The EU – Ukraine Association Agreement and Deep &
Comprehensive Free Trade Agreement explained
The European Union Association Agreement and Deep & Comprehensive
Free Trade Agreement
The European Union Association Agreement and Deep and Comprehensive Free Trade Area
are legislative and business frameworks that will provide Ukrainians with the opportunity, in
partnership with the European Union, to develop their government, administration and
economy in accordance with European values and on the basis of European Union standards
and regulations.
The European Union
The European Union (EU) comprises 28 member states. It originated in 1951 initially as a
means to escape from the wars that had devastated the European continent. In the
intervening years, the EU, founded in Rome in 1957 and its predecessors have grown in size by
the accession of new member states and by cooperation in a wide range of policy areas.
Over the past 60 years, Europe has moved from the terrible devastation of two world wars to
become the leading economic power in the world with one of the wealthiest populations. This
has been achieved through consensus, respect and a common understanding of the benefits of
mutual cooperation and a level playing field for business.
The EU was founded on and all its member states now subscribe to the principles and practice
of:
1. Respect for democratic principles, human rights and fundamental freedoms
2. Respect for and equality under the rule of law
3. Respect for the principles of sovereignty
4. The principles of free market economics
5. The principles of good governance and counteracting corruption
6. The principles of environmental protection
7. Peace and stability both regionally and internationally.
The member states recognise that through the adoption and practice of these principles each
state can secure and defend its own sovereignty whilst at the same time expand economically
in a peaceful and secure environment.
Since its inception the European Union has evolved into the largest economic power in the
world accounting for over 25% of world GDP. The EU has a combined annual GDP of $17.5
trillion, making it the largest economic block in the world, and an average per capita GDP
$32,873 making its citizens some of the wealthiest in the world. Europe’s wealthiest country
in terms of GDP is Luxembourg at $91,387 and the least wealthy is Bulgaria at $15,932.
Despite the recent economic crisis, the European Union and the member states remain some
of the wealthiest in the world, with diversified economies which do not rely excessively on
energy exports, raw materials or under-paid labour. (See the attached charts).
2
The European Union has a population of 508 million people, using 24 official and working
languages within the European Parliament and some 150 regional and minority languages.
Around 60% of EU citizens (304 million) are considered to be economically middle-class. 57%
of the wealth of the EU ($9.97 trillion) is generated by small and medium sized enterprises,
thereby ensuring that the majority have a direct interest in maintaining the systems and values
of the Union. 27% of Europeans are considered to be poor by European standards (Those
earning less than 60% of the mean average salary by nation) but a majority of these are in new
member states that are still in transition to full market economics.
The rule of law is the cornerstone of the European Union. Under EU legislation the law stands
above politics and government and all are subject to it, including national leaders and
politicians. The courts of EU member states are independent and administer the law under
the principle of impartiality and equality. Seeking to influence the courts, judges, prosecutors
and the police in any EU state is a serious criminal offence. As a result, most citizens consider
the courts and the justice system to be reliable and fair.
EU laws affect some aspects of the sovereignty of member states. However in all such cases,
member states have voluntarily transferred parts of their sovereignty to European institutions
in the interests of building a stronger and more efficient Europe.
The European Single Market has brought significant advantages to European businesses by
ensuring a level playing field for all and a set of common rules and standards.
The opportunity for Ukraine
The opportunity for Ukraine is to become a part of the European success story.
The Association Agreement provides a new legal framework for EU-Ukraine relations,
replacing the existing Partnership and Cooperation Agreement signed in 1998. The
negotiations have now been completed and the Association Agreement was initialled on 30
March 2012. If it is signed at the Vilnius summit in November 2013, the Association Agreement
will be the first of a new generation of Association Agreements with Eastern Partnership
countries that support peace, stability, growth and a clear vision of the future.
The agreement with Ukraine is unprecedented in terms of ambition and depth. It will lay the
foundation for political association and economic integration between the EU and Ukraine and
will make the modernization of the country based on the European model a legal obligation.
Unlike a conventional free trade agreement, it will also ensure a comprehensive adaptation of
Ukrainian legislation to meet European regulatory legislation in areas including transport,
energy, services, agriculture and many more. It will unify a significant share of the legal
frameworks of the two parties, eliminating technical barriers in trade and providing enhanced
access to the EU Single Market for Ukrainian exporters. As a result the standard of living in
Ukraine is projected to rise by some 11.8%* over the long-term.
Many people believe that to implement the FTA, Ukraine will only have to change some of its
laws. The agreement is more fundamental than that; Ukraine will not only have to change its
laws, but also its administrative procedures and its institutions, so that they mirror the rules
and regulations of the EU. By doing this, the EU will accept the judgement and authority of
selected Ukrainian institutions and in the same way Ukraine will accept the same from EU
institutions. The impact of this process should not be underestimated; it will greatly affect for
example how the police, the prosecution service and the courts work, ensuring greater
transparency and accountability.
3.
This Agreement will create a more dynamic framework for EU-Ukraine relations, with the EU
working as a partner to support core reforms on competition and competitiveness, on
economic recovery and growth, governance and sector co-operation in areas such as energy,
transport, environment protection, industrial and small and medium enterprise (SME)
cooperation, social development and protection, equal rights, consumer protection, education,
training and youth as well as cultural cooperation.
There are many benefits for businesses in Ukraine. Firstly, the Association Agreement foresees
the establishment of clear and transparent business laws and procedures, reducing the scope
for abuse. This will ensure that all Ukrainian businesses have a more certain business
environment, enabling them to effectively plan, develop and grow.
Moreover, better health and safety standards will benefit Ukrainian consumers as they will be
assured of the quality and hygiene of the products on sale, reducing the risk of harm to all.
It is often believed that Ukraine will have to adopt all EU rules immediately after conclusion of
the negotiations, leading to huge costs. This is not the case. The Free Trade Agreement will be
implemented progressively, with Ukrainian business rules changing gradually over a period of
time, at least 10 years and for some areas, even longer. Therefore, Ukrainian businesses will
have time to adjust and adapt their operations. The Verkhovna Rada has already passed many
new laws that bring Ukrainian laws into line with European legislation.
Thanks to the Association Agreement, relations between the EU member states and Ukraine
will deepen. The Agreement provides for co-operation on the world stage on global issues
such as science and technology, anti-terrorism and peacekeeping; also on technical issues such
as environment and energy, and above all in sharing and maintaining essential values - human
rights and fundamental freedoms. People to people contact will increase as Ukrainian
universities, companies and organisations build ever closer ties with European partners.
Finally, the Agreement recognises the importance of the introduction of a visa free travel
regime for the citizens of Ukraine in due course, provided that the conditions for wellmanaged and secure mobility are in place.
Legislative revision on its own, however, will not bring about systemic change. It will be up to
the people of Ukraine to grasp the opportunities presented to build a new future for their
families in accordance with European values, to develop Ukrainian business in a spirit of
entrepreneurialism that will harness the unique skills of the nation and enable Ukraine to take
its rightful place in the family of European nations.
Europe is providing the mechanism; it is up to the people of Ukraine to make it work.
What does Ukraine need to do to ensure that the EU member states will sign the
Association Agreement in Vilnius in November of this year?
It will be up to the Ministers of all 28 member states to decide in advance of the Vilnius
summit whether Ukraine has made sufficient progress in addressing the conditions that the
Foreign Affairs Committee of the European Union established in December 2012. These
conditions cover three main broad areas: an end to selective justice, improvements to
electoral legislation and the introduction of reforms in line with the Association Agenda.
4.
Specific areas requiring action include:
1. Reform of the prosecutor’s office in line with European standards;
2. Revision of the electoral law by the Ministry of Justice;
3. Resolution of the outstanding cases of selective justice.
4. The establishment of dates for by-elections in five single mandate constituencies
together with clear rules for balanced media access in accordance with European
standards.
5. Legislation to improve the business climate and the resolution of trade issues in line
with WTO rules.
But it is not just a question of the quantity of legislation passed but also the quality of laws,
which should be in line with European standards and values, and that the implementation and
enforcement of those laws is fair, impartial and consistent. The signing of the Associations
Agreement and the DCFTA are however only the beginning as the most important work on
the implementation of the Association Agreement will only start once the agreement is signed.
How will the Association Agreement and Deep and Comprehensive Free Trade
Agreement affect Ukraine’s relationship with Russia and other former Soviet
States?
The Association Agreement does not prevent Ukraine from developing a constructive
relationship with the Eurasian Customs Union or any other state as long as it is based on
respect for the rules of the WTO and does not contradict the DCFTA. The experience of
other East European states is instructive. Lithuania, for example, has reported a 20% year on
year increase in trade with Russia and there is no business reason why this should not be the
case for Ukraine.
The Association Agreement will not be at the expense of Ukraine's relations with Russia or
any other neighbour. On the contrary, it should bring benefit to all. The Association
Agreement together with the DCFTA is a blueprint for reform. It is a win-win agreement
where all the parties gain something positive including Russia and the other members of the
Commonwealth of Independent States as Ukraine will become a more effective economy and
therefore a better and more reliable partner.
For further information please contact:
Elvira Garanina
E-mail: [email protected]
Tel.: 044 536 1508
Mob. Tel.: 097 927 0002.
Sources of data
All the data quoted in this document has been sourced from or calculated on the basis of information from Eurostat, the World
Bank, the United Nations, Transparency International and the Government of Lithuania
* A joint study of the German Advisory Group and the Ukrainian Institute for Economic Research and Policy Consulting.