The EU's Association Agreements with Georgia, the Republic of Moldova and Ukraine
On 27 June 2014 the EU will sign Association Agreements with Georgia and the Republic of Moldova and complete the signature process with Ukraine, each providing for a Deep and Comprehensive Free Trade Area.
This is an important moment both for the EU and for the countries concerned as the Agreements will significantly deepen political and economic ties between the signatories with a long-term perspective of closer political association and economic integration.
1. What are the objectives and contents of the Association Agreements?
The Association Agreements aim to deepen political and economic relations between the EU and the other signatories and to gradually integrate these countries in the EU's Internal Market, the largest single market in the world. This entails creating a Deep and Comprehensive Free Trade Area (DCFTA) between the EU and each of these countries.
Following the signature much work will remain to be done on domestic reforms. In this area, the EU and each country will cooperate on: strengthening the rule of law, advancing judicial reforms, fighting corruption, ensuring respect for fundamental rights and freedoms and strengthening democratic institutions.
Main areas of cooperation:
Core reforms: reforms are foreseen in a number of key areas, including public governance, justice, law enforcement, economic recovery and growth, consumer protection and sectors such as energy, transport, environmental protection, industrial development, social development and protection, education, youth and culture.
Values: the Agreement puts a strong emphasis on democracy and the rule of law, human rights and fundamental freedoms, good governance, a well-functioning market economy and sustainable development.
Trade: the Agreements will offer their signatories a framework for modernising their trade relations and for developing their economies. Opening the markets through the progressive removal of customs tariffs and quotas, and harmonising laws, norms and regulations in various trade-related sectors will make this possible.
As well as contributing to stability and the promotion of democratic values in the EU's neighbourhood, the agreements will benefit EU businesses by opening up new markets and providing for a more secure business environment when investing in these three countries.
2. Signature and provisional application
The EU will sign the above three agreements on the 27 June 2014 in the margins of the European Council meeting in Brussels. The Association Agreements with Moldova and Georgia will be signed in their entirety, while the signing of the Ukraine Association Agreement concerns the chapters left after the political ones were signed on 21 March.
The Agreements with all three countries foresee provisional application so that an impact may be expected to a large extent already prior to ratification by the European Parliament and EU member states, a process that may take some time to complete.
The Association Agreements provide for provisional application to start on the first day of the second month after both the EU and the respective partner countries have fulfilled required procedures on their side. Signature and the consequent implementation of the Association Agreements will confirm and seal political association and economic integration with the EU, but the greater the commitment and implementation of the Agreements, the greater the opportunities they will offer. Earmarked for provisional application are provisions regarding such important EU values as democracy, human rights and the rule of law as well as the principles of a free market economy, sustainable development and effective multilateralism.
For Georgia and Moldova important provisions regarding conflict prevention, crisis management and regional stability are to be implemented. For Ukraine there is a provision on regional application (consistent with the non-recognition policy of the illegal annexation of Crimea) included in the Final Act to the Agreement.
Another important area where provisional application can start soon is that of economic and sectorial cooperation. This concerns, for example, consumer protection, financial services, civil society cooperation and the countries' participation in EU Agencies and programmes. The Deep and Comprehensive Free Trade Area part of the Association Agreement will be provisionally implemented, alongside the financial assistance and anti-fraud and control provisions.
Between the signature of the Association Agreements and the beginning of their provisional application a considerable amount of work will need to be done to prepare the institutional set-up. This includes the creation of the Association Council, and establishing various committees and subcommittees and their rules of procedure. The same is true for e.g. trade-related working groups, engagement with civil society and parliamentary cooperation. In this way, it will be possible to formally approve the institutional set up and the monitoring mechanisms as soon as we reach the date of provisional application.
3. Implementation and immediate benefits
The EU will work with the three partner countries' governments and businesses to bring about reforms and upgrade goods and industries to the necessary standards. This will benefit an extraordinarily diverse array of sectors.
Assistance ranges from the modernisation of the agricultural sector – e.g. boost rural communities, produce higher quality products – to better regulating financial services, so as to ensure investors' protection and safeguard of the country's financial system.
How will citizens and businesses in the partner countries and in the EU benefit from the Association Agreements?
Once signed and implemented, concrete benefits can flow from the Agreements. Examples include a better protection of consumers including lower prices and better-quality products; more business opportunities for small and medium enterprises through a wider opening of markets and, as a result, more jobs and less emigration; better access to improved health services; more efficient use of energy and the development of renewable energy sources; a better functioning judiciary sector, a strengthened rule of law and increased transparency.
Businesses in the three countries whose goods and practices meet EU standards will be able to trade freely in any EU country without tariffs or restrictions. Likewise, EU goods and services exporters, and EU investors will be able to operate freely on partner country markets and sell more readily and cheaply to businesses and citizens in Georgia, Moldova and Ukraine.
How will economies benefit from the Association Agreements?
Trade conditions for goods and services, including the wide establishment conditions for companies will be immediately improved for both the EU and Georgia, when the Agreement enters into force. This will facilitate trade and investment. This is particularly important for Georgia, which needs further foreign investment to boost its economic growth. Georgia’s enterprises will have access to the EU market without transition periods. But it is also true that a number of additional benefits that Georgia will take from the Agreement do depend on the completion of reforms.
The Association Agreement with Georgia goes significantly further than classical forms of economic integration, offering not only improved trade and investment opportunities but also assistance in trade-related reforms with the aim to contribute to economic recovery and growth and to better integration of the Georgian economy with the world markets. Provided that the reforms are completed, an economic growth of 4.3% per year is predicted (amounting to €292m in national income).
For example, Georgian agricultural products will become more attractive on the EU market thanks to the removal of EU import duties worth €5.7m on basic agricultural products and €0.5m on processed agricultural products. New market opportunities in the EU and higher production standards in Georgia will spur investment, stimulate the modernisation of agriculture and improve labour conditions.
Georgia will benefit from new trading opportunities and easier access to the EU market. The Agreement should allow the Georgian economy to catch up with the EU in terms of competitiveness and thereby gradually find its place in the world economy. This will open up new opportunities not only in EU-Georgia trade, but in Georgia's trade with the rest of the world, given the worldwide recognition of EU norms and standards. The application of these standards will bring significantly more choice and higher quality products to Georgian consumers and make Georgia a more attractive place for foreign investors. The most sensitive sectors will benefit from long transitional periods to ensure the smooth adaptation of Georgia's economy.
The Association Agreement with Moldova goes significantly further than classical forms of economic integration, offering not only improved trade and investment opportunities but also assistance in trade-related reforms with the aim to contribute to economic recovery and growth and to better integration of the Moldovan economy with the world markets. Independent economic research suggests that Moldova's participation in the DCFTA will boost its exports to the EU by 16%, and imports from the EU by 8%. The DCFTA as a whole is expected to boost GDP by 5.4% annually, if reforms are completed.
For example, Moldovan agricultural products will become more attractive on the EU market thanks to the removal of EU import duties worth €43 million on basic agricultural products and €3 million on processed agricultural products. New market opportunities in the EU and higher production standards in the Republic of Moldova will spur investment, stimulate the modernisation of agriculture and improve labour conditions.
Moldova will benefit from new trading opportunities and easier access to the EU market. The Agreement will allow the Moldovan economy to catch up with the EU in terms of competitiveness and thereby gradually find its place in the world economy. This will open up new opportunities not only in EU-Moldova trade, but in Moldova's trade with the rest of the world, given the worldwide recognition of EU norms and standards. The most sensitive sectors will benefit from long transitional periods to ensure the smooth adaptation of Moldova's economy.
The trade provisions will make the Moldovan market more open for imports from the EU. This will bring more competition, which normally brings prices down for the consumers. According to independent research, consumer prices are expected to decrease by about 1.0 and 1.3 percent over the short and long run, respectively.
Experience has already proven that Moldovan producers are able to sell more and more to the European Union market. This will be even truer when Moldova has aligned its safety and health standards to those of the EU to easily and effectively sell to what is the largest single market in the world. The DCFTA will enable Moldova to go through this process in an orderly and technically supported manner, and give Moldovan producers open access to the EU market.
Through tariff liberalisation and above all regulatory approximation, Ukraine will take advantage of new trading opportunities and easier access to the EU market. It can expect to reap the benefits of its firm commitment to a path of institutional and economic reforms.
Through the Agreement Ukraine will progressively remove customs tariffs and quotas, extensively harmonise laws, norms and regulations in various trade-related sectors, and create the conditions for aligning key sectors of the Ukrainian economy to EU standards. The DCFTA will create opportunities for trade by lowering tariffs on imports. European Commission estimates suggest that the implementation of the EU-Ukraine deal is expected to boost Ukraine's income by around €1.2 bn per year.
Ukrainian exports to the EU are expected to increase by €1 bn per year. Sectors that would benefit the most are wearing apparel and textiles, food products, vegetable oil and non-ferrous metals. New market opportunities in the EU and higher production standards will spur investment, stimulate the modernisation of agriculture and improve labour conditions.