Shallow market integration and weak developmental capacities: Ukraine’s pathway from periphery to periphery

Abstract

How do transnational integration regimes (TIRs) shape domestic developmental capacities to benefit from trade integration? Some scholars acknowledge the passive influence TIRs can have on domestic capacities to spur development. Others conceive of TIRs as active agents of change but disagree as to whether their effects are positive or negative. This paper takes issue with some of these approaches and reveals important caveats of others by investigating how the shallow mode of transnational market integration shapes domestic developmental capacities. The paper uses the developmental pathway of Ukraine’s automotive industry as a case study. Strikingly, the sector maintained its peripheral position despite initial developmental features that made it as good an investment destination for multinationals as automotive sectors in other peripheral economies that eventually became more integrated in transnational value chains. I argue that it needs strong states being able to use the opportunities offered by the shallow mode of integration for development. By contrast, weak states can hardly shield themselves against capture by rent-seeking networks, since TIRs only provide limited assistance for building developmental capacities in the context of shallow integration.

Keywords:

• Automotive industry
• development
• European Union
• oligarchs
• transnational market integration
• Ukraine

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Parts of the empirical analysis draw on Langbein (2016).

2 In 1994, tertiary school enrolment was at 40% in Ukraine but only at 13% in Romania. Towards the end of the 1990s, Ukraine still outscored Romania on educational measures, with more than twice as many people enrolled in tertiary education (World Development Indicators. Retrieved from http://databank.worldbank.org/data/home.aspx).

3 Law of Ukraine “On the Unified Customs Tariff,” No. 2097-XII, Feb. 5, 1992.

4 Interview with Ukrainian expert, Kyiv, Nov. 12, 2014.

5 The acquis communautaire is the accumulated body of EU law and obligations. It comprises all of the EU's treaties and laws, declarations and resolutions, international agreements and the judgments of the Court of Justice. It also includes all EU measures relating to Justice and Home Affairs as well as to the Common Foreign and Security Policy.

6 Cabinet of Ministers Decree “On Making Amendments and Additions to some Resolutions of the Cabinet of Ministers of Ukraine”, No. 146, February 16 1998.

7 SKD means assembling welded and painted cars.

8 Interview with Oleh Nazarenko, Director General of the All-Ukrainian Association of Automobile Importers and Dealers, Kyiv, Nov.12, 2014; Interview with Valeriy Pyatnitskii, Ukraine’s chief negotiator during WTO accession negotiations, Kyiv, Nov. 13, 2014.

9 CKD means assembling a product using a complete kit which contains all the necessary parts. Usually, the parts are manufactured in one country and then exported to another country for final assembly.

10 Interview with Valeriy Pyatnitskii, Kyiv, Nov. 13, 2014.

11 “Law on Amending Certain Legislative Acts of Ukraine for Improving the Balance of Payments in Connection with Global Financial Crisis,” Feb. 20, 2009, in effect from Mar. 6, 2009.

12 Interview with Berend de Groot, Head of Cooperation in the EU Delegation to Ukraine, November 4, 2016. Retrieved from: https://euukrainecoop.com/2016/11/04/public-administration1/

Additional information

Funding

Parts of the research for this article has been supported by the European Union's Seventh Framework Programme for research, technological development and demonstration (project “Maximizing the integration capacity of the European Union – Lessons of and prospects for enlargement and beyond” [MAXCAP]) under grant agreement no 320115.

Notes on contributors

Julia Langbein

Julia Langbein is senior researcher at the Center for East European and International Studies (ZOiS), Berlin. Her research focus lies in the field of comparative political economy (with a focus on Eastern Europe), European integration and institutional development. She is the author of Transnationalization and Regulatory Change in the EU’s Eastern Neighbourhood (Routledge, 2015); and co-author of Varieties of Dis-embedded Liberalism. EU Integration Strategies in the Eastern Peripheries of Europe, Journal of European Public Policy, 2017 (with László Bruszt); and Core-periphery disparities in Europe. Is there a link between political and economic divergence?, West European Politics, 2019 (with Tanja Börzel). Langbein’s work has also appeared in Governance, the Journal of Common Market Studies, Europe-Asia Studies and Eurasian Geography and Economics.