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OCTOBER- DECEMBER 2005 DEDICATED TO
"UKRAINE'S JACKSON-VANIK GRADUATION"

Ambassadors Pifer and Miller Chair Jackson-Vanik Graduation Coalition

Announcement: Jackson-Vanik Graduation Coalition; U.S.-Ukraine Foundation (USUF)


Ukrainian President Victor Yushchenko announced after his January 2005 inauguration that Ukraine's graduation from the provisions of the U.S. Jackson-Vanik Amendment would be at the forefront of his economic and foreign policy objectives for 2005.

Last April, following their Washington meeting, U.S. President George Bush joined President Yushchenko in expressing support for "immediately ending application of Jackson-Vanik to Ukraine."

This past August, during a visit to Kyiv, U.S. Senators Richard Lugar and Barack Obama announced that bills had been introduced in Congress to formally graduate Ukraine from Jackson-Vanik.

And most recently, in October 2005 U.S. Secretary of State Condaleeza Rice sent letters encouraging swift Congressinal action to Congressman Bill Thomas, Chairman of the Ways and Means Committee, Charles B. Rangel, Ranking Minority Member of the House Ways and Means Committee and to Senator Charles E. Grassley, Chairman of the Senate Finance Committee.

Why is Ukraine's graduation from the provisions of the Jackson-Vanik Amendment on everyone's agenda?

The 1974 Amendment, named for Senators Henry "Scoop" Jackson and Charles Vanik, imposed trade restrictions on the Soviet Union in response to its poor human rights policies, particularly restrictions on the emigration of religious minorities.

However today, more than thirty years later, Ukraine has built a strong record of allowing open emigration and has created conditions for religious minorities to pursue their beliefs freely. Ukraine is a success story for Jackson-Vanik and it now merits graduation from the Amendment's
provisions.

In June of 2005, government officials, members of the Verkhovna Rada and Congress, representatives of non-governmental organizations, the media and business community members met in Washington D.C. for the U.S.-Ukraine Foundation's Policy Dialogue Working Session.

Engaged in action-oriented, focused discussion of issues and problems in U.S.-Ukraine relations and Ukraine's democratic reform, the working session produced "action plans" of policy recommendations for both U.S. and Ukrainian government officials.

The action plans repeatedly call for the U.S. Congress to graduate Ukraine from the Jackson-Vanik Amendment. For this reason, the U.S.- Ukraine Foundation has declared October, November and December "Jackson-Vanik Graduation Months."

The Jackson-Vanik Graduation Coalition, headed by former U.S. Ambassadors to Ukraine Steven Pifer and William Miller, is working to achieve Ukraine's graduation from the Jackson-Vanik Amendment before the December, 18 2005 Congressional recess.

We invite the public to participate in the Coalition's campaign to have Ukraine graduated from Jackson-Vanik by the end of this year.

HISTORICAL BACKGROUND ON THE AMENDMENT

The Jackson-Vanik Amendment, as contained in Title IV of the 1974 U.S.Trade Act, was a response to the discriminatory emigration policies of the former Soviet Union and other communist states. The communist restrictions had the most serious impact on religious minorities, particularly on the
ability of Soviet Jews to emigrate.

From the perspective of the United States, these restrictions on the free movement of persons were actionable human right violations that justified harsh U.S. trade consequences.

The Jackson-Vanik Amendment stated that non-market economies that continued to impose emigration restrictions on their citizens would not be granted permanent normal trade relations or "most favored nation" status by the United States.

Ukraine is still waiting to be formally graduated from Jackson-Vanik, despite the fact that President Bill Clinton in 1997 found Ukraine to be in full compliance with the Amendment's freedom-of-emigration requirements. Several former Soviet states have already been graduated, including Georgia and Kyrgyzstan in 2000 and Armenia in 2004.

Various non-governmental groups, including the National Conference on Soviet Jewry, the Euro-Asian Jewish Conference and the Heritage Foundation, agree that over its thirty-year lifespan, Jackson-Vanik has served the important purpose of securing freedom of emigration for religious minorities.

However, they also believe that Ukraine has demonstrated its full compliance with the Amendment's objectives and therefore should be graduated from the trade restrictions it imposes.

Today's Ukraine, colored by the democratic Orange Revolution, has been applauded by President Bush and Congress for its free-market reforms and open-governance policies.

Ukraine's graduation from Jackson-Vanik is therefore an important affirmation of Ukraine's successful democratization and President Yushchenko's global economic agenda.

The Heritage Foundation's Dr. Ariel Cohen has said, "The U.S. has supported the triumph of democracy in Ukraine and is interested in a Ukraine that is stable, prosperous, and integrated in Euro-Atlantic structures. Washington should demonstrate unwavering support for Ukraine's pursuit of its democratic
aspirations."

Before the House International Relations Committee in July 2005, Ambassador Daniel Fried, Assistant Secretary for European and Eurasian Affairs, U.S. State Department, testified that, "Ukraine has complied with the provisions of the Jackson-Vanik Amendment to the Trade Act of 1974 for over a decade. This Administration strongly supports Ukraine's immediate "graduation" from Jackson-Vanik.

As the Ukrainian people look for tangible signs of our new relationship, they are perplexed that Ukraine remains tainted by the legacy of Jackson-Vanik. We urge Congressional action on this matter."

The U.S.-Ukraine Foundation and the Jackson-Vanik Graduation Coalition believe that graduating Ukraine from the Jackson-Vanik Amendment this year is precisely how the U.S. should demonstrate its unwavering support of Ukraine.

JACKSON-VANIK'S TRADE RESTRICTIONS

In addition to the historical human rights concerns that prompted the 1974 Amendment, it is also important to consider the current political and trade implications of Jackson-Vanik's continued application to Ukraine.

Since President Clinton's 1997 finding of full compliance, which was highlighted in a July 1998 joint statement by the U.S.-Ukraine Binational Commission, led by U.S. Vice President Al Gore and Ukrainian President Leonid Kuchma, Ukraine has received normal trade relations status under the full compliance provision of the Jackson-Vanik Amendment.

However, as early as 1992, President George H.W. Bush exercised his presidential waiver authority to extend normal trade relation treatment to Ukraine. Non-normal trade relations status allows the U.S. to impose higher tariffs on imports as well as non-tariff barriers such as quotas.

However, the 1992 presidential waiver of the Amendment's trade restrictions and the 1997 finding of full compliance have meant that Ukraine's import and export sectors have nonetheless enjoyed normal trade relations status and have not been directly harmed by U.S. tariffs or barriers resulting from
Jackson-Vanik. One important reason for desiring permanent normal trade relations status, as would be achieved by graduation from the Jackson-Vanik provisions, is the significance of permanent status to the global trade community.

Economists show that permanent normal trade relations status, much like market-economy status, improves foreign investment opportunities and the bargaining power of domestic business in trade negotiation.

This is mainly because permanent normal trade relations and market-economy status both indicate domestic economic stability and the fact that the country abides by the global trade rules.

JACKSON-VANIK'S POLITICAL IMPLICATIONS

Ukraine's current status (in full compliance, but still subject to Jackson-Vanik) also carries a negative political connotation. Continued application implies that Ukraine has not met the requirements of
Jackson-Vanik. This is distressing to Ukrainians and friends of Ukraine who believe - correctly - that Ukraine has fully met the Amendment's requirements.

This is why Jackson-Vanik graduation has figured so prominently on President Yushchenko's agenda with the United States. According to Peter Savodnik's September 29, 2005 article in the Wall Street
Journal (Europe,) "A Step Towards Normalcy, "Delaying an end to Jackson-Vanik -- for whatever reason -- would hinder the democratic transition by depriving Mr. Yushchenko of a much-needed
political win. By lifting Jackson-Vanik this year, before the parliamentary campaign begins in earnest, Washington would let everyone know that the Ukrainian president is not alone."

THE CONGRESSIONAL RESPONSE

Six bills were introduced in the 109th Congress to graduate Ukraine from Jackson-Vanik, three in the House and three in the Senate: S. 410 by Senator John McCain, S.632 by Senator Richard Lugar and S. 46 by Senator Carl Levin, H.R. 885 by Representative Henry Hyde, H.R. 1170 by Representative Sander Levin and H.R. 1053 by Representative Jim Gerlach.

On November 18, 2005 the U.S. Senate passed bill S. 632 to graduate Ukraine. But now the House of Representatives must also pass legislation to graduate Ukraine from the Jackson-Vanik Amendment. The House Ways and Means Committee is currently considering several possible bills. But some in Congress seem unwilling to move on the issue of Ukraine's graduation, apparently believing that maintaining the Amendment's application to Ukraine allows the U.S. to retain leverage when challenging certain trade issues, including Ukraine's importation of American poultry.

Another concern in the U.S. Congress has been Ukraine's historically weak intellectual property protection laws. In 2001, such concerns led the U.S. to designate Ukraine as a "Priority Foreign Country" under its Special 301process, which placed Ukraine on a list of the biggest violators of intellectual property standards. The U.S. subsequently withdrew certain trade benefits from Ukraine.

However on August 2, 2005, the Verkhovna Rada passed a Laser-Readable Disk Law, which significantly strengthened the intellectual property regime (IPR) in Ukraine. (The law also meets crucial WTO membership requirements by creating enforcement mechanisms to counter the illegal production of CDs and DVDs.) Since August, the Ukrainian parliament has continued to pass IPR laws to come into further compliance with WTO requirements. It is now speculated that Ukraine will be prepared to join the WTO by early 2006.

As a result of Ukraine's efforts, on August 31, 2005, U.S. Trade Representative Rob Portman announced that all tariff sanctions that had been placed on Ukrainian exports to the United States were now being lifted.

Portman commended President Yushchenko and Prime Minister Tymoshenko for "their personal involvement in securing passage of these amendments, which is expected to improve Ukraine's protection of intellectual property rights."

TO GET INVOLVED

The U.S. House is currently considering three bills to graduate Ukraine from Jackson-Vanik and extend normal trade relations status to Ukraine: H.R. 1053 by Representative Jim Gerlach, H.R. 885 by Representative Henry Hyde, and H.R. 1170 by Representative Sander Levin. All bills are awaiting committee consideration, therefore it is very important that members of the House show there support for these bills by adding their names as Co-Sponsors.

The U.S.-Ukraine Foundation's Policy Dialogue and the Jackson-Vanik Graduation Coalition believe that now is the appropriate time for Congress to graduate Ukraine form Jackson-Vanik. The Coalition is currently expanding its network of support and developing an action plan for working with Congress to achieve the goal of Ukraine's graduation by the end of this year.

The U.S.-Ukraine Foundation urges your participation in the Jackson-Vanik Graduation Coalition.


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