On January 1, 2011, new rules governing the terms for internal and international trade (Incoterms-2010) came into effect throughout the world and, consequently, in Ukraine as well. They were developed by the International Chamber of Commerce (ICC). Created as early as in the beginning of the last century, this organization enjoys immense authority in the world of trade and, as a result, is not only a participant in international business, but also stimulates international trade and investment, trying to help entrepreneurs take advantage of globalization and accommodate themselves to its challenges.
The small group of shrewd business leaders who created this organization called themselves “traders of the world.” Accordingly, members of the present-day ICC are convinced that their organization is a mighty force. Volodymyr SHCHELKUNOV, president of the Ukrainian National Committee of the ICC and head of the Secretariat of the Council for Enhancing Competitiveness of the National Economy at the Cabinet of Ministers of Ukraine, also believes in the mission of global trade in the modern world, a concept he expounded on in his interview to The Day.
Have Ukrainians learned to trade with the world over their 20 years of independence?
“Yes, Ukraine gaining independence made many of us sit down at imaginary school-desks and learn about business and, what was especially topical, international trade. I had to deal with it as well, being the director of InterMetBiznes International Trading & Financing Company. We were learning to trade, mastering the ABCs of pricing policy, trying to analyze markets and studying such terms as FOB, CIF and FAS, which had not been previously known. In other words, we were determining our place in the real world order, from which we had been previously shut off by many walls, both by the iron curtain and by total subordination to Moscow, that had monopolized foreign trade and would not let it go. Nowadays most Ukrainian companies, that export and import to and from both neighboring and distant foreign countries, are trading in accordance with all international business rules. The ICC and the rules created by it have been effective for around 100 years already. Nobody will trade with us by some peculiar rules. Consequently, our export-oriented companies could not ignore this.
“And presently, since January 1 of the current year, new ICC rules regulating the use of relevant terms for domestic and foreign trade have been introduced for the next ten years. They should be known by rote, like a sapper knows the rules of neutralizing explosives. Otherwise you will break down and go bankrupt.”
What is the difference between the new rules and the old ones?
“The most complete and concise answer possible to this question was given by Rajata Gupti, President of the International Chamber of Commerce. According to him, the Incoterms-2010 rules take into account the expansion of free trade areas, as well as electronic communications in entrepreneurship, the concern of business circles with the safety of moving goods, and with changes in logistics practices. The Incoterms-2010 have renewed and consolidated the ‘delivery’ rules, reduced the total number of terms (from 13 to 11) and presented a simpler and clearer statement of all provisions.”
What was and is the Ukrainian Committee of the International Chamber of Commerce doing to eli-minate “trading illiteracy” of our fellow citizens?
“Here there are advanced copies of the aforementioned Incoterms-2010 rules. Only a few people have seen them yet, but everybody who deals with the foreign trade is obliged to know them. These obligatory rules will be effective until January 1, 2020, when they will be renewed for another decade. Together with the ICC, ZED Exporters and Importers Association LLC, we have published them in English and Ukrainian, so that our business circles would be armed with relevant knowledge.
“At the heart of our elucidatory and educational activities is the Practical Business School, which has been in operation for five years already. This name was not chosen by chance. The audience of the School gets acquainted with all the techniques pertaining to global trade, from the tactics and strategy of holding negotiations, creating joint ventures etc. down to electronic commerce and protection of intellectual property. Presently we also teach the audience to apply the new Tax Code and Incoterms-2010. In addition, we apply much effort to make these new rules known to as many entrepreneurs as possible. To that end we have held a range of meetings and roundtables; we are in contact with the Tax and Customs Services, the Ministry of Economic Development and Trade, and the Ministry of Finances. You are right, in many respects, this work is like a ‘campaign against illiteracy.’
“Of course, all countries introduce these rules, being guided first of all by the need to protect domestic manufacturers and national interests. We were also acting that way. But if previously, before our accession to the WTO, much attention was paid to prevention of antidumping investigations against Ukrainian pro-ducts, now the leading place is taken by the task of simplifying exchange and removing any complications.”
Has Ukraine already felt any advantages of its membership in the WTO? Or has the global financial crisis spoiled everything?
“In any case, the time for stunning results has not yet come. I was one of negotiators in the course of preparing the accession to the WTO. And, as the president of the ICC Ukrainian Committee and a specialist in this matter, I can say that prior to the beginning of those negotiations we studied in detail the experience of those countries that had previously joined the WTO, all the positives, negatives and problems of the WTO, and held sectoral roundtables with representatives of the chemical, metallurgical, woodworking and light industries. In doing so, we were always trying to find positives, wherever they were. We also discussed the way of getting ready for negatives, in order to smoothly enter and leave a gi-ven country or situation, unless and until national manufacturers suffer any damage. We also held regional trainings so that people would understand what we could get out of this organization, of this system in general.
“It should be noted that after having acceded to the WTO, thanks to the position of the government, which had been headed by Prime Mi-nister Yanukovych at the key stage of the negotiations, Ukraine maintained accommodation periods associated with tariff policy, quota allocation and licensing. Our colleagues in the negotiations have helped by explaining that Ukraine should not wait for one fine morning when it wakes up and makes sure that it already operates by the rules of this organization. Some accommodation periods have already expired, others are still in force. It is a matter of protection of the national manufacturer and protectionism both on our part and in respect to some countries, which were trying to impose their rules on us. But, in any case, I consider the accession to the WTO as a necessary and successful project for Ukraine. It was duly prepared and adapted to our conditions. Much explanatory work has been carried out with business circles. Only lazy and ignorant people have failed to understand what the WTO means for us. Whether we like it or not, the global market is not a place for ill-informed and weak people; only the strong and wise can survive. We were far from stating that the WTO would be a panacea to all ma-ladies. Everybody understood that accession to this organization would also create substantial problems for Ukraine. But the main thing is that we have directed the business circles’ attention so as to avoid possible negatives or to prevent damaging our enterprises, and being able to renew activities afterwards...”
How has Ukraine benefited from its WTO membership?
“Since Ukraine has become a full-fledged member of the World Trade Organization, we have practically got rid of antidumping investigations against Ukrainian enterprises and have become equals among equals.
“The WTO has helped us arrange a system of the quality control of products and services, a system of making applications to international arbitration courts to protect our rights and interests, and it has helped us use the Ukrainian legislation in our work on international markets. And if we summarize the achievements, then it is safe to say that we have taken a step forward into the civilized world, which trades according to strict but fair rules.”
You have created subdivisions of the Committee in Ukraine’s regions. What initiatives do they take, and what are they doing to improve our enterprises’ economic relations with foreign companies?
“Our representative offices operate in all regions of Ukraine, they have arranged horizontal and vertical relations with countless regional structures; they also deal with relations between the public authorities and business circles, and support a tolerant interaction with controlling organizations. A lot could be said about this. But I want to draw your attention to the fact that in each of those subdivisions of the Committee there is a representative of the Ukrainian Bureau of Combating Commercial Crimes, which was created by the Committee. We have signed a relevant contract with the London Bureau of Combating Commercial Crimes and with the State Committee of Ukraine for Financial Monitoring. Thanks to it we are able to exchange information about new frauds and criminal schemes taking place throughout the world. Mr. Pottenhal Mukundan, head of the London Bureau, holds trainings and se-minars in our offices, in order to prevent such crimes from spreading in Ukraine.”
Together with energy efficiency, the country is also facing the problem of alternative energy sources. Nowadays there is much talk about two extremely interesting projects: the construction of a liquefied gas terminal and the extraction of shale gas. Do you believe in their success? Because much will depend on whether foreign investors would like to work on them with us...
“I agree. But here I am a little skeptical. I will explain: I will be able to believe in these projects only after I see an active position among our foreign partners, with whom we are bound by obligations in terms of joint production. If some French companies are interested in methane production at the coalmines of Luhansk region and in other places, where they begin their operation, then they invest money, order and pay for research and design work. At present there are immense prospective projects, but their efficiency, their economic feasibility is not yet able to compete with traditional energy sources. Consequently, the ball is in the investors’ court. As soon as they see that an acceptable rate of return is reached, many will come in. And if no interest in these projects is aroused, then unfortunately there will be no rapid progress along these lines.”