CommentaryJURIST Guest Columnist Dmytro Vorobey is an LL.M. Candidate at the University of Pittsburgh School of Law, and has interned at the district prosecutor’s office and the district court in Novomoskovsk, Ukraine. In the second entry of a 14-part series from the LL.M. students of the University of Pittsburgh School of Law, Vorobey provides insight into the EU-Ukrainian negotiations toward a free trade agreement, occurring in the backdrop of Ukraine’s possible accession to the EU…
On February 16, 2012, the European Commission informed the European Community of the progress made toward the Deep and Comprehensive Agreement on Free Trade (DCFTA) between the EU and Ukraine, which is part of a future Association Agreement for which the Cooperation Council adopted an agenda [PDF] in November of 2009. The DCFTA will add a new spin to EU-Ukraine relations and complete a lengthy negotiation process that was launched in Kiev, on February 18, 2008, shortly after Ukraine’s accession to the WTO.
Ukraine seems to be able and willing to consider loosening trade barriers with the EU. According to Valerii Piatnitskii, the chief Ukrainian official on EU integration matters and head of the Ukrainian negotiating team in Brussels, Ukraine’s expansive trade and export policy can be narrowed down to one guiding principle: “to trade, not to retreat.” Piatnitskii said: “[t]he modern world compels a state that is striving to achieve economic success to maintain a flexible and persistent policy.” The Ukrainian government has generally been an active negotiator, currently rallying to expand its trading interests in all directions including the Commonwealth of Independent States (former Soviet states), Morocco, Syria, Israel and Montenegro. However, the DCFTA with the EU is now being given special attention.
According to Eurostat [PDF], European exports to Ukraine account for less than two percent of EU export output, whereas Ukrainian exports to the EU make up as much as 33 percent of its total export output. Therefore, the country’s efforts to enlarge its exports generally pervade the DCFTA negotiations. The benefit of a DCFTA involving trade in agricultural outputs and processed food are likely to be beneficial for Ukraine, even though some of Ukraine’s industries may suffer from the liberalization and opening of internal markets to competition from the EU. Although the DCFTA is not without its flaws, officials within the Ukrainian Ministry of Economic Development and Trade hope that the agreement will ensure greater access to EU markets for Ukrainian businesses, particularly in commodity exports. However, Ukraine’s willingness to push the negotiations forward may, in fact, be part of its much larger EU membership aspirations.
Irrespective of each party’s aspirations, the agreement is final, at least in general terms. As reported by Minister Kliuev, the work on the agreement is now largely technical. Even though the statements made by both the Ministry of Economic Development and those involved in the negotiations are fairly optimistic, some Ukrainian analysts argue that the agreement contains just as many disadvantages as advantages.
According to the report [PDF] prepared by the Institute for Economic Research and Policy Consulting, the DCFTA may bring about consequences that go far beyond economic statistics and predictions. Although efforts to bring existing Ukrainian legislation up to EU standards have been made since 2004, many analysts in the corporate sphere fear that the practical implementation of the DCFTA will negatively impact the competitiveness of Ukrainian companies. The analysts believe this due to the initially high costs of statutory auditing and due diligence checks, as well as the bargaining disadvantage from the disclosure to suppliers and customers. According to the report, companies face the risks of introducing the necessary disclosure standards in a quite unstable environment with higher numbers of raiding attacks. At the same time, the benefits of the agreement include greater protection of property rights due to international cooperation and a chance to avoid litigation due to higher disclosure standards.
It is also doubtful whether the agricultural sector, which has always been of particular importance to Ukraine and perhaps to a lesser extent to the EU, will be subject to the same conditions, even if the DCFTA is signed and becomes effective. According to a World Bank report [PDF], the only fair trade agreements involving the EU that have had a major agricultural component were with countries of Central and Eastern Europe. However, these agreements were tailored for accession to the EU from the very beginning, so they should not be viewed as blueprints for possible negotiation outcomes for the DCFTA. According to this point of view, the EU is unlikely to offer Ukraine anything more than it has already offered through the Doha Round negotiations.
A number of other issues concern Ukrainian businesses, one of them being the fact that most EU member states tend to subsidize their agricultural sectors. This makes European exporters much more competitive pricewise than Ukrainian businesses. In his recent interview [PDF], Piatnitskii acknowledged the existence of this problem. However, according to Piatnitskii, if signed, the DCFTA will obligate EU member states to stop subsidizing their own producers should they decide to export their products to Ukraine. Nonetheless, the question of how these measures would be implemented remains.
The European Commission has also set conditions independent of economic prospects or numerical figures. According to the Commission’s position, the signing of the agreement will depend greatly on Ukraine’s compliance with democratic standards. In this respect, the conviction of Ukraine’s former Prime Minister Yulia Tymoshenko is likely to have hindered the final negotiations. Fortunately for the Ukrainian delegation, the trial itself did not have a major impact on the final round of DCFTA negotiations. The European Community is, nevertheless, concerned with the Ukrainian government’s actions against Tymoshenko. On November 27, 2011, the EU parliament passed a resolution stating that failure to review Tymoshenko’s conviction would jeopardize the prospects of concluding and ratifying an EU-Ukraine Association Agreement. Despite the fact that the Association Agreement is unlikely to be signed in the near future, political conditions may well influence a more immediate DCFTA deal.
The current political situation in Ukraine may, therefore, have a negative impact on EU-Ukrainian cooperation prospects. The upcoming parliamentary elections are expected to be another benchmark that could potentially facilitate the materialization of the agreement. Speculation aside, it should be said that the agreement is not without controversy. Given the multiplicity of issues involved, as well as the current political situation in the Ukraine, the process is to be watched closely.
Dmytro Vorobey received his bachelor’s degree in law from Yaroslav the Wise National Law Academy in Kharkiv, Ukraine, in 2011. Vorobey was also selected as the Ukrainian delegate to the European Youth Parliament in 2009, and was a member of the 2009-2010 Yaroslav team at the Vis International Commercial Arbitration Moot. He is a recipient of the Fulbright Fellowship administered by the Institute of International Education.
Suggested citation: Dmytro Vorobey, Negotiations toward an EU-Ukraine Free Trade Agreement, JURIST – Dateline, Apr. 10, 2012, http://jurist.org/dateline/2012/03/dmytro-vorobey-ukraine-eu.php.
This article was prepared for publication by Michael Micsky, an assistant editor for JURIST’s student commentary service. Please direct any questions or comments to him at studentcommentary@jurist.org
