АНАЛІТИКА

12.12.2006 | Ukraine-EU Relations After the Parliamentary Elections-2006
Oleksandr Sushko - Center for Peace, Conversion and Foreign Policy of Ukraine

In 2006 Ukraine achieved a certain progress in its relations with the European Union. In the political sphere it held the fair and democratic parliamentary elections on 26 March 2006. In the economic sphere it completed adjustment of national laws with the WTO standards. In the field of foreign policy it aligned itself with EU positions in most of critical international issues, and actively cooperated with the Republic of Moldova in customs and border-related matters. At the same time, quite a few items specified in the Ukraine-EU Action Plan are still outstanding that makes it impossible to regard Ukraine as a distinct success of the European Neighborhood Policy.


CURRENT STATE OF IMPLEMENTATION OF UKRAINE-EU ACTION PLAN


In 2005-2006, the joint preliminary review of the Action Plan implementation was carried out at the Ukraine-EU summits (1 December 2005, 27 October 2006), at the sessions of the Cooperation Council (13 June 2005, 14 September 2006), at the sessions of Cooperation Committee (19 October 2005), and meetings of Ukraine-EU subcommittees.


Independent monitoring was conducted by NGOs and think-tanks. In particular, issue #7 (2005) of the “National Security and Defense” journal was devoted to these issues. The journal is published by the Ukrainian Center for Political and Economic Studies named after Oleksandr Razumkov.


However, in 2006, results of the public monitoring were not published at all that makes this analysis the first attempt to compare various expert assessments and official interpretation of the Ukraine-EU Action Plan implementation review published by now both by the CEC and the Ukrainian government.


It proceeds from the text of the CEC Communication entitled “On Strengthening the European Neighborhood Policy” (published on 4 December) that in Brussels’ opinion (although it is not stated directly that way) the best country engaged in the European Neighborhood Policy (ENP) is Morocco and not Ukraine, as Kyiv has expected, at least in the economic  component of the integration. That African country was commended for liberalization of its economy, systemic reforms in the field of transport, environment and financial sector in compliance with the EU-Morocco Action Plan .


Ukraine’s accomplishments are also indicated, although less enthusiastically, in particular, the progress made in consolidating respect for human rights and the rule of law that are the long-term results of the Orange revolution. It is mentioned that only initial steps have been taken in the fight against corruption. CEC commended cooperation in the field of foreign and security policy, in particular cooperation with EU and Moldova in border management and customs-related issues. It mentioned finalization of adjustment of the national law with the WTO standards and completion of negotiations with EU on visa facilitation and readmission .


It means that in the second year of ENP and Action Plan Ukraine has approached the recognition as an “EU best neighbor” (something expected by many in 2005), although there is no ground for totally optimistic assessments: Morocco has been a WTO member for many years, it has started the free trade negotiations with EU earlier than Ukraine. Ukraine evidently ranks first in the “political” component of the Action Plan implementation, mainly because of the positive inertia of the Orange revolution that makes it possible for Ukraine to continue to report about existing free speech and media, political pluralism and democratic freedoms.


The web-site of the Cabinet of Ministers contains the Position Paper on Ukraine-EU Action Plan implementation by the Ukrainian Side in 2005-2006 (drafted for public discussion)  that has assessments with which the Ukrainian government is going to report about the Action Plan implementation.


POLITICAL DIALOGUE AND REFORM


The main argument in favour of the progress in this sphere is holding the free and democratic elections on 26 March 2006.
Official reports refer to the OSCE/ODIHR report on the parliamentary elections of 26 March: the parliamentary elections on 26 March were held generally in accordance with commitments taken within the OSCE, CE framework, and other international standards of democratic elections.


The Position Paper of the Ukrainian government says that “Pursuant to the amended Constitution of Ukraine, in August 2006 the coalition of parliamentary groups formed the Government as a political body responsible to the President of Ukraine and Verkhovnha Rada of Ukraine and under control of the Verkhovna Rada of Ukraine”. Nevertheless, nothing is said about serious difficulties with implementation of the new constitutional model that led to apparent problems in carrying out a single domestic and foreign policy of Ukraine after August 2006 and to permanent confrontation between the presidential and prime-ministerial components of the executive branch.


As regards the fight against corruption, the European side stated that efforts in that area were at the initial stage.


The Ukrainian document mentions that according to the Corruption Perception Index by the Transparency International in 2006, as compared with 2005, the ranking of Ukraine in fight against corruption has improved by 14 positions (Ukraine has moved from 113th  to 99th position).


Ukraine ratified the Civil Law Convention on Corruption (the Law of Ukraine No. 2476). On 1 January 2006, Ukraine became a full member of the Group of States against Corruption (GRECO). With a view to establish criminal liability for misuse of computer systems and data the Convention on Cybercrime and Supplementary protocol thereto were ratified (the Law of Ukraine, adopted on 7 September 2005 No. 2824; the Law of Ukraine, adopted on 21 July 2006 No. 23). On 18 October 2006, Ukraine ratified the UN Convention against Corruption, the Criminal Law Convention on Corruption (Council of Europe) and Supplementary Protocol thereto (laws of Ukraine ## 251, 252, 253).


In the field of human rights the European assessments mention not only positive changes, but also problems existing in the law-enforcement agencies (tortures applied to detainees), as well as the incident of 6 February 2006 when a group of Uzbek nationals were deported from Ukraine without legal grounds after they had asked for political asylum from political persecutions in their own country following the developments in Andijan.


VISA FACILITATION


On 27 October 2006, the visa facilitation and readmission agreements were initialed at the Ukraine-EU summit in Helsinki. The visa facilitation agreement could be considered the biggest achievement in Ukraine-EU relations of 2006 (CPCFPU published a separate Occasional Report devoted to provisions and effects of this agreement).


Ukraine became the second country after Russia that has completed visa facilitation negotiations (Moldova is now at the initial stage of the negotiating process, no talks are underway with any other neighboring countries so far). Nevertheless, the visa facilitation and readmission agreements will enter into force at the beginning of 2008 at the earliest, as they still have to be officially signed and ratified. After that, some technical aspects pertaining to implementation of these agreements are to be concurred.


READMISSION


At the initialing the readmission agreement the Ukrainian side managed to get accord on the 2 year-long transition period. Although this term is shorter than the one Ukraine has been seeking, it is longer than the period initially proposed by the European Union. Prior to that, the Ukrainian side indicated that it was discriminatory on the part of EU to demand a 1 year-long transition period in conditions when the 3 year-long period was granted to the Russian Federation. Eventually, the parties reached a compromise that would give the Ukrainian side some additional time to technically develop the relevant infrastructure and conclude negotiations on the readmission agreement with Russia, so that it could enter into force simultaneously with the one concluded with EU thus preventing Ukraine from turning into an accumulator of illegal migrants from third countries.


COOPERATION ON BORDER AND CUSTOMS ISSUES


Another tangible success in the Ukraine-EU relations is fruitful cooperation on border and customs-related matters in the Ukraine-EU-Moldova triangle. Launching of the EU Border Assistance Mission at the Ukraine-Moldova border (December 2005) and establishing the new customs regime by Ukraine and Moldova on 3 March 2006 became the first example of such successful multilateral cooperation under the EU’s sponsorship. However, the fundamental objective of this cooperation – settlement of the Transdniestrian problem - has not been achieved so far, and lack of progress in that issue gives rise to reasonable questions if the joint efforts by EU, Ukraine and Moldova have been sufficient. The increasing role of EU in the settlement of the Transdniestrian problem demonstrated serious differences in positions of EU and Russia on that issue that also affected the climate of the Ukraine-Russia relations.


In July 2006, the EU Border Assistance Mission expanded its presence: a new office and analytical center were opened in Illichivsk and Odessa respectively, staff of the mission was increased by 40 persons, and CEC allocated additional finances in the amount of 6 million EURO.


The Mission’s mandate expires at the end of 2007. For it to be extended, Ukraine and Moldova should without delay (in view of EU lengthy internal procedures) address the European Commission requesting extension of the Mission’s mandate for the next two years.


ECONOMIC AND SOCIAL REFORMS AND DEVELOPMENT


On 30 December 2005, the European Union recognized Ukraine as a market economy (it was excluded from the list of “economies in transition” in the framework of the EU’s anti-dumping laws).


In 2006, the U.S. government decided to grant Ukraine the market economy status. On 23 March, the U.S. President signed the law abolishing the Jackson-Vanick amendment.


On 25 October 2006, the Fitch international rating agency improved its outlook for Ukraine as regards the issuer default ratings in foreign and local currencies from “stable” to “positive”.


On 10 November 2006, the Moody’s Investment Service international rating agency revised its outlook for Ukraine’s B1-rated medium and long-term government bonds in foreign and national currency and its "B-2"-rated foreign currency bank deposit ceiling to positive from stable. The rating outlook for Ukraine's Ba3 foreign currency country ceiling for bonds was also changed to “positive” from “stable”.


Analyzing the situation as regards the improved investment climate in Ukraine the government document states that according to the World Bank in 2005 Ukraine ranked among the top ten European states by the criterion of time needed to register an enterprise.


TWINNING


To start the TWINNING instrument for the first time envisaged by the EU policy vis-à-vis Ukraine:


- the Chief Department of Civil Service was empowered to guide and coordinate the preparation and implementation of the TWINNING program in Ukraine;


- TWINNING Administrative Office started its operation in Ukraine;


- several acts of the Cabinet of Ministers of Ukraine on foreign training of civil servants and activity of foreign advisors were amended. 
First TWINNING projects were launched in the fields of regulation of power engineering, competition, standardization, civil aviation safety.


ACCESSION TO WTO


Completion of domestic procedures (on 13 December) required for Ukraine’s accession to WTO was the biggest achievement of Ukraine if the field of implementation of the economic part of the Ukraine-EU Action Plan.


In October-November, the Ukrainian government submitted and the Verkhovna Rada adopted the package of 20 bills adjusting the Ukrainian laws to bilateral protocols signed during negotiations with the Working Group member-countries.


However, on 18 December, when the Working Group met in Geneva, it did not consider the laws in question, as most of them had been submitted to the WTO governing body after the deadline date of 23 November. It appears that the Working Group will consider the laws’ conformity to Ukraine’s earlier commitments in February 2007 at the earliest. If the Working Group finds that the laws do not fully comply with the reached arrangements, the parliament will have to amend them.


With the Working Group report approved in February (the most optimistic and less likely scenario) or in spring (more realistic scenario) the decision by the WTO General Council as regards Ukraine’s accession should be expected in summer 2007 at the earliest.


TRADE


There are statistical discrepancies between EUROSTAT data and the data of the State Committee of Statistics of Ukraine.


According to the State Committee the foreign trade turnover with the EU member-states in 2005 amounted to $ 21.1 billion, that is by 10.0% more than in 2004. The volume of commodity export to the EU member-states shrinked by 5.9% and amounted to $ 9.2 billion, while the import from these states to Ukraine grew up by 26.6% and amounted to $ 11.9 billion. The EU member-states’ share in Ukraine’s foreign trade was 29.9%


In January – September 2006, the foreign trade commodity turnover of Ukraine with the EU member-states amounted to $ 18.48 billion. During this period the volume of exported commodities from Ukraine to the EU member-states increased by 14.1% ($ 7.84), while the import from the EU to Ukraine increased by 27.9% and amounted to $ 10.64 billion. The EU member-states’ share in Ukraine’s foreign trade was 30.9%.


According to the Eurostat data, foreign trade turnover between Ukraine and EU in 2005 increased by 16.6% comparing to 2004 and amounted to ? 20.68 billion, in January – March 2006 it constituted ? 5.65 billion, which is by 28,9% greater than in the same period of 2005.


PROSPECTS FOR UKRAINE - EU TALKS ON A NEW REINFORCED AGREEMENT


At the EU-Ukraine summit in Helsinki the parties did not commence talks on a new reinforced agreement and on the establishing a free trade area, as Ukraine’s accession to WTO is EU’s precondition for such talks to start.


Since by October the Ukrainian side had not completed either domestic or external procedures concerning Ukraine’s accession to WTO, the issues of a new reinforced agreement was not included into the summit agenda. Accession to WTO as a precondition for launching the talks on the new agreement was envisaged in the Ukraine-EU Action Plan which was approved in February 2005.


The EU Council has already authorised the European Commission to negotiate the new agreement with Ukraine. The position of principle on that issue was declared by the Ukrainian side as well. At this stage, the positions of the parties are evidently different on certain conceptual issues. Ukraine wants the new agreement envisage the relationship of association with prospective membership in EU, whereas EU, at this stage, does not seem to be willing to grant Ukraine such prospects.


EU’s conceptual approaches are now influenced by the “deep free trade” concept proposed by the Centre of the European Policy Studies (CEPS) in Brussels. This concept envisages both lifting the tariff restrictions and taking essential steps in adjustment of the Ukrainian laws to the European ones.


Preliminary consultations between Ukraine and the European Union concerning the new agreement have already started with the next stage to begin on 1 February 2007.


German presidency in the European Union commencing on 1 January 2007 increases importance of the recent German proposals as regards modification of the European Neighborhood Policy (ENP) and placing EU’s European neighbors, first of all Ukraine, in a separate group with a privileged status as compared with the North Mediterranean and Middle East countries. However, details of such status are still unclear.


The official start of the negotiations can be delayed due to lengthy procedures required to finalize the process of Ukraine’s accession to WTO. Ukraine is not in position to affect those procedures. Most of 2007 can be lost for negotiations if EU insists on them to start only after finalizing the accession of Ukraine to that organization (this could be in autumn 2007 when the Verkhovna Rada ratifies the agreement on Ukraine’s accession to WTO). The Ukrainian side points to the discriminatory approach in that issue, as the start of similar talks with Russia was not preconditioned by its accession to WTO.


The talks on a new enhanced agreement between Ukraine and the European Union are going to be difficult. They will not have been completed by the time when the Partnership and Cooperation Agreement (PCA) expires (March 2008), so as to ensure a direct transition from PCA to the new agreement.


It means that in March 2008 certain legal vacuum will surface in the relations between Ukraine and the European Union, as both the Partnership and Cooperation Agreement and the Action Plan will expire, whereas the new agreement will not be ready for implementation. The most evident way-out is to extend the Partnership and Cooperation Agreement for 2 years.


The Action Plan will also have to be modified (and possibly extended) in view of the prospective transition to a new legal framework in the relationship.
 



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