De Gucht: we’ll speed up Association Agreement’s provisional application

European Commissioner for trade, Karel De Gucht, visited Ukraine on October 1 and 2. During his meetings with Ukrainian authorities, he discussed trade and economic aspects of the impending Association Agreement and progress toward its eventual signature. During a briefing at the headquarters of the EU Delegation to Ukraine, he made the following key remarks:

European Commissioner for trade Karel De Gucht in Kyiv on October 2nd
European Commissioner for trade Karel De Gucht in Kyiv on October 2nd

On a choice between a free trade area with the EU and a Russian-led customs union. This is a choice of a model. Either you imprison yourself within a customs union, protecting yourself with high tariffs, and try to live in splendid isolation, or you take the route of a deep and comprehensive free trade area (DCFTA) with the EU, moving toward lower tariffs and to approximation of regulatory measures.

On the provisional application of the Association Agreement. It is of paramount importance that after (hopefully) the signature [of the Agreement in Vilnius], we can come to what is called the «provisional application» of its deep and comprehensive free trade area (DCFTA) chapter. This means that all relevant substance of the DCFTA comes into practice before the DCFTA is ratified by all the EU member states. It is very important that this happens as soon as possible— hopefully in early next year.

Ukraine can expect that almost 100% of the DCFTA part of the Association Agreement will be provisionally applied. Only a very minor thing under DCFTA won’t come under provisional application (less than 1% of the DCFTA part).

IMG_4401On economic benchmarks for signature of the Association Agreement. The EU Council of Ministers has mentioned a number of economic benchmarks. Therefore, to sign the Association Agreement, Ukraine should not only comply with political conditions, but also with economic expectations. And we have to reach an agreement on this before Vilnius.

These expectations refer to problems with regard to [Ukraine’s decisions about] the recycling fee on imported cars, safeguard measures on cars, coke imports, local content in production of energy from renewable sources, and renegotiation of multilateral tariff commitments under the WTO. They also relate to Ukraine’s actions to improve the business climate.

We reached an agreement that the Ukrainian government will inform the EU by the end of October  about its proposals to resolve all these problems.

IMG_4442On Ukraine’s business climate. Yesterday evening we had contact with business circles, where all important business associations were present. And their message is clear: the business climate in Ukraine is getting worse. It is becoming more unpredictable. Ukraine should do what is necessary to make the business climate better.

On recycling fees on cars. It is up to Ukraine whether to have a recycling fee or not. But this measure cannot be discriminatory. Now it applies only to imported cars and not to domestic cars, and that’s against the WTO rules. This is what we would like to see disappearing.

On Russian pressure on Ukraine and EU response to this pressure. You are under pressure from Russia, and you are not the only one. Lithuanian exports to Russia, for example, are upheld at the border. The EU will go to the WTO over this. And the EU is ready to defend Ukraine on this before the WTO because this [i.e. Russia’s trade pressure] is obviously completely against the rules of the WTO.

Secondly, in February we agreed on a special facility of €610 million [of EU assistance to Ukraine] that should go together with possible a agreement with the IMF.

Thirdly, the best solution to all of this is that as soon as possible – and I am reasoning in terms of months or even weeks – we get to the provisional application of the Association Agreement. In this case, the Agreement would work, and this will be the right signal to Russians. Indeed, we will speed up [the provisional application] as much as possible.

Theoretically, we could also set up so-called «autonomous trade preferences » for Ukraine. But this procedure would take much more time than the provisional application. First, you need a waiver from the WTO, and I’m not sure that Russia would be very enthusiastic about that. So technically it doesn’t make sense – it is much better to move quickly to the [Association] Agreement as such.