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Appendix A: Text of Proposed Certification Decree Decree # 90034.9. In the area of standardization and certification, Ukraine will begin liberalization of its certification regime by recognizing certain international certification documents. This list of certification documents will be specified in a Cabinet of Ministries Resolution. Text of Cabinet of Ministry's Resolution As set forth in decree #90034.9 regarding the recognition of international certification documentation, the attached list of agribusiness certification documents are now recognized in Ukraine. If an importer can prove a product has one of these international certifications, the product does not need to be recertified in Ukraine. A. If a product has one of the international certificates listed below and an importer of that product has successfully completed the application process, customs officials will recognize the certificate and issue a "Certificate of Recognition" within 25 days of initial application. This will allow the product to enter the country legally. 1. An importer must include the following in its application: 2. All documents shall be prepared in Ukrainian. English language documents shall be accompanied by notarized Ukrainian translations. B. The importer must produce international certifications each time it imports products.13 List of International Agribusiness Certifications Recognized by
Ukraine [13] Structured after Moldavia’s guidelines. Appendix B: Analysis of Key Players and Their Interests Interests in Ukraine The State Committee of Ukraine for Standardization, Metrology, and Certification (Derstandard - DSTU) Interests Tatiana Kisalova, the head of the Ukrainian State Committee on Standardization, Metrology, and Certification (Derstandard or DSTU), spearheads the fight against liberalizing the standards and certification regime. She is an effective politician who has built up her power base with skillful planning. She holds press conferences every Friday at 2:00 p.m. to inform the public of current standards and certifications issues, as well as her nationalistic ideas. She says it is her duty to protect the Ukrainian people from dangerous Western products that could hurt them or flood the market thereby putting Ukrainians out of business. In June 1998, President Leonid Kuchma introduced a progressive business decree to the Parliament (Vakhovna Rada - VR). One of the 14 articles included in the decree, Article 12, stated that Ukraine would recognize the International Organization for Standardization and other international standards bodies. Kisalova saw to it that Article 12 was removed from the decree. To pass a certification decree Kisalova will need to be persuaded to not oppose it. However this will not be easily accomplished. Kisalova and her regime have fought and will fight any trade liberalizations that threaten their authority over Ukraine's certification system because their income and power are vested in it. The National Institute of Standards and Technology has proposed that the United States negotiate certification issues by sector. This may be more feasible than suggesting that Ukraine recognize all international standards. Indeed, the United States was unsuccessful with this approach in 1998. The coalition should first attempt to win over Kisalova and the DSTU, and this will require a thorough understanding of DSTU and Kisalova's "Committee Empire." The following questions will help the coalition determine what incentives it can use to convince Kisalova to open her system-what angle to take in discussing the subject with her and how she might be persuaded to change the goals of the organization. It is crucial that she know what she will get out of liberalization. 1. What is DSTU's/Kisalova's power based on? If the coalition is not successful in winning over Kisalova, it should attack her system, revealing it as a corrupt, antiquated system that does not benefit Ukrainian importers and consumers. Private Ukrainian Certification Laboratories, Research Institutes, and Customs Officials DSTU and Kisalova are not the only ones with a vested interest in maintaining the status quo. Ukrainian standards research institutions and certification laboratories were subsidized during Soviet times. Now they rely solely on the private sector for their income. People who work at these institutions will not support reforms if it means they won't get paid. Ukrainian Government Interests President Leonid Kuchma is sincere in his efforts to reform Ukraine's economic and trade systems. The problem is he does not have much support. The VR lacks cohesion and consensus on a clear set of goals, and the ministries, agencies, and committees are alienated from one another instead of working together towards common goals. Although Kuchma has tried to propose liberalizing decrees or laws, he doesn't yield much power without the full support of his deputies. Kuchma welcomes support from the West, and he wants to be seen by the West as a pro-reform, pro-business player. However, he needs to be careful to not appear to be selling-out to the West. In order to secure re-election, Kuchma has tried to satisfy everyone. He is slowly realizing that never taking a stand is not getting him anywhere. The Parliament is made up of 442 deputies. There are approximately 14 to 15 different parties represented, ranging from the Communist Party of Ukraine to the Reform and Order Party. The overall interest of the government is to make life easier for the Ukrainians. For some it may be to protect them from the West. For others it means opening up the country to reap the benefits of the West. Identifying key, influential deputies in the VR will help the coalition build consensus among the remaining deputies. Finding out how each member votes will help identify key leaders and key opponents, although this may be difficult since voting is done by secret ballot. The fact that there are many factions represented in the VR will only complicate this task. As in any congressional or parliamentary system, members of Ukraine's Parliament are not well informed on every issue brought to the table. But the problem is worse in Ukraine because lobbyists are not yet commonplace. It is critical to start informing each member of Parliament on the issue of certification and its benefits. Many of the progressive members of Parliament want to promote
positive relationships with trading partners, accede to the World Trade
Organization (WTO), and join the European Union. These people may be
able to help sway the remaining members. Each member needs to understand
that Ukraine will not be able to accede to the WTO or join the EU
without first reforming its certification system. Another governmental interest is that of protecting Ukrainian businesses. Like all governments, the Ukrainian government would like to be able to protect its markets and also reap the benefits of trade. The impulse to protect the agricultural sector is especially strong because it is the most important sector in Ukraine. The Ukrainian government is trying to understand what it means to open its markets and how it will benefit from trade liberalization. Helping government officials answer these questions will help convince them of the need for reform. State Committee of Entrepreneurs (SCE) Alexandra Kushel heads the State Committee of Entrepreneurs (SCE), which was recently established in Ukraine. She has a strong-willed personality and is trying to become a dominant figure in the Ukrainian government. The SCE was created to support the efforts of Ukrainian businesses. The Committee efforts are funded indirectly by the International Center for Policy Studies (ICPS), which is funded by USAID. The SCE supports recognition of international standards in all sectors. Kushel and her Committee will be key in the fight for economic and trade policy reform. Anything that will assist this Committee in gaining power and bringing in influential allies will help in the campaign to liberalize the certification system. The SCE is one of the West's strongest Ukrainian allies. Because Ukrainians and do not trust the West, most reform campaigning should be carried out by the SCE and a coalition of Ukrainian business supporters or other influential Ukrainian figures. The SCE should both submit the proposed decree and organize the lobbying effort in favor of it. The SCE will organize all conferences, trainings, and meetings on certification. Articles, briefing papers, media pieces, should also be produced under SCE's supervision. Although Ukrainians know that the West supports SCE, it is still better for SCE to spearhead the campaign than to have foreigners overtly leading the effort. To counter Kisalova's message, Kushel needs to hold regular press
conferences to discuss the benefits of open, free trade for Ukrainian
consumers and producers. She should also publish articles to counter
Kisalova's arguments. Ukrainian Business Interests Ukrainian businesses and distributors that import goods into Ukraine also have problems certifying goods. Accordingly, these companies will be key to the Coalition's campaign. They have experienced first hand the obstacles presented by the Ukrainian certification system. However, Ukrainian businesses that do not import, but compete with imports, want to protect their markets from cheaper imports. These companies will not want to liberalize the certification regime. They need to understand that they, too, can benefit from an open trading system because such a system facilitates their own ability to export. Many Ukrainian small business owners want to learn from the West, and they are open to trade liberalization. It is important to build consensus among these people and encourage them to support government officials who favor liberal economic and trade reforms. United States Business/Other Foreign Business Interests in Ukraine For foreigners, it is difficult and expensive to do business in Ukraine. Foreign small companies do not survive in Ukraine. Only large companies that can afford short-term losses or can afford not to get paid for six months remain. They stay hoping that they will benefit when the economy picks up. The majority of foreign businesses in Ukraine belong to the American Chamber of Commerce or participate in the Gore/Kuchma Commission organized by the Department of Commerce. Foreign companies have written white papers, briefing papers, and appeared before the Gore/Kuchma Commission to voice their complaints and give advice concerning the current standards and certification regime. The American Chamber of Commerce has played an important role in the process; it provides a third party entity through which these companies can channel complaints and reform efforts. Because of their financial power and knowledge, U.S. and foreign businesses hold some power in Ukraine. These companies can help Ukraine reform its economic and trade policies. Interests in the United States American Companies that do Business in Ukraine U.S. companies that do business in Ukraine have a vested interest in opening Ukraine's markets. These companies need to encourage their U.S. congressional representatives to take up Ukrainian trade issues with the White House. Specifically, they should push Vice President Gore to make certification a top priority for the Gore/Kuchma Commission. In general, U.S. companies need to convince the U.S. government to use Ukraine's WTO accession and IMF and U.S. AID money as leverage with the Ukrainian government. The United States is the third largest aid donor to Ukraine. It should get something in return for this investment. United States Government (USG) The United States' first interest in Ukraine is security. After the break up of the Soviet Union, it spent a large amount of money and effort negotiating nonproliferation agreements with Ukraine. Most recently, in 1998, the two countries signed an agreement stipulating that Ukraine would not sell a nuclear reactor to Iran, and in return, the United States would fund a large business initiative in the city of Kharkiv, a large industrial sector of Ukraine. The United States' second interest in Ukraine is economic. This interest is tied to the first because a stable, prosperous Ukraine is less likely to sell weapons or other war materials. The United States has given Ukraine a great deal of money to pay for development projects aimed at economic policy reform and business development. The Gore/Kuchma Commission is one of the largest governmental efforts the United States has made to develop a relationship with Ukraine. The seriousness of this effort is questionable; in two years there has been minimal progress in the economic and trade area, particularly in standards and certification. However, the United States and other foreign governments do hold a small amount of leverage over Ukraine. Because the United States gives the largest amount of aid money to the country, it may be able to persuade Ukraine to move forward with desirable economic and trade reforms just as it persuaded Ukraine to sign the reactor agreement. The United States and other foreign countries can also use Ukraine's prospective membership in the WTO as leverage. Ukraine is a few years away from becoming a member of the WTO and knows it must reform its system in order to be considered part of the "club." However, this strategy could backfire because there is not consensus in the VR that Ukraine should become a member of the WTO. The Ukrainian president and many VR members support accession, but there are a number of deputies and other key ministry officials that do not support the effort or simply haven't clearly decided if they want to accede to the WTO. The United States also wields indirect leverage via the International Monetary Fund (IMF). The Ukrainian government, specifically President Kuchma wants to receive IMF money. In the summer of 1998, Kuchma scrambled at the last minute to write reform decrees and convince IMF officials that Ukraine was making a concerted effort to follow IMF provisions. However, lacking a clear consensus on overarching goals for the economy, Parliament did not give these decrees full support. The United States should also underscore that, if Ukraine is to join the European Union, it will need to become a member of the WTO first. There are plenty of examples for Ukraine to follow in its reform process, including Estonia, Latvia, Slovakia, and Moldavia. The United States will also have to decide how much of its leverage
with Ukraine to spend on security versus economic issues. Appendix C: Sample Letter to Coalition
Member March 1, 1999 John Doe Dear Mr. Doe: As an investor in Ukraine, Seeds International (SI) is surely aware of the difficulties of importing products into Ukraine. Selco Machinery International (SMI) is particularly concerned about certification requirements that make importing products into Ukriane extremely difficult. Ukraine does not recognize any international agribusiness certifications. Instead it requires all products to be certified under Ukrainian national standards. This process is excessively costly and time consuming and acts as a trade barrier that costs our companies valuable market share. A Seeds International representative in Ukraine stated that it costs your company $75,000 every two years to certify all of your seed lines, as well as an enormous input of time and energy! The agribusiness sector is one of the fastest growing sectors in Ukraine. It is important to start breaking down trade barriers in order to take advantage of this great market opportunity. Convincing the Ukrainian Parliament to recognize international agribusiness certificates will make the Ukrainian market more accessible for importers and investors. SMI is forming coalitions in both the United States and Ukraine in an effort to mobilize support for Ukrianian legislation that recognizes international certificates. SMI would like SI to join the coalitions. With your support we can immediately begin to coordinate efforts and increase our sales in Ukraine. I will contact you next week to tell you more about our coalition efforts. Sincerely, Don Juan Appendix D: COMMERCIAL INTEREST Market Opportunities for Foreign Agribusiness Companies in Ukraine Selco has a strong vested interest in economic and trade reforms in Ukraine. The agribusiness sector is one of the fastest growing sectors in the country and offers incredible market potential for Selco in the future. Because Ukraine's manufacturing sector is still not reliable, there is a critical need for dependable farm machinery-machinery that Selco can supply. In 1998, Selco sold $80 million worth of agricultural machinery in Ukraine. If Selco is successful in persuading Ukraine to accept international standards, it will not only save close to $150,000 a year in recertification costs for its tractors, combines, and harvesters, it will also save time and energy required by Ukraine's arduous recertification process. This human resource expenditure can be re-focussed on increasing Selco's market share in Ukraine. The United States currently holds only five percent of the agricultural machinery market in Ukraine, a large majority of which is held by Selco. Selco's equipment has a good reputation in Ukraine as solid, reliable, and high quality. Agricultural Machinery Market Potential in Ukraine14 In 1998, Ukrainian farms had 361,000 tractors, 72,000
grain-harvesting combines, and 37,900 fodder-harvesting combines. The
actual need was 515,000 tractors, 86,000 grain combines and 50,000
fodder combines. Sixty percent of Ukraine's agricultural machinery is
fully depreciated. Approximately 100 plants manufacture agricultural machinery in Ukraine. Generally, Ukrainian plants run at only 10 to 20 percent of capacity because they lack working capital and new technologies. Ukrainian farms in the public sector use the following types of machinery and equipment: tractors, combines, chemical sprayers, fertilizer distributors, fodder and animal feed harvesters, potato planter harvesters, flax production machinery, sprinkling and water machinery, and plows. According to the Ministry of Statistics, there are 15,739 agriculture
enterprises in Ukraine. This includes collective agriculture enterprises
(10,252), state agriculture enterprises (4,440), joint stock companies
(699), and agriculture cooperatives (348). The main end-users of
agricultural machinery are these agricultural enterprises, private farms
(36,000), private distributors, and newly established machinery
stations. Size of Agriculture Machinery Market (in US$ millions)
Agrochemical Market in Ukraine16 In the last five years, it has been difficult for Ukrainian agricultural producers to obtain pesticides and other agricultural chemicals. Local pesticide and agricultural chemical production meets only 20 percent of the country's annual need. While local production is expected to meet 25 percent of total demand by the year 2000, Ukraine will still need to rely on imported chemical compounds to meet its total pesticide demand. The government is working to increase the country's pesticide production base, but a lack of capital and technology, as well as unfavorable tax policies, hinders such development. It is more economical to import pesticides than it is to produce them domestically. The Ukrainian agricultural sector offers U.S. companies opportunities in joint production or in simply providing the Ukrainian market with necessary seeds, pesticides, and herbicides.
Ukraine is still reeling from the Asian and Russian financial crises.
Nonetheless, Ukraine kept its inflation rate low in 1998, it has made
progress toward privatizing its economy, and it has lowered its budget
deficit.17 As the economy gains strength, foreign
companies that stay in Ukraine will surely benefit. Appendix E: Draft Dear Colleague Letter Dear Congressional Colleague, American agribusiness companies that export to and invest in Ukraine face a number of trade barriers, including barriers that arise from Ukraine's certification requirements. Ukraine does not recognize any international certificates. Instead, it requires all products to be recertified under its own national standards-a time consuming and costly process that limits American imports into the country. A group of companies has formed the American Agribusiness Coalition (AAC) and the Ukrainian Agribusiness Coalition (UAC) and has developed a strategy for persuading the Ukrainian Parliament to recognize international agribusiness certificates. Congressional support for this strategy will be crucial. Specifically, the coalition needs Congress to 1) provide funding for an educational campaign on international certification in Ukraine, 2) write a resolution pledging that Congress will continue to promote reform in Ukraine, and 3) pressure Vice President Gore to give the certification issue priority in the Gore/Kuchma Trade Commission negotiations. This issue hits close to home. Certification barriers restrict U.S. trade and therefore impact U.S. production levels and American jobs. It is important that we support these companies that employ our constituents. We must support any efforts that will help U.S. companies prosper. The agribusiness sector is one of the fastest growing sectors in Ukraine. It is important to start breaking down trade barriers so that American companies can take advantage of this great market opportunity. Please join us in supporting the efforts of the AAC and the UAC. Sincerely, Senator Peter
Fitzgerald
Senator Richard Durbin Appendix F: WHITE PAPER In Support of International Standards and Certification ISSUE Ukraine's current system of certification and standardization does not recognize international agribusiness certificates and, therefore, is not consistent with international standards. The process of certifying products in Ukraine is excessively costly and time-consuming and costs American agribusiness companies valuable market share. OBJECTIVE Ukraine must be convinced to recognize international agribusiness product certificates and establish a certification system that facilitates the importation of products into Ukraine. BACKGROUND As Ukraine accelerates its integration into world markets, the Ukrainian system of standardization and certification has become increasingly problematic for foreign companies that do business in Ukraine. In some cases, Ukrainian standards are exceedingly complex but nonetheless do not contribute to public safety. In other cases, these standards are quite similar to international ones, making the recertification process entirely redundant. Overall, the Ukrainian certification system is unpredictable, complicated, and expensive.18 Selco, which holds an internationally accepted certification from the OECD, pays an additional $60,000 each year to recertify its tractors in Ukraine-although the certification document and requirements are almost an exact copy of what is required by the OECD. Seeds International pays close to $75,000 for the two-to-three year certification process of all of their hybrids. Ukraine's deviation from international standardization and certification norms also hurts Ukrainian manufacturers who are not equipped to compete in international markets. Ukraine's lack of harmonization with American/European standards makes it very difficult for Ukrainian manufacturers to enter the European and American markets. The WTO Technical Barriers to Trade (TBT) Agreement commits member countries to use international standards as a basis for mandatory standards. International standards promote worldwide trade, interpenetration of products between sectors, global communications systems, and the transfer of emerging technologies. By facilitating world trade, international standards help promote economic growth. ANALYSIS Most major trading nations understand and subscribe to the need for an international system of standards. Such a system helps ensure that each country's consumers are protected and facilitates the flow of goods across national borders. Western Europe and the United States have harmonization their standards, certification and licensing processes. Western companies also recognize the need for compliance with local laws, including compliance with local standards and codes. The present Ukrainian system of standardization, certification and licensing of foreign goods, however, has been a major hindrance to investment in Ukraine. This system is unpredictable, lacks transparency, and is overly complex. It has negatively affected not only foreign companies operating in Ukraine, but also Ukrainian companies that attempt to operate in foreign markets and find themselves unprepared to meet Western standards. Ukrainian consumers also lose under this system; if companies did not have to pay for costly, redundant certifying methods, they would be able to lower prices and more companies could import more products into the Ukraine. Consumers would have greater product choices. Ukrainian officials spend a great deal of time and energy creating ways to make money by certifying, inspecting, and controlling foreign products. The country as a whole would be better off if that energy were spent figuring out how to harmonize Ukrainian products with world market standards. If Ukraine wants to successfully integrate itself into the world market system, become a member of the World Trade Organization (WTO) and the European Union (EU), and attract investment, it will have to recognize international standards and certification bodies. In July 1998, President Leonid Kuchma issued a degree stating that Ukraine would recognize international standards. The decree failed to pass in Parliament because it was opposed by Derstandart (DSTU), the governmental agency that controls Ukraine's certification and standardization regime. The decree was far to sweeping for DSTU to swallow. A less threatening and more promising strategy would be to address international certification sectorally. Selco proposes starting with a strategy to persuade Ukraine to recognize international agribusiness certificates.
To mobilize support and build consensus in the Ukrainian Parliament for recognition of international certification, Selco will form the Ukrainian Agribusiness Coalition (UAC) in Ukraine. In the United States, Selco will form a domestic coalition, the American Agribusiness Coalition (AAC). The AAC's goal will be to build consensus in the United States government to push the Ukrainian Parliament toward recognizing international certificates. The AAC will be comprised of American companies doing business in Ukraine, selected American agribusiness associations, and U.S. labor unions. Specifically, the AAC will: · Lobby the U.S. Congress to: The UAC, made up of foreign agribusiness companies operating in Ukraine, Ukrainian businesses, and other Ukrainian officials and organizations, will mobilize to educate the Ukrainian public and government of the benefits and importance of a liberalized certification system. The UAC will be responsible for proposing the certification decree to the Ukrainian Parliament (see Appendix A). The UAC will then strategize to get the decree passed through the Parliament. The UAC will focus its strategy on combating the following obstacles: · Ukraine's desire to protect its market from an influx of imports
that may put Ukrainian companies out of business. Specifically, the UAC will: · Build support in the Ukrainian Parliament (Vakhovna Rada) by
identifying key members who will support a decree recognizing UAC's list
of international certificates. |
Appendix
G: American Agribusiness Coalition Members’ Congressional Representatives