Integration Dynamics Within EU-Ukraine Agreement

INTEGRATION INTEGRATION WITHIN DYNAMICS OF THE EU DYNAMICS OF THE EU- -UKRAINE AGREEMENT IMPLEMENTATION AGREEMENT IMPLEMENTATION WITHIN ASSOCIATION: ASSOCIATION: UKRAINE Veronika Movchan Institute for Economic Research and Policy Consulting In the framework of the project "Ukraine s integration in the EU common market: achievements in the frame of the Association Agreement and the need for modernization Berlin, 2 September 2021

EU EU- -Ukraine Association Agreement milestones Ukraine Association Agreement milestones 2007: AA talks launched 2011: AA talks concluded 2012: AA initialed 2014: AA signed, ratified, the provisional application started for all titles expect DCFTA 2016: provisional application of the DCFTA began 2017: AA entered into force in full 2018: gradual updating of AA annexes has begun 2021: AA comprehensive overview under Art. 481 launched 2026: the establishment of the DCFTA to be completed 2

In In economic economic integration, the Association integration, the Association Agreement contains Agreement contains: : A. Arrangements envisaging the direct action Example: abolition of import duties B. In-then arrangements, the implementation of which requires Ukraine to fulfill certain commitments to open an opportunity for deeper integration Example: conclusion of the ACAA C. Arrangements, the implementation of which contributes to the creation of level playing field for fair competition of Ukrainian and European companies on the common market. These arrangements do not pave the way for additional decisions on deepening integration as a result of Ukraine's fulfillment of its obligations Example: strengthening the protection of intellectual property rights 3

In focus: In focus: deeper deeper integration under if integration under if - - then then mode mode We identified 15 areas, in which Ukraine have to implement a set of commitments to pave the way for the EU decisions on deeper integration Technical barriers to trade Sanitary and phytosanitary measures Customs procedures Financial services Postal and courier services Telecommunication services Transport (5 sectors) Energy (2 sectors) Public procurement Education (recognition of qualifications) So far, tangible results have been achieved only in two: SPS (recognition of equivalence for seeds certification) and Natural Gas Below we review the progress in several areas in more details 4

Technical barriers to Technical barriers to trade (1/2) trade (1/2) Market: industrial goods Method of integration: conclusion of the Agreement on Conformity Assessment and Acceptance of industrial products (ACAA) Why important: For business: trade costs reduction as no need for double conformity assessment; faster placement of new (innovative) products on the market; easier exports for smaller firms increased production and trade For people: same product safety in Ukraine and the EU; higher product varieties on the market; higher protection of consumer rights; faster availability of new (innovative) products; slower inflation For government: stronger economic growth more public revenues; lesser administrative expenses 5

Technical barriers to Technical barriers to trade (2/2) trade (2/2) Current situation: October 2020 - May 2021: pre-assessment expert mission to assess the readiness of legislation in the framework of assessing Ukraine's readiness to conclude the ACCA Agreement. The results of the mission indicate a high level of legal harmonization, however, it is not fully sufficient and requires further work. Second half of 2021: expected launch of the assessment of the legislation implementation and quality infrastructure effectiveness Further harmonization of legislation and development of quality infrastructure 6

Transport (1/2) Transport (1/2) Market: transport services Method of integration: International maritime transport: internal market treatment Air Transport: Common Aviation Area (CAA) Agreement Domestic river / rail / road transport: possibility of concluding special agreements Why important: For business: increased linkages; new business opportunities; costs reduction For people: increased safety and environmental standards of transport services; higher service varieties on the market; higher protection of consumer rights; lower prices (in some cases) For government: stronger economic growth more public revenues 7

Transport (2/2) Transport (2/2) Current situation: In 2021, the Government approved an updated Action Plan for the implementation of the National Transport Strategy until 2030 "Drive Ukraine 2030", which was approved in 2018 and provides for deepening integration with the EU International maritime transport: Ukraine joined several international conventions; progress in legal harmonization needed Domestic river transport: In 2020, a law on inland water transport was adopted, partially incorporates the provisions of all six EU directives relating to this mode of transport Domestic rail / road transport: progress in legal harmonization needed Air Transport: CAA initialed back in 2013; expected to be signed in October 2021 8

Energy (1/2) Energy (1/2) Market: markets for energy goods and services Method of integration: not clearly defined in the Association Agreement, occurs within the framework of the European Energy Community Why important: For business: increased competition on the market higher variety of services; increased market transparency; predictable legal framework better investment climate For people: increased safety and environmental standards; higher protection of consumer rights; higher service varieties on the market; lower prices (in some cases) For government: stronger economic growth more public revenues; reduced dependence on Russia (national security issue) 9

Energy (2/2) Energy (2/2) Current situation: Gas market: following the results of 2020, the Energy Community assessed the status of implementation of European acquis on the gas market in Ukraine as "almost completed" (84%). Ukraine has achieved a significant level of integration through: The creation of a separate independent operator of the gas transmission system, Agreements on cooperation of operators of gas transmission networks of Ukraine and neighboring EU member states, and Signing an agreement on gas transportation between Naftogaz and Gazprom based on EU rules Electricity market: one of the main European integration tasks was on the agenda - joining the ENTSO-E network. In May 2021, the President signed a law allowing Ukrenergo to be certified as a European-style OSP 10

Association Agreement Association Agreement (AA) and Green overlapping objectives overlapping objectives (AA) and Green Deal: Deal: Energy markets and energy efficiency The Green Deal is not an international agreement that Ukraine can join However, Ukraine can align its policy objectives with the Green Deal AA & Green Deal share objectives Climate change Circular economy Green Deal & AA Why important: For Ukraine: new business opportunities; new technologies; higher economic development; better quality of life For the EU: contribution to achieving the goal of climate-neutral Europe by 2050 Transport Agriculture Digitalization 11

Prospects for integration in 2021 Prospects for integration in 2021- -2023 2023 Signing of the Common Aviation Area Agreement (2021) Mutual access to public procurement markets recognizing the completion of several stages of the Indicative Plan Ukraine's accession to the European common transit system Connecting to the ENTSO-E network Conclusion of an agreement on mutual recognition of electronic trust services Conclusion of the ACAA Further recognition of the equivalence of certification systems for agro-food products Mutual recognition of authorized economic operators 12

Further steps for Ukraine Further steps for Ukraine Continue to harmonize legislation within the framework of the Association Agreement taking into account: Necessity for consultations with EU on compliance of draft regulations with the EU acquis before the adoption of these regulations Necessity for further verification of compliance with changes in EU norms and practices Necessity for dynamic adaptation to changes in EU legislation Continue to implement the new legislation and develop institutions Refrain from steps that violate the Agreement / destroy what has already been achieved Modernize the Agreement in the light of changes in the global agenda, such as the emergence of the European Green Deal, and seek additional opportunities to deepen integration 13

Further steps for Further steps for the EU the EU Participate in consultations with representatives of Ukraine regarding the compliance of draft regulations with the EU acquis before the adoption of these acts Carry out regular verification of compliance of adopted legislation and its implementation with EU norms and practices and publish assessments Modernize the Agreement in the light of changes in the global agenda, such as the emergence of the European Green Deal, and provide additional opportunities to deepen integration, e.g. in transport sphere Continue to provide technical and financial support to the Association Agreement implementation 14

This study was prepared within the project "Ukraines integration in the EU common market: achievements in the frame of the Association Agreement and the need for modernization" implemented by the Institute for Economic Research and Policy Consulting in partnership with DiXi Group and the Resource and Analysis Center Society and Environment by financial support of the International Renaissance Foundation. This is the fourth edition, updated and expanded. The first three publications were carried out by the International Renaissance Foundation within the framework of the Public Synergy action with the financial support of the European Union. Contacts Contacts Reytarska 8/5-A, Kyiv 01054, Ukraine tel: + 38-044-278-6360 e-mail: institute@ier.kyiv.ua www.ier.com.ua @IER_Kyiv IER.Kyiv 15