Archive for June 18th, 2013


Tying the DCFTA to the AA – a bad idea on reflection?

June 18, 2013

On numerous occasions over the past few years within this blog – too many to link to in fact – I have pondered the wisdom of the EU in tying the Association Agreement to the Deep and Comprehensive Free Trade Agreement in relation to Ukraine.

Naturally I can see the realpolitik of tying political reform to the gains of trade.  Opening up the EU single market which is probably one of the most protectionist in the world to Ukraine was to come with a political price of symmetry not just by way of legislative reform to support the trade agreement, but equally if not more importantly, to move Ukraine firmly into the political orbit of the EU.

I have on several occasions questioned the pragmatism of making the two agreements inseparable  – for trade it a two-way street – and Ukrainian concessions in reaching this agreement opens up 46 million potential customers to an EU that is still mired in financial crisis, is forecast to have less annual growth than Ukraine this year, has record levels of unemployment (almost 12% across the Member States and well over 25% in some Member States) and thus whatever figures the EU hierarchy had forecast by way of internal EU improvements economically and socially when making the decision to tie the AA to th DCFTA have simply not been delivered – leaving a deeply unhappy society.

If it cannot generate growth internally within its own market, then simply it has to look externally – but in making the AA inseparable from the DCFTA and with Ukraine currently unlikely to fulfill the expectations of the EU by the proposed signing of the agreements in November – then the much needed market opportunities for both sides will not open up as fully as they could have.

Even if growth increased by a meager 0.1% – for both sides it is currently significant.

I have, however, on numerous occasions also predicted that in the event of failing to sign the agreements, at least parts – if not all – of the DCFTA will be quietly delivered anyway – making a complete mockery of tying the AA to the DCFTA in the first place – and the realpolitik behind doing so.

Quit obviously should that occur and the DCFTA be quietly implemented without the political AA, then the EU loses a significant political reform lever with Ukraine, notwithstanding a perceived failure with regards to “values” trumping “interests” amongst many onlookers.

That said, should the agreements not get signed the AA political lever loses much significants – for several years at least anyway.

The questions are therefore, will the EU take the opportunity – Ukraine fully compliant or not – to tie in its largest and most significant neighbour – and if not, how likely is it the DCFTA going to be implemented – in part, or in full – should there be no signatures at the November Vilnius Summit?

The calls for implementing the DCFTA regardless have been growing behind closed doors in Brussels for some time, and they are now becoming public calls – in this case from an evermore significant player within the EU machinery.  (One can expect a Polish candidate to become the next leader of either NATO or the EU – or possibly both.)

As I wrote only a few days ago – whether the agreements are signed in Vilnius or not, the EU will not – because it cannot – walk away from democracy promotion and consolidation in Ukraine anyway.  It also cannot turn a blind eye to its economic situation and its need for comprehensive market growth and access wherever it can be found – and there is an agreement concluded with Ukraine awaiting implementation that really cannot be ignored.

It is perhaps too soon to say whether tying one agreement to another was a poor policy decision.  That will become clear by the end of September when all major remaining EU orientated legislation is slated for a RADA vote – and is also the month predicted by several observers for the release of Tymoshenko – if it is to occur at all.

However, it would seem that regardless of signatures, the likelihood of the DCFTA – in part or in full, will occur – just as I have predicted it would.

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