Leiden Law Blog

Associating with Ukraine: Just free trade or unjust policy?

Associating with Ukraine: Just free trade or unjust policy?

To allow for more popular involvement, the Dutch parliament, in 2015, voted for the possibility of a – non-binding –referendum. The first attempt at direct involvement will be on April 6 and concerns the Association Agreement between the EU and Ukraine. The initiators of the referendum are opposed to the transfer of authority from the Dutch to the European level. They want a public debate on these issues and are using the possibility of a referendum to force a debate on the direction of the EU.

As always, voters may choose how they will vote and for whatever reason. Not many people will actually read the 486 articles, 179 pages long Agreement, let alone fully understand the precise legal meaning of what it says.

Associating in free trade

The EU is clear in its intentions with the Association Agreement. It aims “to promote gradual rapprochement between the Parties based on common values and close and privileged links, and increasing Ukraine's association with EU policies and participation in programs and agencies” (art. 1.2(a)) and to “establish conditions for enhanced economic and trade relations leading towards Ukraine's gradual integration in the EU Internal Market, including by setting up a Deep and Comprehensive Free Trade Area (…) and to support Ukrainian efforts to complete the transition into a functioning market economy by means of, inter alia, the progressive approximation of its legislation to that of the Union” (art.1.2(d)). The core of the Association Agreement lies in creating an extended free trade agreement (FTA), which is the lightest form of economic integration. The signatories will abandon import tariffs and possibly non-trade barriers, but remain independent in their agreements with other countries or trading blocks. The EU and Ukraine agree to establish such an FTA over  a transitional period of 10 years (art. 25). The EU Ukraine Association Agreement extends the FTA to other areas of economic integration that are important to the EU, most notably the free movement of capital and services (the free movement of persons is not in the Agreement.) Furthermore, the agreement mentions  cooperation in the field of economic sectors and macro-economics.

How much does it cost?

Most of the burden in the Agreement falls on Ukraine, which has to adjust its rules and regulations to the EU standards. To achieve this, it will receive appropriate administrative and financial support from the EU. In its budget, the European Commission has pledged a sum of 3 billion euros in the coming years (2015-2020) to finance this support, which amounts to 1 € per European per year. A further 8 billion euros will be made available to Ukraine in loans from the European Investment Bank and the European Bank for Reconstruction and Development. Although economic analysis usually gives positive income outcomes from economic integration, it is hard to predict an accurate reward from the Association Agreement with Ukraine for the European economy.

Keeping the eye on the prize

The EU has 20 Association Agreements with other countries, as far away as Chile, and more are in the making. From that perspective the one with Ukraine is standard practice for the EU. But the Dutch referendum makes this one special. A ‘yes’ or ‘no’ on the Association Agreement between the EU and Ukraine may therefore very well become a vote pro or contra the European integration. If the Dutch members of parliament, who voted in favour of the Association Agreement, want a positive outcome to the referendum (and the debate), they would be well advised to provide a well-argued position in this case.

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