Mr. Valery KHOROSHKOVSKY, minister for economy and problems of European Integration of Ukraine, answers the questions of our correspondent Volodymyr Muzyka

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Volodymyr Muzyka: Mister Khoroshkovsky, to begin with, could you give us a glimpse of the structural subdivisions of your Ministry, the first and foremost business of which is the in-depth continuous study and solution of the problems of European integration of Ukraine?

Valery Khoroshkovsky: In April 2002 our Ministry created the Department of European Integration intended to better coordinate the activities of central organs of executive power concerning the cooperation of Ukraine and EU. In accordance with the manning table, we employ there 23 specialists, and 19 of them are directly engaged in the Eurointegration problems. Four persons are engaged in tackling the questions of cooperation with NATO in the field of military economy.

Among the specific tasks of the department there is an implementation of functions of the secretariat of Ukrainian part of Ukraine - EU Committee set up according to the Agreement about partnership and cooperation between Ukraine and the EU. Besides, the department coordinates the activity of organs of executive power, directed at implementation of provisions of the mentioned Agreement and tackling trade questions between Ukraine and the EU. The department also executes the functions of secretariat of two branch subcommittees of the Ukraine-EU Committee, i. e. on the questions of

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trade and investments and on the questions of finances, economy, and statistics. In addition, it coordinates the work of two more subcommittees.

The participation in the development and realization of the strategy of European integration of our country also belongs to the jurisdiction of this department. With that end in view it draws annual Plans of realization of priorities of the Program of integration of Ukraine to the EU. After claim of documents by Cabinet of Ministers a department carries out monitoring of their implementation.

V. M.: Is not that too much for one structure, the more so when it is understaffed?

V. Kh.: Yes, quite a bit. However, I would like to add that a number of other structural subdivisions of the Ministry also deal with the problems of Eurointegration. Say, the management of cooperation with the EU within the framework of the TACIS program and countries of Europe tackles the problems of technical aid of EU. This management is a part of the department of co-ordination of international technical aid. The management of Euroregional cooperation is engaged in the problems of cooperation of Ukraine with neighboring countries within the frame work of European regions. It belongs to the department of regional development. Activity of all other subsections of Ministry in one way or another is also directed at realization of strategic course of Ukraine to Eurointegration.

V. M.: What governmental structures does the Ministry cooperate in the first place solving different problems of Eurointegration? Are there any problems of parallelism in bureaucratic procedures among the Ministry and other Ukrainian offices?

V. Kh.: Creation of proper administrative institutions is the important condition of realization of policy of European integration. I think that there are more than enough of them. Lately their activity was upgraded. In particular, we managed to tackle the problem of functional parallelism. Now public authorities can be most effective in their work.

Among other important partners, we very closely cooperate with the Ministry of Foreign Affairs, the coordinator of cooperation with the EU in the political sphere. Another important partner is the Ministry of Justice that coordinates the process of adaptation of legislation of Ukraine to the legislation of the European Union.

Numerous working contacts with other leading ministries and departments take place within the framework of the Ukrainian part of the Ukraine-EU Committee. By the way, there are over thirty organs of executive power.

V. M.: What are the nuances of cooperation of your Ministry and the Ministry of Foreign Affairs? Everybody knows, economy and policy are intertwined too closely.

V. Kh.: The main principle of our joint work with the Ministry of Foreign Affairs is to make every effort on the way of reforms and European choice defined by the President of Ukraine. The Ministry of Economics as the coordinator of cooperation with the European Union in economic and social spheres and Ministry of Foreign Affairs as the coordinator in the political sphere step by step move towards Eurointegration policy and bilateral agreements with the European

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Union. There are instructive documents of the President of Ukraine demarcating who's responsible for what. It allows doing without parallelism and misunderstandings.

I would like to underline that approaches of two ministries to the majority of questions of European integration coincide. Then, you can always reach a consensus through consultations and joint analytical work. That is our way in our work; incidentally, not only with the Foreign Ministry, but with other organs of executive power as well.

V. M.: Are there corresponding contacts with the organs of legislature as well?

V. Kh.: Sure. The ministry cooperates very effectively with the Verkhovna Rada of Ukraine. In particular, the Committee on problems of European integration is our parliamentary "lobby".

V. M.: Taking into account that European integration is a process, the participants of which included not only central administration, but institutions of local governing as well, one would like to know about your relations with the regional organizations and establishments.

V. Kh.: In the context of this question I would like to size up one actual problem: up to now the course toward the integration into the EU remains the prerogative of the center. This is substantial shortcoming under conditions when there is a thesis "from Europe of countries to Europe of regions." Therefore, we spare no efforts and actively include the regions of Ukraine into the shaping and realization of the policy of Eurointegration.

V. M.: There are lower organizations under your Ministry bearing direct relation to the Eurointegration of Ukraine. For example, there are trade and economic missions at the Ukrainian embassies. Are there such missions in all countries of European Union and applicant countries?

V. Kh.: The trade and economic missions in composition of the diplomatic establishments of Ukraine abroad are active in eighteen states-members of the EU and candidate countries aspiring to join this organization. Those are such countries as Austria, Belgium, Great Britain, Greece, Spain, Italy, Netherlands, Federal Republic of Germany, Finland, France, Bulgaria, Latvia, Lithuania, Poland, Romania, Slovakia, Hungary, and Czekhia.

We know from our experience that the trade and economic missions is a practical and operative instrument of tackling complicated questions of the European integration of Ukraine. Following the instructions of the Cabinet intended to energize doings in this direction the trade and economic mission will be opened in composition of the Office of Ukraine at the EU (Brussels) at the end of this year.

V. M.: What is the dynamics of commodity turnover with the EU countries in general?

V. Kh.: Today our trade with the EU is growing faster, than with other countries of world. For example, for the last year the part of trade in goods and services with the countries of the European Union in the value of external trade of Ukraine grew from 19.6% to 21.0%.

These data show the increase of intensity in the trade and economic relations between Ukraine and countries of the EU. However, the part of Ukraine in the trade of EU on the whole was

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insignificant: about 0.4% of the volume of foreign trade operations of the European Union. This rate, especially if we compare it with flourishing of trade of the EU with the western neighbors of Ukraine and countries of the Baltics, is conditioned, above all things, by the character of mutual trade relations defined by respective agreements.

V. M.: And what are the prospects of 2003?

V. Kh.: In January-June the value of external trade of Ukraine with the countries of the European Union made USD4.9bn that is 26.1% (USD1.0bn) more than for the similar period in 2002.

V. M.: And we already have a customer base, don't we?

V. Kh.: In export and import operations Germany, Italy and Great Britain are at the top of the list. The highest rates of growth of export trade were with Grand Duchy of Luxembourg (6 times), Germany (1.7 times), and Denmark (1.7 times).

V. M.: What are the main articles in the structure of Ukrainian export and import?

V. Kh.: In January-June in 2003 those were deliveries of base metal and hardware (24.0% of the total export of commodities to the countries of European Union), mineral products (24.2%) products of light industry (12.5%), products of agroindustrial complex and food (8.2%), machines, equipment and machinery (7.2%).

In the general structure of import from the countries of the European Union, as before, there were such leaders, as deliveries of machines, equipment, machinery (27.1% of the total import of commodities from the countries of EU), devices and vehicles and transport facilities (10,4%), products of chemical industry and associate branches (16.1%), products of light industry (8.9%).

V. M.: And what is in sight?

V. Kh.: To my mind, Ukraine can multiply the value of external trade with the EU approximately 1.5 times (up to USD12.5bn to USD13.0bn) yearly as a result of entry of the new countries-candidates to the European Union in 2004 and on condition of favorable market. I would also like to note that in January-June 2003 the total value of external trade of Ukraine with the countries of the European Union and members-to- be made USD7.3bn in 2004, 31.,0% more than for the same period last year. In the meanwhile the volumes of export of commodities and services in Ukraine, comparing to January-June 2002, increased 31.8% and made USD4.0bn, and the volumes of import from these countries to Ukraine during the first six months went up 30.1% and made USD3.3bn.

V. M.: Could you be more specific?

V. Kh.: One such example is the development of bilateral trade in textile products. According to the Agreement between the European Community and Ukraine on trade in textile products the European Union does not impose quanti-tative limitations on the import of the Ukrainian commodities of textile and clothing industry. In its turn Ukraine undertakes to adhere to the level of European custom tariffs on similar commodities. Thanks to realization of this Agreement the volumes of trade between Ukraine and the European Union kept growing during the last few years, and abolition of quotas helps to develop export possibilities of enterprises of textile and

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clothing industry. So the volumes of export of these commodities to the countries of the EU for 2001 equaled USD398.1m. This is more than one half of all Ukrainian export of these commodities. As compared to 2000, the indexes increased 10%, or USD37.7m. The volumes of export for 2002 exceeded 6% the 2001 index and equaled USD421.6m.

V. M.: What are the prerequisites of the future development and deepening of bilateral trade relations with the European Union?

V. Kh.: Above all things, they rely on drawing a new Agreement on trade in steel- and-foundry products; granting Ukraine the status of a market economy country; initiation of consultations about the creation of free trade zone taking into account Ukraine's progress on its way the WTO; granting Ukraine "social preferences" within the framework of the Generalized System of Preferences of the European Union.

V. M.: Every item of this enumeration might be a basis for an interview. I hope, they will be featured in the magazine under the heading "European choice" which could be edited together with your Ministry. In the meanwhile there are questions about certain aspects of cooperation with the countries of Europe. Soon there will be a meeting of Ukrainian-Lithuanian commission on the questions of European integration. Are there similar commissions or structures in other European countries? How many such commissions are there and which of them are the most effective?

V. Kh.: The decision about formation of Ukrainian-Lithuanian commission on the questions of European integration was made during the official visit of Prime Minister of Lithuanian Republic Brazauscas to Ukraine this past June. Our delegation will be headed by First Deputy Minister of Economy and on matters of European Integration Valeriy Pyatnytskiy. We suggested the Lithuanian party to hold the first meeting of the commission in the first half of December this year. Now we are busy working out proposals for the agenda.

Regularly, twice a year, the Permanent Ukrainian-Polish Conference on the matters of European Integration is held. During its meetings we developed directions for the ministries and departments of both states. They include priorities of strengthening Ukrainian-Polish cooperation in the field of European integration. Poland will support the association of Ukraine with the European Union as the nearest strategic objective of Ukrainian foreign policy. The parties will energize the expansion of trade and economic cooperation between Poland and Ukraine. And, finally, Poland will deepen cooperation with proper institutions of Ukraine in order to share its experience with Ukraine.

As a result, today we can consider the Republic of Poland the consequential and active lobbyist of the interests of Ukraine in Europe.

Separate consultations on the matters of Eurointegration were held with Czech experts (in June 2003).

Moreover, the exchange of opinions on some matters of European integration with the members and members-to-be of the European Union is continuously conducted within the framework of the meetings of proper bilateral commissions on the questions of trade and economic

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cooperation.

V. M.: What result of the Seventh Summit Ukraine-EU in Yalta do you consider the most important?

V. Kh.: The results of the Summit permit us to conclude that it became a starting point in the initiation of common actions in relation to the use of new possibilities and opposition to the challenges arising from the expansion of the European Union for our bilateral relations.

At this summit the main attention was paid to further development and deepening of relations between Ukraine and the European Union in the light of the expansion of the European Union and its future bordering on Ukraine. The parties discussed the state and prospects of bilateral cooperation in such priority branches, as trade and economy, politics and security, justice and internal affairs.

The initial design of the Plan of actions Ukraine-EU became the important agreement of the summit. This document comes to take place of the Common Strategy of EU in relation to Ukraine, which expires at the end of this year. During the summit the European Union was handed Ukrainian suggestions concerning the content of the Plan of actions and agreed, what this should be a common document.

The agreement was reached that the European Union would increase technical aid to Ukraine and that the new mechanisms of rendering aid would be worked out.

V. M.: The Summit agreements are political agreements. They will have positive effect only if they are applied in practice. Could you share your opinions on it with us?

V. Kh.: Besides the forenamed questions, we need to spare no efforts implementing provisions of the Agreement about partnership and cooperation between Ukraine and the European Union in concrete spheres. One shouldn't also forget about the integration of Ukrainian infrastructure networks-transport, power and TV communications-into common European ones. We should also take care of the preparation and implementation of the general schedule of adaptation of the Ukrainian legislation to that of the European Union. One should be looking for the new ways in the visa dialog. The free-trade zone between Ukraine and the European Union is also an important issue.

V. M.: The creation of the free trade zone, presumably, should go in a package with the decision of the European Union about acknowledgement of the market status of the Ukrainian economy, or shouldn't it?

V. Kh.: It is a very sensible question for Ukraine.

I am sure that the decision of the European Union about granting Ukraine the status of the country with market economy could become a stride in the direction of deepening of economic cooperation between the parties. This was a positive signal for foreign investors which might energize their activity in Ukraine.

I believe, the operating conditions of economy of Ukraine fully meet the criteria set by the European Commission for market economies. All the more Ukraine may be granted the status of market economy. Our enterprises have already been working under market conditions for a long time now, and the government of Ukraine constantly feels pressure and

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dissatisfaction of the business circles with the delay with the decision. That is why this past May, 2003 we sent comprehensive answers to the additional questions of the European Commission concerning the determination of the market of economy of Ukraine, in particular in relation to progress in privatization, implementation of legislation in the field of taxation, corporate management and in the field of competition.

We expected the positive decision about granting Ukraine the status of market economy before the summit Ukraine-EU. However, even today the European Commission is uncertain about the market character of the Ukrainian economy. In October we received the letter from the European Commission asking for some details and telling that final decision would depend now on prompt expert clarification of certain particulars. The Ministry of Economy and matters of European Integration prepared necessary materials and sent them to the European Commission at the beginning of November 2003.

V. M.: How can the Common Economic Space concept influence this agreement?

V. Kh.: According to the European Commission, the questing of granting Ukraine the status of a market economy is a technical one, therefore signing of this Agreement will have no impact upon the decision of the European Commission about the conformity of Ukrainian economy to market criteria.

V. M.: Joining WTO is the most important moment of our advancement to the European Union. However, there are other moments as well. Have you any comments about it?

V. Kh.: Yes, speaking of Ukraine, joining WTO is the most important and characteristic move not only for the integration into the world trade organization but for our European integration as well.

The entry into the WTO together with deepening of mutual trade and economic relations stipulates for the beginning of negotiations between Ukraine and the European Union about the creation of free trade zone.

Other steps on our way to the European Union may include signing of sectorial treaties in the most sensible spheres of trade relations-trade in textile, steel and furnace products, and, later on, trade in agricultural produce and products of chemical industry.

Our progress on the way to Eurointegration way will also provide for consistent implementation of Agreement about partnership and cooperation between Ukraine and the European Union.

However, the inclusion of the Ukrai-nian infrastructure-above all things power, transport and telecommunication networks-into the European infrastructure is the key precondition of integration of Ukraine into the European Union. In this sphere Ukraine has potential which can be properly used by the members of the European Union.

V. M.: Certainly, all of it should complement the implementation of the known Copenhagen criteria which outline the requirements to the candidate countries entering the European Union, shouldn't it?

V. Kh.: In my opinion, they are known very well. This is democracy, supremacy of law, providing for human rights, respect and protection of rights of minorities.

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Today Ukraine undertakes additional steps to meet these criteria. In particular, the President has put the question of political reform on the agenda. The special accent is on tackling the problem of the freedom of speech in Ukraine.

V. M.: But our work in all spheres needs, first and foremost, adoption of renewed legislative basis in keeping with the norms of European Union; secondly, it should be successfully implemented. What do you think of it?

V. Kh.: In this connection I want to remind of the National program of adaptation of the legislation of Ukraine to the legislation of the European Union, which is now handled in the Verkhovna Rada, and the Schedule of adaptation of the legislation of Ukraine to the legislation of the EU which is scrutinized by Ukrainian and European experts now. I consider that these two documents will help us to structure our work in the field of adaptation.

V. M.: Some experts think that joining NATO can accelerate our entrance into the European Union. There are also opponents of this opinion. What do you think about it?

V. Kh.: NATO is one of major elements of global security and international relations, the most effective network-forming organization promoting the new architecture of the EuroAtlantic system of security.

The EuroAtlantic integration is the logical continuation of the strategic course of Ukraine towards assertion of the principles of democracy and achievement of the level of economic development typical of European countries. Therefore, I agree with the experts which consider that our membership in NATO will be the considerable stimulus for European integration.

V. Kh.: Finally, there is the question about the terms, when Ukraine will hand in an official application, if not about the entry into the EU, then about gaining the status of the associated member of the European Union?

V. Kh.: The plans of Ukraine in relation to the integration to the European Community are expressly laid down in the Message of the President of Ukraine the "European choice. Conceptual basis of the strategy of economic and social development of Ukraine in 2002 to 2011." We have set a goal for ourselves to be ready to begin negotiations with the European Union about the entry problems in 2011.

But I think that the main thing for Ukraine is not this formal application or signing a membership agreement, but the real implementation of criteria which can show our internal willingness to acquire a right and undertake the obligations of the member of the European Union. Our purpose is achievement of European standards of living for the citizens of Ukraine, European standards of democracy, human rights and freedoms, stability in politics and public life, effective economy, welfare and prosperity. And I hope we will be able to attain it.

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The Update of Foreign Trade in Commodities

January-September 2003

According to the State Committee of Statistics of Ukraine