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EU declares Ukraine a free-market economy

KIEV -- The European Union agreed yesterday to declare Ukraine a free-market economy, handing President Viktor Yushchenko a major victory as he seeks a closer partnership -- and eventual membership -- with the 25-nation bloc.

The market economy status, which should further open EU markets to Ukrainian exports, was the top prize to emerge from a brief summit between EU and Ukrainian leaders in Kiev. EU officials also backed Ukraine's ambitions to join the World Trade Organization and called Ukraine's progress ''on track."

''All of these are important in their own right, but the greatest importance is the symbolism of a newer and deeper and stronger relationship between the EU and Ukraine," Prime Minister Tony Blair of Britain said during the summit.

Yushchenko, who swept to power after hundreds of thousands of Ukrainians massed in the capital to protest election fraud last year, hailed the EU declaration and pledged to secure a place in the group for the poor former Soviet republic.

''Today, we got a clear political decision regarding the granting of market economy status to Ukraine. The changing of status causes a chain of changes in our relationship," Yushchenko said after the talks.

The EU, however, has given only a lukewarm reception to Ukraine's bid for membership. Also, Yushchenko's efforts to join the WTO this year suffered setbacks because of strong opposition in parliament.

The free-market status, which will take about a month to formalize, should make it easier for Ukrainian companies to export goods to EU nations by essentially giving the country a stamp of approval over how it regulates its economy.

It also gives Ukraine the right to defend itself against European accusations of illegally dumping products cheaply on EU markets.

Ukraine exports a third of its products to EU countries, but analysts said that could grow significantly.

By comparison, nearby Poland, already an EU member, sends almost 80 percent of its exports to the EU.

The status could also spur foreign investment in Ukraine.

''It will also work from the other direction, driving foreign direct investment by prompting the EU to take another look this way," said Tomas Fiala, managing director of the Kiev-based Dragon Capital investment house.

There are some issues that remain unresolved, however. Ukraine is pushing the EU to simplify some of the visa requirements for its citizens, and the EU, in turn, wants Ukraine to sign an agreement to take back refugees that enter EU countries via Ukraine.

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