Newspaper article International New York Times

Prospects Cloudy as Ukraine Shifts Its Focus ; Free-Trade Agreement with European Union Offers Uncertain Promise

Newspaper article International New York Times

Prospects Cloudy as Ukraine Shifts Its Focus ; Free-Trade Agreement with European Union Offers Uncertain Promise

Article excerpt

Foreign investment is sprouting along Ukraine's western borders, but the country's recent history of strife has made some companies hesitant to move in.

Before gliding along trails or sliding down slopes, many of the world's skis start at this bustling, sprawling factory in western Ukraine.

Here, skilled machinists combine wobbly ribbons of carbon fiber and thin sheets of stiff titanium, stacking them like cake layers, and then heat-pressing, shaping and polishing them into finished slats for cross-country or downhill use.

Here, too, craftworkers steam and bend wood into the sticks used by hockey players around the world under brand names that include Nike and Oxelo.

The factory's Austrian owner, Fischer Sports, pays employees the equivalent of about $307 a month on average -- perhaps one-eighth the amount that skilled woodworkers and machinists might earn in Fischer's home country.

And since January, when a new free-trade pact between Ukraine and the 28-country European Union took effect, Fischer's costs have been further reduced by the elimination of tariffs on the machinery and raw materials flowing into the country and the finished goods that are shipped back out.

The pay may seem paltry by Western standards, but the factory's 1,500 workers tend to see the jobs as opportunities. Ukraine is one of the Northern Hemisphere's poorest countries, with an economy that generates less than $3,100 a year per person.

"Europe is our future," said Yuri V. Oros, a machinist on the ski line.

But that future is clouded by Ukraine's recent troubled past -- the country's hostilities with Russia and the nationalism now threatening the solidarity of the European Union. In a recent nonbinding referendum in the Netherlands, for example, nearly two- thirds of Dutch voters urged their government to rescind its support of the Ukraine pact.

And even as Fischer and some other multinational companies, including Nexans, a French maker of electrical wiring, have invested in Ukrainian operations to take advantage of the free-trade arrangement, many other companies are hesitant to venture into this former Soviet republic.

So it is unclear how far any benefits of the trade pact might carry beyond the western edge of Ukraine near the Polish border, where most of these factories are situated, and into the broader economy in this country of 44.4 million, about five million of whom are now living in areas claimed by Russia or pro-Russian separatists.

"We will have episodic, anecdotal success stories, but it's too early to call it a success," said Tymofiy S. Mylovanov, president of the Kiev School of Economics.

Over all, Mr. Mylovanov said, Ukraine's economy is barely growing, stunted by low labor productivity and widespread corruption. Only over the long run, he said, might the trade agreement help lift Ukrainians from poverty.

The accord, called the European Union Association Agreement, has already had a tortured journey. After a former Ukrainian president rejected it in 2013, opting instead for a deal with Moscow, pro- Europe citizens took to the streets in Kiev in protests that led to a revolution.

The new government in Kiev pivoted back to the European agreement, signing it in March 2014. But that same month Russia annexed the Ukrainian province of Crimea, inciting a Russian-backed civil war in eastern Ukraine.

By the time the European Union trade pact took effect as scheduled, many Ukrainians were so distracted or demoralized by war and years of recession that they hardly noticed.

Yet, here in Mukachevo, a picturesque town of cobble-paved roads and a 14th century hilltop castle left over from the Austro- Hungarian Empire, the Fischer plant provides a glimpse of what the future of greater European integration could mean for this country. …

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