beneficial socio-economic partnership on the geographically neighboring territories.

The border cooperation is the specific form of realization of international division of labor in the scope of regions of two or more countries. They can create production infrastructure, jointly utilize resources, develop recreation network environmental projects in order to stimulate co-operation infrastructure in the border areas. In this form of cooperation we often find reflection of the past historical contacts, national and other factors promoting transborder cooperation.

For Ukraine, which is situated in the geographical center of Europe and whose international integration model so far has no clear definition, the problems of border cooperation are of special interest. The latter is strengthened by both numerous economic ties of Ukrainian producers, consumers and cooperators with other FSU republics, and traditions of border cooperation with countries-former members of Council of Mutual Economic Aid-which aspire now to join the EU. In fact, such traditions can be considered somewhat conditional as they came into being in the times of the so called monopoly of the state on foreign trade, when international cooperation took place under strict administrative control and entrepreneurial activity as such was impossible. The border area cooperation included direct production ties within the framework of co-operation and specialization, joint use of natural (energy, water etc.) resources, sharing of scientific and technical, organizational-administrative experience, barter, labor resources maneuvering (for example, during harvesting), wide cooperation in agroindustrial complex, during construction works and use of production infrastructure to name only a few.

Within the context of the declared geo-economic choice of Ukraine-integration into the EU-the Decree of the President of Ukraine of June 11, 1998 #615/98 became the characteristic reflection of the role of the border ties. This document determines other directions of integration into the European Union up to 2007 and stresses the importance of development of the mechanisms of regional integration, direct

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contacts among regions of our country and neighboring countries of the central- eastern region of Europe.

The transformation of socio-economic systems of countries of Central-Eastern Europe, decentralization of management stipulated new paradigm of border cooperation. Regional business corporations, which began to appear at the end of the 80s and rapidly developed in the 90s, penetrated western markets. Such orientation of work of private structures met the demands of geoeconomical reorientation of the former members of the Council of Mutual Economic Aid.

In practice it means turning to the Western European integration standards, joining the system of Western European institutes and creation of specific sub-regional models of cooperation, first of all Visegrad Threesome (later Foursome) and Central European initiatives. Therefore, it is possible to consider the obvious decline of the role of Ukraine as a participant of the process of border cooperation objectively conditioned, especially because of lagging on the start of reforms which were conducted later rather ineffectively.

Alongside with geographical, geopolitical factors, presence of proper infrastructure and production pre-conditions for development of border cooperation there is a number of important subjective factors-institutional instruments of normative, organizational, and legal character. The imperfection of legislation became one of the main hindrances for the development of border cooperation with participation of Ukraine and other transformation countries.

So far the border factor has rather small effect on the dynamics of export-import operations in those regions of Ukraine, which abut upon FSU republics-Russia, Byelorussia and Moldova. In any case they have preserved their traditional contacts. One can observe another strange thing: during the 90s Chernihiv, Sumy, Kharkiv, Luhansk and Donetsk Oblasts bordering upon Russia mostly rerouted their export deliveries to the West and countries of the Asiatic-Pacific region. Unfortunately, the situation never changed even after the governments of Ukraine and Russian Federation had signed the agreement about border cooperation in 1995.

The Lutsk, Rivne, Zhytomyr, Kyiv, and Chernihiv Oblasts bordering upon Byelorussia have much lower export potential and ignore this neighbor country as their partner.

The status of a neighbor of such small state as Moldova also failed to influence the structure of export-import and production cooperation activities of Chernivtsi, Vinnytsia, and Odesa Oblasts. Despite the fact that the Odesa Oblast is a top Ukrainian exporter (sixths place in the late 90s) it pays insufficient attention to Moldova, while Moldova is more dependent on metal and commodities import from other Ukrainian oblasts.

The important aspect of border cooperation is related to the development

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of transportation network. In the world the transportation infrastructure usually grows the most intensively near the border providing for better communication with the foreign markets. It is critical for Ukraine now to integrate its border transport crossings into the national transport network and European or transcontinental transport corridors. The new transport corridors should be constructed in the Western part of Ukraine, the old ones should be modernized, and the connections should be made with the basic transportation network of Ukraine. The expanded West-to-East corridor, corresponding to the central latitudinal route Carpathians-Kryvbas--Donbas, may be considered a part of the Euro-Asian transport corridor.

In order to give a new impetus to border cooperation with participation of Ukraine it is necessary to take such one-sided and multilateral international measures:

* to simplify the transborder movement of goods and services in the border areas which are produced and consumed in these areas;

* to liberalize the movement of citizens in border areas, that will simplify not only humanitarian contacts but also seasonal labor, temporal migration, terms of renting on adjoining territories of the neighboring state;

* to introduce the two-side favorable system in relation to some types of international economic activity on boundary territories;

* to develop the legislative, normative basis of border cooperation on the foundation of methodological criteria of the European Union;

* to simplify regulative, documentary procedures for legal and physical entities which carry out transborder contacts and operations;

* to develop the mechanisms of common use of natural resources and environmental control on boundary territories;

* to create the registers of kinds and subjects of entrepreneurial activity on boundary territories to be instrumental in providing of proper business information;

* financing and stimulation of the development of transportation infrastructure on boundary territories, connecting to relative European transcontinental transportation corridors; and

* to support formation of the simplified mechanism of bank credit extensions, insurance services etc.

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The modern stage of the development of humanity is characterized by the progressive internationalization of economic life. This tendency became already obvious within the first decades after WWII. This process was promoted by both regional integration efforts and aspirations of the leading global market economies to comprehensively liberalize the whole system of international trade, expand markets and increase the efficiency of economies due to extended

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cooperation and deeper specialization of production.

As a result at the turn of the century it was a qualitatively new process of internationalization of economic life in the world. Presently the international economic cooperation, which is being reshaped as a frontal economic integration, has become the principle factor of development of some economies. In the meantime the latter may lose some signs of its identity while transforming into the inalienable elements of the wide international market systems.

The one-sided dependence of Ukraine on certain types of import (mainly energy carriers) perceptibly limited possibilities of geopolitical maneuver, as well as solution of military and internal socio-economic problems. And vice versa, the limitation of resource potential and decrease of production, instability of money market during the 90s created modest preconditions for expanding export, protection against galloping import. In the early 90s there were considerable losses due to slackening control of external economic exchange in Ukraine, inconsequence and overburdened legislative- normative regulation. To a greater or lesser extent the lack of scientific substantiation of governmental actions in relation to the international trade caused these and other negative phenomena.