Introduction

This paper explores whether the recent developed dispute between Uzbekistan and Ukraine holds any serious consequences.  In October, 2018 Kiev launched an anti-subsidy investigation into the import of cars of the Uzbek enterprise, GM Uzbekistan. Yet, it is not clear what results the Ukrainian National Association (UkrAvtoProm) was waiting for from the investigation. Moreover,  The UNA claims that Uzbek car manufacturers  might receive state subsidies and enjoy certain benefits within the framework of these subsidies. Verification of this information overpowered the Commission of Ukraine on international trade. But, the reaction of Tashkent was not long in coming. The parliament of Uzbekistan is highly disappointed with the investigation of Ukraine regarding the import of Uzbek cars, and some deputies urge the Uzbek authorities to take retaliatory measures if the Ukrainian government decides to take restrictive measures against Uzbekistan.

The procedure of this paper is as follows: First, the paper will briefly outline the major matter of commercial disputes causing the impairment of Uzbek-Ukrainian relations.  Then the paper turns to Uzbekistan to set out responsive economic conditions against the Ukrainian investigation.  Finally the paper looks at detente of economic relations between two countries. 

What’s the starting point?

The tense economic situation can seriously damage the relations of the once friendly states if Uzbekistan and Ukraine do not approach a resolution of this conflict wisely. However, for now, one thing is clear, the Uzbek-Ukrainian conflict will not end quickly because the investigation into the GM Uzbekistan case  will probably last more than a year.[1]

It all started in October 2019 when Kiev launched an anti-subsidy investigation into the import of cars of the Uzbek company, GM Uzbekistan. The investigation started with the filing with the national association called Ukravtoprom where Ukrainian government  believed that the import of Ravon cars goes against the law of Ukraine "On the protection of national producers from subsidized imports."

The row started in October 2018 when Ukraine’s government launched an investigation into whether Uzbekistan was providing its carmakers with unfair subsidies and other forms of support. The investigation was actually conducted at the request of the Ukrainian auto manufacturers’ request.[2] According to Ukravtoprom, from 2015 to 2017 the volume of imports [3] of cars from Uzbekistan to Ukraine grew in absolute terms by more than 760 percent.[4] The Ukrainian government  claimed that the Uzbek vehicles were cheaper thanks to governmental subsidies than those offered by local manufacturers even previous economic defense measures. This was a major prompt to commence an investigation into automobiles coming from GM Uzbekistan.

Responsive action

In response to the Ukrainian investigation, Uzbekistan suspended customs clearance on goods from Ukraine without official statement. In particular, Uzbekistan has ceased customs-clearing of pharmaceuticals.[5]In addition, for a small period of time, sugar and other goods entering Uzbekistan were not unloaded and were not cleared as a response to the anti-subsidy investigation of the Ukrainian government.

As a result, in early December 2018, Ukraine ceased the investigation, after which the Ukrainian pharmaceutical goods began to be imported into Uzbekistan on the same day.There is no doubt that Uzbekistan was  already ready to take reciprocal measures, so it hoped that Ukraine would make a wise decision that would not harm long-term friendly relations. At the same time, it should be pointed out that over the past three years, imports of goods from Ukraine amounted to $ 642 million, while Uzbek exports  was $ 169 million.  The balance of trade between the two countries is strongly in favor of Ukraine.[6]

An interesting point is that the share of Uzbek cars in Ukraine, similar to those produced in Ukraine, was only 0.35% in 2015, 0.22% in 2016 and 0.87% in 2017. In the year of 2017, the auto manufacturer GM’s cars ranked 10th place in sales. In reality, the sale volume of Ravons  was inconsiderable to damage to Ukrainian auto industry.[7]

Since the beginning of November, Uzbekistan has suspended the process of customs clearance of goods from Ukraine.[8] In particular, Ukrainian pharmaceutical manufacturers were discontinued for a short term period of time. Apart from this, Uzbekistan had ceased to clear the medication being loaded, plus, since December 1, 2018, sugar and other goods entering Uzbekistan were not unloaded and were not cleared by customs.

Detente of Dissension

It was commonly acknowledged that according to the decree of the President of Uzbekistan dated August 21, 2008, Uzbek auto-producers were granted great privileges until the end of 2017. Since 2018, they have not been valid.[9] Citing the great privileges, Ukraine had launched the investigation. Actually, Uzbek car sales rate in Ukraine was not as high as those imported from other countries. In 2017, 13,940 new cars were imported into the country, of which 2,823 were from Uzbekistan. However, from January to August 2018, out of 7808 cars imported into Ukraine, only 702 were of Uzbek production. The import volume of products coming from Ukraine into Uzbekistan is more than three times as much as Uzbek products being exported toUkraine. Especially, in auto-industry market of Ukraine the share of Uzbek cars in total imports decreased from 20.3% to 9% in 2018 as if compared with 2017, while the last months of 2018 import from Uzbekistan was almost absent.[10] The anti-subsidy investigation of Ukraine  into Uzbek car imports has been stopped since the privileges given to the automakers of Uzbekistan have not been in effect since 2018.

The anti-subsidy investigation was terminated regarding the import of passenger cars manufactured in Uzbekistan. It should be pointed out that the Uzbek government could subsidize the auto manufacturers which exports their cars to the Ukrainian market and would create unequal conditions for the local Ukrainian automakers. [11]

In regards to the Ministry of Foreign Trade of Uzbekistan, it was highlighted that the Ukrainian investigation was unfair on the issue that the main share Uzbek cars’ export into Ukraine is accounted for small class A cars, which are not produced by local auto-producers.[12]

Consequently, the use of compensatory measures was not necessary. It was also decided by Ukraine to terminate the anti-subsidy investigation regarding the imports into Ukraine of cars originating from Uzbekistan without using measures.

Concluding Remarks

Economic trade situation, which would have become a political one, played a temporary sense. However, it was prompted to that Uzbek-Ukrainian relations could decrease relatively to a low degree.

As a result for a short span of time auto-manufacture under Uzbek brand was not cleared and imported into Ukraine in response to which Uzbekistan has launched embargo on Ukrainian sugar and pharmaceutical goods. President of Uzbekistan Shavkat Mirziyoyev delivered a serious blow to the country's automobile industry when he mentioned that the automobile industry is a key element in the country's economy, but production as well as exports have recently declined.

Fortunately, Ukraine came to the decision that ceasing investigation is the best way to detente the tension. Personally, this temporary impairment of mutual relations was a trigger for that relations between two republics should be balanced every single time.

Khumoyun Akhmadov is currently a senior student at the University of World Economy and Diplomacy, Tashkent, Uzbekistan, majoring in International Relations and alumnus of Ajou and Nagoya Universities in South Korea and Japan respectively. My research interests lie in the area of development and security. I am also a close observer of new trends and developments in East Asia and Central Asia.

References:

1. Uzbekistan, Ukraine exchange import-ban threats amid trade row, (euroasianet, Nov 4, 2018), https://eurasianet.org/uzbekistan-ukraine-exchange-import-ban-threats-amid-trade-row
2. Uzbekistan-Ukraine "trade war" over? (AZERNEWS, Dec 6, 2018),https://www.azernews.az/region/142164.html
3. Ukrainian Motor Vehicle Manufacturers Association Agency, http://ukrautoprom.com.ua/en/
4. Uzbekistan suspends import of Ukrainian sugar, dealing blow to exporters., Natalia Datskevych, (Kyiv Post, Dec. 2, 2018)
5. “On the establishment of an enterprise with foreign investments” Presidential Decree, August 21, 2008, Uzbekistan.
6. The Ministry of Foreign Trade of Uzbekistan, https://mft.uz/en
7. Ukraine drops anti-subsidiary probe into Uzbek car imports, ( The Tashkent Times, Dec. 4, 2018), http://tashkenttimes.uz/economy/3252-ukraine-drops-anti-subsidiary-probe-into-uzbek-car-imports

[1] Uzbekistan, Ukraine exchange import-ban threats amid trade row, (euroasianet, Nov 4, 2018), https://eurasianet.org/uzbekistan-ukraine-exchange-import-ban-threats-amid-trade-row

[2]  Uzbekistan-Ukraine "trade war" over? (AZERNEWS, Dec 6, 2018),https://www.azernews.az/region/142164.html

[3] Ukrainian Motor Vehicle Manufacturers Association Agency, http://ukrautoprom.com.ua/en/

[4] Ibid.1

[5] Uzbekistan suspends import of Ukrainian sugar, dealing blow to exporters., Natalia Datskevych, (Kyiv Post, Dec. 2, 2018)

[6] Ibid.5

[7] Ibid. 5

[8] Ibid. 1

[9] “On the establishment of an enterprise with foreign investments” Presidential Decree, August 21, 2008, Uzbekistan.

[10] Ukraine drops anti-subsidiary probe into Uzbek car imports, ( The Tashkent Times, Dec. 4, 2018), http://tashkenttimes.uz/economy/3252-ukraine-drops-anti-subsidiary-probe-into-uzbek-car-imports

[11] Ibid. 2

[12] The Ministry of Foreign Trade of Uzbekistan, https://mft.uz/en