Will WTO Membership Really Improve Market Access for Ukrainian Exports?

Abstract

Although the WTO embraces over 90% of world trade, several large CIS transition countries have not joined it yet. Delays have not only been due to technical problems, but also to a lack of clear understanding of the consequences of WTO membership. The aim of this paper is to ask how important improved market access might be as an incentive for one of the biggest CIS countries, Ukraine, to join the WTO. We employ the gravity model of international trade and include data on 85 of Ukraine’s trade partners. By looking at initial conditions for Ukrainian exports, we estimate the extent to which Ukrainian exports are hurt by barriers imposed by its trading partners, as well as Ukraine 's potential level of trade. Our estimates show that import barriers imposed by Ukraine’s trade partners do not play an important role in determining the volume of Ukrainian exports. Moreover, Ukraine already exports twice the potential level, predicted by our gravity model. Nevertheless, Ukraine depends on small number of unprocessed and semi-processed export goods and the efficiency of its exporting industries is quite low. These results suggest that the Most Favoured Nation mechanism and putative improved market access might not be an important criteria for deciding Ukraine’s accession to the WTO. Our results are consistent with other studies on transition economies, which found that WTO membership plays a much less important role in improving market access than do increasing FDI, regularising dispute settlements, and improving resource allocation.

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