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EU demands Kyiv backtrack on car import tax

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March 17, 1998, 1 a.m. |
The European Union has given Ukraine three weeks to reply to its criticisms of a new law restricting car imports. The law, effective April 1, was passed to promote a car-making joint venture with South Korea's Daewoo, which has promised to invest $1.3 billion in the deal. But provisions banning imports of used cars five years and older and levying a $5,000 minimum customs duty on used vehicle imports has provoked the ire of the EU, Ukraine's second-largest trading partner. 'We have handed over to our Ukrainian counterparts a list of points of this legislation which in our view are not acceptable and we have asked our Ukrainian partners to react to our comments within three weeks,' delegation head Hugues Mingarelli told a news conference on Friday following a week of talks between the two sides. The European Commission, the EU's executive, said last month the law would restrict practically all used vehicle imports to Ukraine and endangered Ukraine's chances of joining the World Trade Organization (WTO). And Mingarelli said on Friday that provisions of the legislation did not comply with WTO rules or an EU-Ukraine cooperation agreement which took effect on March 1. 'I can only say that for the time being the question of sanctions is not on the agenda,' he said, but said if Ukraine's reply was unsatisfactory the issue would be considered by an EU ministers' meeting planned for June. Trade turnover between the EU and Ukraine was nearly $4 billion last year, or 15 percent of Ukraine's foreign trade. Ukraine has defended the law, together with a second law passed by parliament last year exempting Daewoo from a variety of import duties and taxes, as useful to any car maker wishing to invest in the Ukrainian market. And Ukraine's Deputy Industry Policy Minister Vadym Lyashchov, speaking at the same news conference as Mingarelli on Friday, said Ukraine would not make drastic changes. 'The objective of the law remains the same and by and large is in line with requirements of international law,' he said. But he added 'At least tentative amendments and corrections could be incorporated in the main body of the law.' Ukraine, with its difficult investment climate, chronic unemployment and struggling manufacturing industry, has attracted only $2 billion in direct foreign investment since gaining independence in 1991. The AvtoZAZ-Daewoo deal foresees production of 240,000 cars annually including Ukrainian, Daewoo and General Motors models.
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