EU and Its Eastern Partnership: Political Association and Economic Integration in a Rough Neighbourhood
© Springer International Publishing Switzerland 2015Christoph Herrmann, Bruno Simma and Rudolf Streinz (eds.)Trade Policy between Law, Diplomacy and ScholarshipEuropean Yearbook of International Economic Law10.1007/978-3-319-15690-3_18
The EU and Its Eastern Partnership: Political Association and Economic Integration in a Rough Neighbourhood
European External Action Service, Office SCHU 05/340, Rond Point Schumann 9A, 1046 Brussels, Belgium
European External Action Service, Office JOYE 02/448, Rond Point Schumann 9A, 1046 Brussels, Belgium
The views and opinions expressed in this article are those of the authors.
Introduction: The Eastern Partnership Post-Vilnius Agenda
Following some turbulent months in EU–Ukraine relations, the Association Agreement between Ukraine and the EU was signed in Brussels at the European Council on 27 June 2014, together with the agreements with Moldova and Georgia.1
This historic event reversed the decision taken on 21 November 2013, by the previous Ukrainian government to suspend2 the signature of the already long initialled Association Agreement, including its Deep and Comprehensive Free Trade Area (AA/DCFTA).3 The political parts of the Association Agreement with Ukraine were signed in a first step at an Extraordinary EU–Ukraine Summit on 21 March 2014,4 the same day Russia formally annexed Crimea, and exactly 4 months after the suspension decision.
On 16 September 2014, the EU–Ukraine AA/DCFTA was ratified by Ukraine. The European Parliament gave simultaneously its consent on the Agreement.5 This important step was preceded by a meeting on 12 September 2014 between EU Trade Commissioner De Gucht, Minister of Foreign Affairs of Ukraine Klimkin and Minister of Economic Development of the Russian Federation Ulyukayev and resulted in a Joint Ministerial Statement6 on the implementation of the EU–Ukraine Association Agreement/DCFTA. The Ministers agreed to delay until 31 December 2015 the provisional application of the DCFTA while continuing autonomous trade measures of the EU to the benefit of Ukraine during this period.7 This unprecedented step was the result of trilateral consultations on the impact of the EU–Ukraine DCFTA on Russia. It paved the way for ratification of the Agreement while avoiding the withdrawal of Russian trade preferences to Ukraine under the CIS-FTA. The threats of countermeasures have been repeated as recently as in December 2014 by Russian Federation Prime Minister Medvedev in an article published in Nezavisimaya Gazeta.8
Since August 2013, Ukraine had been subject to unprecedented Russian customs control at the Ukraine-Russian borders. This, combined with significant other subsequent Russian pressures, led then President Yanukovych and Prime Minister Azarov to state that the economic impact of the AA/DCFTA was of such magnitude that its related costs—notably with regard to the alleged adverse impact on Ukrainian exports to Russia—had to be carefully studied and significant compensation had to be agreed. Within this context, then President Yanukovych reached a deal with Russian President Putin providing for a significant reduction of the Russian gas price (from USD 410 to USD 268.5 per 1,000 m3) and a USD 15 billion loan over 18 months to prevent Ukraine from economic collapse.9
During the 4 months between suspension and actual signature of the AA, dramatic events unfolded in Ukraine. Massive demonstrations of hundreds of thousands of Ukrainians, outraged by the turnaround of their leadership in view of association with the EU developed into a permanent protest. “Euromaidan” was established on Kiev’s Independence Square and attempts of violent suppression by the authorities led to more far reaching demands, including the resignation of the President. Ukraine saw the worst violent clash in its history with more than 100 deaths and hundreds of injured, kidnapped and disappeared persons.
EU efforts to mediate between government and opposition, carried out by then High Representative/Vice President Catherine Ashton and Commissioner Štefan Füle in a series of missions to Kiev, culminated in a deal brokered by the Foreign Ministers of France, Germany and Poland on 21 February 2014.10
The following day, on 22 February, Yanukovych abandoned his functions as President, allowing a new governmental formation, voted in by a constitutional majority of 371 votes, with significant parts of Yanukovych’s Party of Regions supporting the new government. One of the first steps taken by the new government was to reverse the decision of AA suspension and to urge the EU to move ahead with signature of the AA as soon as possible.11
The agreement was signed 1 month later, on 21 March 2014, the same day Russia formally annexed Crimea.12 The annexation, preceded by an illegal referendum on 16 March, a fully-fledged military assault on Crimea violating Ukraine’s territorial integrity, independence and sovereignty, led to the worst crisis in Russia’s relations with the EU and the US in decades. The annexation was also condemned by a wide majority of countries around the globe, as evidenced by the vote on the United Nations General Assembly Resolution N. 11493 of 27 March 2014 on the “Territorial Integrity of Ukraine” which was adopted with 100 delegations voting in favour, eleven against and 58 abstentions.13
The turbulences in Ukraine did not remain limited to Crimea, but expanded into the Eastern and Southern parts of Ukraine, at the border with Russia. On 11 May 2014, in many towns of the self-proclaimed Donetsk and Lugansk People’s Republics referenda on the status of the Oblasts took place. These referenda sought to legitimise the establishment of the separatist “republics”, with the support of illegally armed militia. The results of the referenda were not recognised by any government, including those of Ukraine, the United States, the Member States of the European Union,14 and even Russia. The following months of “hybrid warfare” by separatists with the support of Russia15 and the “Anti-Terror Operation” of Ukrainian armed forces and security services led to many victims, significant displacements and resulted in massive humanitarian needs.16
Considering the origins and motivations of the EU’s Eastern Partnership policy (EaP) as well as the actual content of the EU’s Association Agreements with its Eastern partners and their economic impact on Russia, it is clear that all of these developments were unintended consequences.
The Eastern Partnership Summit that took place on 28–29 November 2013 in Vilnius between the EU and six Eastern neighbouring states17 was meant to be a turning point in the EU’s relations with its Eastern neighbours. The success of the EaP policy was seen by many as a yardstick for measuring the EU’s foreign policy impact and transformative powers in its eastern neighbourhood, with an association beneath the threshold of enlargement.
The non-signature of the Ukraine Association Agreement was not the only setback that the Vilnius Summit had to face. In September 2013, just a few months prior to Vilnius, Armenia announced that it would not move further with negotiations on its AA with the EU. As a consequence, the planned initialling ceremony of three AAs in the end only included two: Georgia and Moldova. Moreover, the progress on AA negotiations with Azerbaijan was disappointing and had stalled, due to some conceptual and political differences between the two Parties already in early 2013.
Only history will show whether the Vilnius Summit with the dramatic subsequent events in Ukraine was indeed a turning point towards a positive or a negative direction from an EU foreign policy perspective.
In a positive scenario, this Summit and the following months will be seen as the moment when “the point of no return” was reached by three EaP countries (Georgia, Moldova and Ukraine). Countries accept political association and economic integration with the EU as a decisive tool for domestic transformation and modernisation on the same values basis as the EU, strengthening the rule of law, fighting corruption and applying a vast number of EU norms and standards and thus creating a level playing field for domestic and foreign economic operators. Vilnius might also be assessed as a first of many interim steps18 towards an eventual accession of Moldova, Ukraine and Georgia to the EU.19
In a negative scenario, the transformative impact of the EaP initiative will be limited and the countries would ultimately not live up to their commitments and thus not qualify for any further steps on the path towards fulfilling their aspirations. One of the reasons could be the lack of capacity to implement the ambitious reforms foreseen in the association with the EU: systemic rigidities, vested interests and rampant corruption could prevent the necessary political, legal and institutional reforms, hampering economic liberalisation in having real impact. Another negative scenario could be the lack of political will, resulting either from external political, military and economic pressure or from internal domestic opposition capable of changing course and abandoning the intended association with the EU in the short-term and the integration of these countries into the EU in the long-term.
In either scenario, a close look at the Association Agreements with EaP partners is necessary in order to analyse and assess their impact and what would be required to optimise it. Before doing so, an overview of the preceding policy context will help to place this new wave of agreements within the wider context of the EU’s foreign policy projection in its neighbourhood. Finally, a critical analysis will be provided which focuses on the possibility of finding a compatible solution between the two paths of EU integration and Customs Union membership to overcome the dilemma for EaP countries: how to live up to an ambitious political association and economic integration process with the EU while taking account of their political and economic domestic situations and not undermining their socio-economic, historical and political links with Russia.
From Partnership to Association: Genesis of the Eastern Partnership
Newly Independent States and Their Cooperation Partnership with the EU
The new Association Agreements (AA) with the Eastern Partnership countries are supposed to replace the Partnership and Cooperation Agreements (PCA) which the EU had negotiated in the early 1990s with each of the successor states of the Soviet Union. In 1994 the PCAs with Ukraine, Russia and Moldova were signed and 2 years later Georgia, Armenia and Azerbaijan followed suit. Even though the PCA with Belarus was also signed in 1995, it has so far never been ratified, since Member States and the European Parliament raised concerns with regard to the human rights situation in Belarus. Due to the rather long ratification procedures of the EU, the PCAs entered into force only a couple of years after signing between 1997 and 199920 with the Russia PCA having been the first.21
These PCAs were designed as comprehensive agreements, governing the entirety of the EU’s relations with the “countries of the Former Soviet Union”, a term often used in the 1990s. The PCAs helped to normalise and develop relations across many fields with newly independent states, of which none had any relations with the EU before. The aim of these agreements was to strengthen the democratic and economic development of the partner countries through cooperation in some selected policy areas and a suitable framework for political dialogue. The partnerships aimed to provide a basis for cooperation in legislative, economic, social, financial, scientific, civil, technological and cultural fields. The PCAs with Ukraine, Russia and Moldova also provided already the prospect of setting up in the future free trade areas.22 The idea was to accompany the transition of the partner countries to a market economy23 and to encourage trade and investment.
The PCAs, however, did not reflect the new competences in many key policy areas that the EU had been entrusted (for example, in Common Foreign and Security Policy, Home and Justice) nor did they contain a dynamic agenda facilitating political and institutional reforms and much closer economic and sectoral cooperation. Furthermore, although the Agreements established the so-called “Cooperation Councils” responsible for supervising the implementation of the PCAs, the monitoring capacities of these institutional bodies remained limited. Thus, the emphasis in the PCAs was laid on “cooperation” between partners with a rather loose form of commitment and a lack of real enforcement obligation as well as dispute settlement.
The EU’s Neighbourhood Policy for Its New Neighbours in the East
Ten years after the signature of these PCAs, the geographic scope of the EU changed dramatically, affecting also the geopolitics of the European continent. After the two enlargements of 2004 and 2007,24 the EU found itself suddenly in a situation where it shared direct borders not only with Belarus, Ukraine, Moldova and Russia, but the new Member States bordering the Black Sea also linked the EU to the countries in the South Caucasus.
Shortly before the major enlargement to the East became a reality, then President of the European Commission Romano Prodi coined the key terms for a new European neighbourhood policy (ENP) by stating that the countries around the EU, from Morocco and the Mediterranean, to the Black Sea and to Russia and Ukraine, should form an “arc of stability” and “a ring of friends” with the ability to participate in the various EU policies and programmes (“everything but institutions”).25
Russia and the ENP
Russia was supposed to be part of the ENP. The European Commission made this explicit by sending then Enlargement Commissioner Günther Verheugen26 to Moscow in October 2003. Verheugen underlined that “Russian participation in our neighbourhood policy forms an obvious and integral part of such an approach”.27 But Russia declined the EU’s invitation to take part in the ENP. Instead, the “Common Spaces” for EU–Russia cooperation were established at the EU–Russia Summit in November 2003.28
There are various attempts to explain Russia’s refusal to be part of the ENP. One is that Russia has special and strategic relations with the EU, notably in terms of trade and energy relations, which differ substantially from the other 16 ENP countries.29 One can assume that Russia did not want to be monitored/measured by the EU through the so called ENP Action Plans which set out the partner country’s agenda for political and economic reforms and also provide the EU’s instrument to monitor and assess progress in implementation on a yearly basis in so-called ENP progress reports.30 Another reason is that Russia did not want to become “object” of an EU policy, as the approach towards Moldova or Morocco was perceived, but rather be “subject” on the basis of equality and reciprocity at a level of a strategic partner. This is reflected in the four Common Spaces and the related detailed Roadmaps of action, adopted at the EU–Russia Summit in May 2005.31 A new impetus for EU–Russia relations was also intended with the launch of negotiations of a “New Agreement” in 200832 which was meant to replace the 1994 PCA and to provide for a strengthened legal basis and legally binding commitments covering all main areas of EU–Russia relations. To complement the negotiation and building on results achieved under the Common Spaces approach so far, in 2010 the Partnership for Modernisation was launched,33 serving as a flexible framework for promoting reform, enhancing growth and raising competitiveness.
In sum, while there had been one policy of the EU towards its Eastern continental neighbours following the demise of the Soviet Union in the 1990s, the first decade of the 2000s saw an increased deviation between EU–Russian relations on the one side and a specific policy towards Eastern neighbours on the other side.
The finalité of the ENP: Aims and Objectives
The ENP signalled a growing awareness that the EU needed to protect its interests in its new neighbourhood by promoting political stability and economic prosperity, contributing to new business opportunities and preventing instability which may lead to new large-scale migratory flows. At the same time this new approach represented the recognition that ever new rounds of enlargements were politically and financially unfeasible, notably since domestic political support in a significant number of Member States was lacking, often referred to as the so-called “enlargement fatigue”.34 Thus, the ENP did not attempt to address the perennial issue of possible future membership, but left it simply open for Member States as well as neighbouring countries to interpret the “finalité” of the ENP according to national interests.
The ENP had been created in anticipation of the 2004 enlargement round, in order to provide a framework for the EU’s relations with its new neighbours. The dual policies of enlargement and ENP were conceptualised as distinct EU strategies and the clear differentiation between the two became at the same time more ambiguous.35 The ENP provided the opportunity to develop privileged political and economic relations with a degree of integration going beyond normal cooperation with third countries, but stopping short of enlargement. Bilateral Action Plans are intended to anchor reforms and bring the countries closer to the EU (“approximation”). Specific annual Country Progress Reports36 on the implementation of the Action Plans as well as a specific financial instrument, the European Neighbourhood Partnership Instrument,37 with multi-annual country strategies are key instruments to support these objectives.
The emphasis of the ENP was on new forms of cooperation and related financial assistance. New contractual commitments to anchor the new neighbouring countries closer to the EU were already envisaged. Given that the Mediterranean neighbours of the EU already had Euro-Mediterranean Association Agreements (except Syria and Libya), the possibility of obtaining new contractual commitments was most relevant for the eastern neighbours. Subsequently, the European Commission proposed a negotiation mandate for a new agreement with Ukraine in September 2006. This mandate was given by the Council only some 4 months later and the negotiations started in March 2007.38 In February 2008, following Ukraine’s accession to the World Trade Organization, the EU and Ukraine also launched negotiations on a Free Trade Area, later upgraded and called a Deep and Comprehensive Free Trade Area,39 as a core element of the new agreement.
A Need for Differentiation Within the ENP: The Eastern Dimension
In 2008, the EU’s relations with its neighbours were driven by the national interest of some Member States. After the re-launch of its relations to the South with the establishment of the “Union pour la Mediterranée” under French Presidency in 2008, a new initiative for the East followed: the Eastern Partnership (EaP). The Partnership aimed to intensify the EU’s relations with its three eastern European (Belarus, Moldova, and Ukraine) and three south-eastern neighbours (Armenia, Azerbaijan and Georgia) in the South Caucasus.
With the establishment of the ENP, the EU had hoped to avoid the creation of new dividing lines between the new eastern EU Member States and their closest neighbours. In this regard, the EaP was a deepening of that approach.
Eastern Partnership: From a Polish–Swedish Proposal to an EU Policy
Following a debate by the European Council in March 2008 on the need to strengthen the eastern dimension of the ENP, Poland and Sweden put forward a proposal to launch an Eastern Partnership in May 2008.40 In line with the European Council Conclusions of June 2008, the European Commission was supposed to establish the modalities for the EaP with a dedicated communication in spring 2009.41 However, the Russian military action against Georgia in August 2008 accelerated this process and the Commission brought forward its Communication on the EaP to December 2008.42
This Communication supported the aspirations of the eastern neighbours for closer ties with the EU, basing the EU’s commitment on strict conditionality—especially regarding progress made by partner countries in the areas of human rights, democracy and the rule of law. The Commission underlined that the EU’s ambitions for the relationship would depend on the extent to which these European values are respected and implemented in each country. This approach was emphasised later as the “more for more” principle of the Eastern Partnership which was spelled out more precisely in the ENP-Review in May 2011.43 The EU proposed also more intensive day-to-day support for its partners’ reform efforts through a new Comprehensive Institution Building programme. In addition, as mentioned above, the Commission called to upgrade the contractual relations with the partner countries by launching a new generation of Association Agreements. It also proposed a network of Free Trade Areas that could lead in the longer term to the establishment of a Neighbourhood Economic Community. Other objectives included progressive visa liberalisation for partner countries’ citizens, deeper cooperation to enhance mutual energy security and support for economic and social policies to reduce disparities within and across borders.
The New Agreement for Ukraine Sets the Precedent
Similarly, following on from the Georgia crisis, the leaders of the EU and Ukraine agreed at the EU–Ukraine Summit in Paris in September 200844 that the PCA should be succeeded by an Association Agreement in line with Article 217 of the TFEU. Consequently, the New Agreement with Ukraine which was already under negotiation was renamed an “Association Agreement” (AA). Ukraine therefore became the frontrunner but also a test case for the EU’s new approach of shaping its relations with its Eastern neighbours.
The negotiations on the AA with Ukraine, a document of considerable length exceeding 2,000 pages,45 were going to take no less than 5 years. This process responded also to a strong wish by the Ukrainian side to significantly upgrade its relations with the EU in the wake of the eastward enlargements of 2004 and 2007. This approach was also strongly favoured by the new Ukrainian leadership of President Yushchenko and Prime Minister Tymoshenko, who had come to power in January 2005, following the “Orange Revolution”.46 Backed by large popular support in favour of European integration, the Ukrainian leadership’s main aim with the AA was to obtain the promise of a European perspective for Ukraine. Ukrainian leaders characterised the negotiations with the EU as an effective mechanism of EU integration, arguing in favour of an approach of realism.47 Thus, the Ukrainian negotiators’ aim was to prepare for an agreement which was as similar to, and ambitious as possible in terms of scope and in terms of political ambition/vocation as the Europe Agreements with Central European countries or the Stabilisation and Association Agreements with the countries of the Western Balkans. It was considered that such an approach would prepare the way to move to the next political step: EU accession negotiations. This difference of long-term ambition was never solved but left explicitly open, due to the EU’s Member States’ division over that question.
The EU’s negotiators but also the relevant Eastern Partners followed the Ukraine negotiation precedent and, as of 2010, the negotiations on Association Agreements with Moldova, Georgia, Armenia and Azerbaijan48 started.
The Eastern Partnership Association Agreements constitute the core instrument of the bilateral track. The EU’s EaP policy also includes a dynamic multilateral track. This track with its biannual summit meetings,49 its multitude of ministerial level meetings, as well as its four thematic platforms50 and related expert panels, and five high profile flagship initiatives,51 promotes the exchange of best practices between EaP partner countries and the EU Member States. This includes also a very active and visible Eastern Partnership Civil Society Forum with six national platforms, providing significant policy input.52 In addition, interested third countries such as the US, Russia, Japan, Canada, Norway, and Switzerland meet twice annually in the so-called EaP Information and Coordination Group. Furthermore, regular coordination meetings at senior level with International Financial Institutions provide a solid political and coordination framework for the development of individual relations at bilateral level. The multilateral track is an inclusive process, since all six EaP partner countries fully participate in all activities, with no exception.53
Political Association and Economic Integration: In Concrete Terms
The EU’s Association Agreements (AA) with the Eastern Partnership countries are designed to constitute a new stage in the development of the contractual relations between both sides. They represent pioneering documents based on political association and economic integration between the EU and its eastern partners, with the highest degree of mutual commitments. The AAs present a shared commitment to close and lasting relationships, based on common values. Thus, the AAs are a concrete way to foster a dynamic relationship between the EU and its eastern partners, focusing on support to core reforms, on economic recovery and growth, governance and sector cooperation. They envisage ambitious cooperation on home and justice affairs, including a perspective for visa-free travel. The AA also offers gradual integration with the EU Internal Market by setting up Deep and Comprehensive Free Trade Areas (DCFTAs). These go further than classic free trade areas, since they foresee the approximation to relevant EU norms and standards in return for large-scale market access, while providing a strong binding framework to ban all arbitrary trade-restrictive measures, including export duties and quantitative export restrictions. The AAs also constitute a reform agenda for the EaP countries, based around a comprehensive programme of approximation of EaP’s legislation to EU norms and standards in a great number of sectoral cooperation areas. In short, the Agreements are unprecedented in their breadth (number of areas covered) and depth (detail of commitments and timelines), leaving the way open for further progressive developments by neither explicitly referring to nor formally excluding an EU membership prospect.
The Agreements establish an “association” between the EU and the Eastern Partnership country, moving from the previous “cooperation partnership” to a new level of political ambition. With the exception of the EEA countries (Norway, Iceland and Liechtenstein) and Western Balkan candidate countries, the EU has never negotiated such comprehensive and far reaching agreements, notably with regard to partial opening of the EU’s Internal Market to participation by a third country, but also with regard to the partners’ commitments to approximate to the EU acquis.
Values and Principles of Associated Partners
In order to live up to the ambition of this political project of association with the EU, the Agreements put a strong emphasis on values and include an important list of general principles to which both Parties ought to be bound, such as respect for democratic principles, human rights and fundamental freedoms as defined in relevant international instruments; respect for the rule of law; respect for sovereignty and territorial integrity, inviolability and independence and countering the proliferation of weapons of mass destruction, related materials and means of delivery. The Agreements also underline the principles of free market economy, good governance, the fight against corruption, transnational organised crime and terrorism, the promotion of sustainable development and effective multilateralism.
The inclusion of a specific set of “essential elements” in the Agreements underlines the significance of this new “political association”, since the violation of one of these essential elements by one of the Parties could give rise to specific measures under the Agreement, including the suspension of (trade) rights and obligations. These elements are respect for democratic principles, human rights and fundamental freedoms as defined in relevant international instruments; respect for the rule of law; and countering the proliferation of weapons of mass destruction, related materials and means of delivery. In the specific case of Ukraine, the promotion of respect for the principles of sovereignty and territorial integrity, inviolability and independence also constitute essential elements of the Association Agreement.
Level and Dimension of Association in the Area of Foreign Policy
The “political association” is further underpinned by the enhancement of cooperation in foreign and security policy. The Agreements set out the aims of a strengthened political dialogue—going beyond the ambition of the PCAs and reflecting the EU’s new foreign policy instruments—by promoting gradual convergence on foreign and security matters with the aim of the EaP countries’ ever deeper involvement in the EU security area. The Agreements establish a number of fora for the conduct of political dialogue, and provide an innovation also for dialogue and cooperation on domestic reform, based on the common principles set out by the Parties. There are also provisions for intensified dialogue on foreign and security policy, including Common Security and Defence Policy (CSDP), for the promotion of peace and international justice by ratifying and implementing the Rome Statute of the International Criminal Court (ICC), and for joint efforts in relation to regional stability, conflict prevention, crisis management,54 military and technological cooperation, anti-terrorism, anti-proliferation, disarmament and arms control.
Justice, Security and Mobility
In the field of justice, freedom and security, the Agreements pay particular attention to the rule of law, human rights and fundamental freedoms which guide cooperation between the EU and eastern partners in this area. The reinforcement of judicial institutions and practices is also part of the cooperation. The AAs set out the framework for cooperation on migration, asylum and border management, on personal data protection, money laundering and terrorism financing and on anti-drugs policy. This cooperation provides for movement of persons, visa facilitation and readmission and gradual steps towards a visa-free regime55 in due course, provided that relevant conditions for well-managed and secure mobility are in place. The AAs commit both sides to further develop their judicial cooperation in civil and criminal matters.
Economic Integration Through a Wide Range of Sector Cooperation
The Association Agreement strengthens significantly—in comparison to the PCA—sector level cooperation between the EU and the partner country in more than 30 policy areas, such as: energy, transport, environment protection, industrial and small and medium enterprise cooperation, social development and protection, equal rights, consumer protection, education, training and youth, as well as cultural cooperation. These sectors correspond to the different areas of the EU acquis and reflect the magnitude of EU policies. They are inspired by the “35 Accession chapters” which are being negotiated with each candidate country within the enlargement context. Similarly to the accession process in the enlargement context, the chapters correspond to the areas in which reforms are needed so as to prepare for economic integration, or—with regard to selective DCFTA aspects—to prepare for the participation in some parts of the EU’s Internal Market.
In all of the aforementioned areas, enhanced cooperation starts on the basis of current frameworks, both bilateral and multilateral, with the aim of more systematic dialogue and exchange of information and good practice, supporting core reforms, economic recovery, growth as well as good governance.
Deep and Comprehensive Free Trade Area (DCFTA)
The most important innovation within the AA is the Deep and Comprehensive Free Trade Area which goes beyond a traditional FTA and offers gradual integration with the EU’s Internal Market. As a medium and long-term objective, it is intended to base trade between the EU and EaP countries largely on the same conditions as between EU Member States.
The DCFTA foresees the tackling of non-tariff barriers to trade, since the EaP country is asked to align over time its norms and standards with those of the EU in key areas of the Internal Market, notably technical norms and standards for industrial goods, sanitary and phytosanitary standards for agricultural goods, customs cooperation, services, intellectual property rights, public procurement and competition, thus leading successively to ever greater and far reaching market access.
In terms of eliminating technical barriers to trade, the partner country will progressively adapt its technical regulations and standards to those of the EU. To this end, the DCFTA commits both Parties to negotiate an Agreement on Conformity Assessment and Acceptance of Industrial Products to ensure that in specific sectors, the partner country’s legislation and market surveillance systems are in line with those of the EU. As regards trade in animals, plants and their products the DCFTA provides for the alignment of sanitary and phytosanitary (SPS) and animal welfare legislation with the EU’s and the setting up of a rapid consultation mechanism to resolve SPS-related trade disruptance, including a specific early warning system for veterinary and phyto-sanitary emergencies. Part of the DCFTA is also a Protocol on mutual administrative assistance in customs matters which provides a stronger legal framework for efforts to ensure the correct application of customs legislation and the fight against infringement.
The DCFTA provides for national treatment and most favoured nation treatment of companies, subject to limited reservations, and the possibility to access the EU’s Internal Market in the fields of financial, telecommunications, postal and courier, and international maritime services—if and when the EaP country has fully and effectively implemented the EU acquis in these fields. Provisions on Intellectual Property Rights (IPRs), designs (including unregistered ones), and patents which complement and update the WTO TRIPS Agreement and include provisions for the enforcement of IPRs based on the EU’s internal rules are also part of the DCFTA. In addition, a high level of protection for EU and partner countries’ agricultural Geographical Indications constitutes an integral part of the DCFTA,56 not only those relating to wines and spirits, but also any new products added to the list of protected GIs through regular consultations.
The DFCTA also constitutes an unprecedented example in terms of integration of the public procurement markets, in allowing possible access of EaP countries to the EU Public Procurement Market—once the EaP country has adopted the current EU public procurement acquis. As a result, EaP country suppliers and service providers will have mutual market access to the public procurement markets, with the exception made for the defence sector. By aligning its competition law and enforcement practice to that of the EU acquis, EaP state-controlled enterprises will be subject to the same provisions as EU Member States, ensuring that no discrimination by monopolies will be allowed. The section on subsidies is particularly significant in so far as it contains a commitment on behalf of the EaP country to adopt a domestic system of state aid control similar to that which exists in the EU and to establish an operationally independent authority entrusted with the control of state aid.
On trade-related energy issues, the DCFTA introduces binding provisions on pricing, including via the prohibition of dual pricing, on transit of energy products with a view to ensuring the security of supply, and on non-discriminatory treatment of energy-related investments. The DCFTA also provides for commitments on the enforcement of multilateral labour and environmental standards, along with a commitment to refrain from waiving or derogating from such standards in a manner that affects trade or investment between the parties.
Finally, another key innovation within the DCFTA is the introduction of a binding bilateral dispute settlement system. Effective settlement procedures based on the model of the WTO Dispute Settlement Understanding will provide for swift resolution of trade disputes, including by allowing the affected party to impose proportionate sanctions, with faster procedures for urgent energy disputes. Specific provisions on transparency and dialogue with civil society and stakeholders have also been agreed.
The AA Methodology of Economic Integration
Key to the DCFTA but also to the sector-level cooperation is a comprehensive menu of regulatory approximation set out in the Annexes to the Agreements. The Annexes include specific schedules for the transposition and implementation of selected parts of the EU acquis by the Eastern Partnership country. The AA/DCFTA binds the EaP countries to approximate to existing EU legislation, following a period of transition which varies from between 2 and 15 years and depends on the sector as well as on the specific country.
The methodology which was designed for the new generation of Association Agreements is the gradual and dynamic approximation of EaP countries’ legislation to EU legislation, norms and standards. The gradual character of this approximation has two dimensions, on the one hand it is the approximation over time, implying a step-by-step gradual rapprochement of the partner country’s set of rules and legislation to the existing EU’s legislation. On the other hand, a differentiated approximation is foreseen, meaning that only a selected part of for example the environment or agriculture EU acquis is reflected in the Annexes. This is mostly a result of negotiations, reflecting the political and economic relevance both sides have attached to the policy area. The selection is however also a reflection of the degree of the partner countries administrative, financial and institutional capacity to commit to the approximation to EU legislation in a specific area.
The Annexes are in principle subject to updates, in order to take into account the evolution of EU law (legislation, policies and principles). This evolution is conceptualised by the term “dynamic approximation”, implying that the EaP countries will not only approximate their legislation to the current but also to possible future EU legislation. This is of particular importance in terms of partner countries’ EU Internal Market access as they are required to automatically and constantly align their legislation with the EU acquis. The updates of the Annexes within the sectoral parts of the AA, which are not market-access related, are not subject to automatic alignment but to future approval of both Parties via the institutional bodies established under the AAs. Hence the timely and full approximation to the EU acquis is of particular importance for the areas where in principle the partner country could be granted EU Internal Market access. The latter is the case for the public procurement market as well as for financial, telecommunications, postal and courier, and international maritime services. Although the fulfilment of the approximation commitment of the sectoral Annexes is irrelevant for the granting of market access, it is crucial for ensuring the country’s economic integration with the EU.
Taking into account of the fact that once EU Internal Market access is granted, there is a need to monitor the partner countries’ progress in keeping up-to-date with regulatory developments in the EU, specific institutions were established under the Agreements and financial resources made available.
New Institutions and Resources
The AAs include an updated institutional framework encompassing cooperation and dialogue fora from ministerial57 down to the level of technical subcommittees. A specific decision-making role is foreseen for an Association Council and by delegation also for an Association Committee, which may also meet in a specific trade-configuration. The monitoring mechanism, partly inspired by the enlargement screening mechanism, allows the Association Council and/or Committee to evaluate the partner countries’ adaptation of national legislation to EU legislation as well as the functioning of the relevant administrative and institutional infrastructures. The result of the monitoring process will eventually lead to the EU’s unilateral decision to grant the EaP country market access in areas specified in the AAs. In addition, the AAs also provide for other monitoring fora such as a Parliamentary Association Committee or a Civil Society Platform, representing inter alia civil society, non-governmental organisations as well as social partners, trade-unions and employers.
EU’s Financial Assistance
The AA negotiations were not a stand-alone exercise: EU assistance to Eastern Partnership countries is linked with the reform agenda as it emerges from the result of negotiations. The Comprehensive Institution Building Programme (CIB)58 was particularly important in this regard, since it was designed to help partner countries strengthen the capacities of key institutions involved in preparing, negotiating and implementing the new AAs. Furthermore, the CIB supported the creation of the DCFTAs and the management of enhanced mobility opportunities in a secure environment. For the period 2014–2020, a new financial instrument, the European Neighbourhood Instrument (ENI),59 will support countries in the EU’s neighbourhood with a budget of around EUR 15.4 billion. During this period, Ukraine will benefit from approximately EUR 1.4 billion, starting with around EUR 355 million in 2014 and followed by a yearly amount of EUR 130 million for the years 2015–2020. Moldova and Georgia will each benefit from between EUR 335 and EUR 410 million in the years 2014 and 2017.
EaP Association Agendas
In support of the Association Agreement process, specific Association Agendas for the EaP countries were developed. These Agendas replace the ENP Action Plans and are designed to prepare and facilitate the implementation and entry into force of the Association Agreements. They are political implementation tools, spelling out concrete reform steps and related support. They set out the partner country’s agenda for political and economic reforms, with short and medium-term priorities of 3–5 years, while reflecting the country’s needs and capacities. The Ukraine Association Agenda was the first to be agreed back in 2009 and was subsequently updated in 2011 and 2013.60 The Association Agendas for Moldova and Georgia were adopted on 26 June 2014,61 just 1 day before the historic signature of the Association Agreements.
The Prospects and Potential of EaP AA/DCFTAs
As outlined above, the EU has never before opened up its Internal Market to participation by a third country to the degree it has offered to the EaP countries. This unprecedented and unique offer was on the one hand motivated by the need to bridge the gap between membership and partnership, and on the other hand by the pursuance of new market opportunities in the partners’ mutual economic interests in new markets and regions. This is built on the European Commission’s important expertise in the gradual expansion of its Internal Market rules, either through means of the enlargement instrument or by cooperating with countries of the European Economic Area. This ambitious offer was only made possible since the partners in the East also realised that EU membership realistically, if at all, would only be possible with a long-term perspective, and only following the integration of the Western Balkan countries in the EU. Hence, partner countries have made extensive commitments to align with the EU acquis. In return for effective and measurable implementation and enforcement of the acquis, the EU offered gradual access to its Internal Market, which in the mid- to long-term would stimulate economic growth, notably through enhanced trade and investment.62
With the acceptance of this approach EaP partner countries followed reluctantly the EU’s logic: first creating “more Europe inside” their countries, thus creating different conditions for possible future decision-making, with the EU avoiding any explicit reference to the membership question, which remains thus open. It seems that the Eastern partner countries were able to apply a realistic approach to integration and preferred to pocket what was politically on offer in terms of association with the EU, rather than overstretch the then EU-27 Member States’ willingness to cooperate politically and economically.
In May 2011, the European Commission made a major attempt to get a firmer commitment towards a possible long-term perspective of EU membership for Eastern partners based on successful implementation of AA related commitments. The ENP review communication made an explicit reference63 to Article 49 TFEU,64 which is broadly known as the article providing for a membership perspective. However, this never became official EU policy nor was it an EU negotiation position in the AA process, given the reluctance of a significant number of Member States to go that far.65
In perspective, the Eastern partner’s closer economic integration with the EU through the AA/DCFTA represents a powerful stimulant to the country’s economic growth. The AA will create business and investment opportunities in both the EU and EaP. By moving beyond simple MFN treatment, covering preferential trade in goods, services and agricultural products, the DCFTA will promote real economic modernisation and integration with the EU. Higher standards of products with resulting innovation gains, better market choices and consumer protection for citizens, and above all, the Eastern partners’ capacity to compete effectively in international markets should be the result of this process. Cooperation chapters of the AA will help the partner countries address supply-side constraints, and are linked together with the DCFTA parts of the AA to capacity building measures and financial assistance. The AA is therefore designed to provide a focus for cooperation, and will form the core of the countries’ domestic reform and modernisation agenda.
Critical Analysis: What Happened to the Eastern Partnership?
The Eastern Partnership policy comprises a multitude of initiatives with a dedicated multilateral dimension. However, the perceived impact of the AA/DCFTAs as the core instruments in advancing the goals of the Eastern Partnership with the most committed and ambitious three partner countries has been—notably since the Vilnius Summit—at the centre of public and political attention. After years of negotiation and subsequent initialling, the signature of these agreements has created exaggerated fears and ambitions.
At no time has the EU’s external attraction as normative power been seen as more promising by some and more threatening by others.66 The time this asset could be seen as merely “soft power” appears to be over. At the same time, the right of independent European states to make sovereign choices67 in taking over EU norms has never been challenged since the end of the Cold War. The opposition of Russia to the Eastern Partnership policy has been driven by geopolitical and strategic considerations, while its opposition is voiced with regard to the economic integration ambitions of some of our common neighbours.
The Russian Factor
The Vilnius Summit did suddenly catapult the Eastern Partnership to the forefront of attention with regard to the EU’s foreign policy. Although the EU’s policy towards Russia was not formally part of the Vilnius Summit agenda, German Chancellor Angela Merkel rightly underlined during the official dinner that “at the table, there is another invisible guest”. It became clear from this moment on that the EU’s Eastern Partnership policy would need to consider the Russian factor more explicitly, and cater for Russia’s sensitivities better to make the EaP successful.
The EU’s soft power, with its long-term impact leading to transformation of whole societies, promoting fundamental freedoms and the rule of law as well as functioning market economies, has been seriously challenged by Russia’s hard power with its short-term impact, using coercion and providing significant energy price incentives and financial support. But the reverse is also true. The new context created by the sudden reverses in Ukrainian politics with regard to its relations with both the EU and Russia have generated an unprecedented public interest in EU foreign policy and re-awakened fears of a new era of Cold War rivalries on the European continent. If the AA/DCFTAs are really the cause for such fears, then they are grossly exaggerated, since they are not designed to lead to new dividing lines on this continent, but to promote additional economic opportunities without severing traditional ties.