Introduction to the AA and DCFTA Basic principles and Understanding Course number : EUI30

1. Introduction to the AA and DCFTA Basic principles and Understanding Course number: EUI30 Lecturer

2. Aims of the lecture • To familiarize participants with foundations of the Association Agreement, • To allow participants to appreciate the main aspects of Ukraine’s integration with the European Union, • To enhance the general knowledge of EU-Ukraine political integration, • To facilitate understanding of EU-Ukraine sectoral integration.

3. Part 1 General overview of EU-Ukraine integration process

4. Meaning of integration • Notion, • Aims, • Scope, • Fields, • Forms, • Regional v. European integration?

5. Historical overview of EU-Ukraine integration process • Independence of Ukraine and cooperation with European Communities (1991-1994); • Evolution and implementation of the EU-Ukraine Partnership and Cooperation Agreement (1994-2013); • EU-Ukraine sectoral cooperation in the context of the EU enlargement policy (2000-2013); • Participation of Ukraine in the European Neighbourhood Policy and the Eastern Partnership and their impact on reforms in Ukraine; • Deepening of integration process under the AA and further perspectives (2014-nowadays).

6. EU-Ukraine Association relations Association ≠ membership in EU 2) Association relations under international agreements (AA) Court of Justice (case12/86Demirel, p. 9): “association agreement creates special, privileged links with non-member country … which must take part in Community system … in all fields covered by the Treaty”. art. 217 TFEU: reciprocal rights and obligations, common action and special procedure for membership (Serbia, Montenegro…) without membership (Chile, Morocco, Israel …) 1) “Associated territories” (“associated countries”) – Рart IV TFEU, Annex ІІ • Greenland • Bermuda • Saint Helena • New Caledonia • Aruba • British Virgin Islands….

7. Aims of Association (art. 1(2) AA) (a) to promote gradual rapprochement on common values and close and privileged links, and increasing Ukraine's association with EU policies and participation in programmes and agencies; (b) to provide enhanced political dialogue in all areas of mutual interest; (c) to promote, preserve and strengthen peace and stability in the regional and international dimensions; (d) to establish conditions for enhanced economic and trade relations leading to gradual integration in the EU Internal Market, including DCFTA and to support Ukrainian efforts to complete the transition into a functioning market economy by, inter alia, the progressive approximation of its legislation to that of the Union; (e) to enhance cooperation in the field of Justice, Freedom and Security with the aim of reinforcing the rule of law and respect for human rights; (f) to establish close cooperation in other areas of mutual interest.

8. Main directions of European integration of Ukraine Political integration Economic integration (general and sectoral) Integration in the field of culture, science, technologies etc. • Integration in the field of justice, freedom and security

9. Participation in EU Agencies and programs for Ukraine Chapter 28 “Participation in European union agencies and programmes” of PartV“Economic and Sector Cooperation” AA Protocol III on a Framework Agreement between the European Union and Ukraine on the General Principles for the Participation of Ukraine in Union Programmes of 2010 EU Framework Programme in research and innovation "Horizon 2020“ Customs and tax policy, the EU programmes "Fiscalis 2020", "Customs 2020“ Statistics - "Statistical Programme of the EU“ "The EU programme to enhance the competitiveness of the small and medium-sized enterprises” (COSME) “Creative Europe” • European Space Agency (ESA); • European GNSS Supervisory Authority (GSA); • European Defence Agency (EDA); • European Agency for the Management of Operational Cooperation at the External Borders of the Member States of the European Union (FRONTEX); • European Monitoring Centre in Drugs and Drug Addiction (EMCDDA); • European Centre for Disease Prevention and Control (ECDC); • European Anti-Fraud Office (OLAF); • European Aviation Safety Agency (EASA); • European Police Office (EUROPOL); • European Police College (CEPOL).

10. European integration of Ukraine and its international activities • Cooperation with • UN • UNHCR • OSCE • International Criminal Court • Council of Europe + ECHR • OECD • WTO • ICAO • Recognition and implementation of • United Nations Charter 1945 • Helsinki Final Act of 1975 • Charter of Paris for a New Europe of 1990 • Convention for the Protection of Human Rights and Fundamental Freedoms 1950 • UN Convention of 1951 relating to the Status of Refugees and the Protocol 1967 • UN Convention against Transnational Organized Crime of 2000 + 3 protocols • UN Convention against Corruption of 2003 ….

11. Part 2 Particularities of EU-Ukraine Integration Process (political, economical integration and integration in the field of freedom, security and justice)

12. Political integration Aims of political dialogue (art. 4 AA) (a) to deepen political association and increase political and security policy; (b) to promote international stability and security; (c) to strengthen cooperation on international security and crisis management; (d) to foster cooperation between the Parties for achieving peace, security and stability on the European continent; (e) to strengthen respect for democratic principles, the rule of law and good governance, human rights and fundamental freedoms, including the rights of persons belonging to national minorities, non-discrimination of persons belonging to minorities and respect for diversity, and to contribute to consolidating domestic political reforms; (f) to deepen cooperation in the field of security and defence; (g) to promote principles of independence, sovereignty, territorial integrity and the inviolability of borders.

13. Scope of EU-Ukraine political integration • EU-Ukraine Summits, Association Council, Parliamentary Association Committee, other institutional formats of political cooperation • Cooperation on bilateral, regional and international level • Internal (domestic reforms) and external dimension (convergence in the area of foreign and security policy) • “Soft” commitments of Ukraine: - accession to Rome Statute of International Criminal Court (art. 8) - strengthening cooperation on international and regional security issues and crisis management - non-proliferation of weapons of mass destruction - disarmament, arms controls, arms export control and the fight against illicit trafficking of arms - combating terrorism

14. Security and Defence – special focus of political integration • Art. 4, 5, 7, 9, 10-13 AA • Agreement establishing a framework for the participation of Ukraine in the EU crisis management operations • Agreement on security procedures for the exchange of classified information • AGREEMENT between the European Union and Ukraine on the participation of Ukraine in the European UnionPolice Mission (EUPM) in Bosnia and Herzegovina (BiH) EU-Ukraine cooperation in international and regional security, defense and crisis management sectors and military and technical cooperation - contribution to EU Naval Operation ATALANTA - contribution to EU Battle group – HELBROC - military trainings “Talos 2015”, “Common Challenge 2015” Cooperation with EU special missions – EUAM, EUBAM cooperation with European Defense Agency and European Security and Defense College

15. EU-Ukraine cooperation in the field of justice, freedom and security • Art. 14-24 AA • strengthening the principle of respect of human rights and fundamental freedoms and rule of law - reinforcement of institutions at all levels in the areas of administration • strengthening the judiciary - special focus on protection of personal data , protection of minorities • combating corruption, terrorism, money laundering, drug trafficking, illegal migration etc. • legal cooperation (judicial cooperation in civil and criminal matters + extradition) • Dialogue on Human Rights • Subcommittee on freedom, security and justice cooperation with • EUROPOL • EUROJUST • FRONTEX • EUBAM • EUAM • EU Monitoring Centre for Drugs and Drug Addiction (EMCDDA)

16. EU-Ukraine cooperation in the field of migration and related issues • Movement of persons • Security of documents • Mobility of workers (equal treatment and no free movement) (Art. 17-18 AA) • Fighting with illegal migration (art. 16 AA) - readmission • Cooperation in the field of asylum (art. 16 AA) • Cooperation in border management (art. 16 AA) • Cooperation with EUBAM and EUAM

17. Economic integration • Aim: Integration into EU Internal Market • Part IV and selected chapters of part V of AA • Art. 1(2) AA (d) to establish conditions for enhanced economic and trade relations leading towards Ukraine's gradual integration in the EU Internal Market, including by setting up a Deep and Comprehensive Free Trade Area as stipulated in Title IV (Trade and Trade-related Matters) of this Agreement, and to support Ukrainian efforts to complete the transition into a functioning market economy by means of, inter alia, the progressive approximation of its legislation to that of the Union; • Scope of Deep and Comprehensive Free Trade Area • Perspectives under Regional Convention on pan-Euro-Mediterranean preferential rules of origin 2011

18. Part 3 Selected SectoralIssues of EU-Ukraine Integration Process

19. EU-Ukraine Cooperation in Energy Sector.Integration into Energy Community • Art. 337-342 of Chapter 1 “Energy cooperation, including nuclear issues” of PartV «Economic and Sector Cooperation» • EU Energy Union Strategy of 25.02.2015 • Memorandum of Understanding on Strategic Energy Partnership between EU, EURATOM and Ukraine of 24.11.2016 Energy Community Treaty of 25.10.2005 • Energy Charter Treaty of 1994 Aims : • nuclear safety; • integration of electricity and gas markets; • enhancing security of energy supplies and transit of hydrocarbons; • enhancing safety and environmental standards in the coal sector; • energy efficiency. • Cooperation with EURATOM • Agreement between the European Atomic Energy Community and the Cabinet of Ministers of Ukraine for Co-operation in the Peaceful Uses of Nuclear Energy  • Agreement for Cooperation between the European Atomic Energy Community and the Cabinet of Ministers of Ukraine in the field of nuclear safety • regional cooperation • Agreement on the conditions for the future integration of power systems of Ukraine and Moldova with the grid of continental Europe of 28.06.2017 • Memorandum of understanding on a Joint approach to address the natural gas diversification and security of supply challenges as part of the Central and South-Eastern European Gas Connectivity 

20. EU-Ukraine cooperation in transport • Transport Panel of Eastern Partnership • Chapter 7 “Transport” of PartV «Economic and Sector Cooperation» AA • Agreement between the European Community and Ukraine on certain aspects of air services of 01.12.2005 - Perspectives of Single European Sky Aims: • develop sustainable transport system • promote efficient, safe and secure transport operations • enhance the main transport links Sectors: • Automobile transport • Railway • Maritime transport • Inland water transport • Aviation

21. EU-Ukraine cooperation on consumer protection and food safety • Chapter 20 “Consumer protection” of PartV“Economic and Sector Cooperation” AA + Annex XXIX • ensure a high level of consumer protection • achieve compatibility between EU-Ukraine systems of consumer protection • avoid barriers to trade Cluster 2 of Subcommittee on Economic and Other Sectoral Cooperation of Committee of Association Cooperation focuses on: • exchange of information • expertise on legislative and technical capacity • improvement of information provided to consumers • training activities • encouraging the development of independent consumer associations Implementation of Hazard Analysis and Critical Control Points for food products

22. EU-Ukraine cooperation in science and technology • Chapter 9 “Science and Technology” of PartV «Economic and Sector Cooperation» AA • Agreement on cooperation in science and technology between the European Community and Ukraine of 04.07.2002 (renewal) • Joint Committee on S&T • Agreement between the European Union and Ukraine on the participation of Ukraine in the Union programme Horizon 2020 - the Framework Programme for Research and Innovation (2014-2020) • Aims: -to contribute to scientific development • to facilitate resolving national and global challenges (health-related issues, environmental protection including climate change etc.) Special focus on cooperation in space issues - Chapter 8 “Space” of PartV «Economic and Sector Cooperation» AA -Cooperation Agreement on a civil Global Navigation Satellite System (GNSS) between the European Community and its Member States and Ukraine of 01.12.2005

23. EU-Ukraine cooperation in the field of education and culture • Europe 2020 strategy aimed at updating and improving higher education systems in the EU Member States • Chapter 23 “Education, Training and Youth” of PartV «Economic and Sector Cooperation» AA Aim: • enhance mutual understanding, promote intercultural dialogue and increase the knowledge of respective cultures Participation in ERASMUS+ • Chapter 24 “Culture” ” of PartV «Economic and Sector Cooperation» AA Aim: • enhance mutual understanding and foster cultural exchanges Agreement between the Government of Ukraine and the European Commission on the participation of Ukraine in the "Creative Europe“ of 19.11.2015 EaP Platform 4 “Contacts between people” Ukraine – beneficiary of the Eastern Partnership Culture Programme II 

24. Things to remember • Association Agreement creates a comprehensive legal framework for bilateral relations between the EU and Ukraine, • At its heart are provisions dealing with political integration and with trade, • Association Agreement also provides for a fair degree of integration in other sectors.

25. Deep and Comprehensive Free Trade Area: Substance SLAF TetianaAnakina STF LyudmylaChernyaha

26. Plan of the module • Scope of DCFTA • Notion of DCFTA, FTA and DCFTA, main principles of DCFTA (general overview), DCFTA dispute resolution mechanism 2.Elements of DCFTA (general legal analysis) • movement of goods under AA, movement of services under AA, movement of capital and current payments under AA 3. DCFTA (general economic analysis) • Background for signing AA/DCFTA, key features, benefits and challenges of the DCFTA for Ukrainians (trade and business opportunities) • Tariffs and non-tariffs barriers 4. Policy implications • Sectors overview, benefits and costs for business, consumers and government

27. Part 1. General scope of DCFTA

28. aims of Association (art. 1 (2) AA) d) to establish conditions for enhanced economic and trade relations leading towards Ukraine's gradual integration in the EU Internal Market, including by setting up a Deep and Comprehensive Free Trade Area as stipulated in Title IV (Trade and Trade-related Matters) of this Agreement, and to support Ukrainian efforts to complete the transition into a functioning market economy by means of, inter alia, the progressive approximation of its legislation to that of the Union;

30. Title IV TRADE AND TRADE RELATED MATTERS • Chapter 1 National treatment and market access for goods • Chapter 2 Trade remedies • Chapter 3 Technical barriers to trade • Chapter 4 Sanitary and phytosanitary measures • Chapter 5 Customs and trade facilitation • Chapter 6 Establishment, trade in services and electronic commerce • Chapter 7 Current payments and movement of capital • Chapter 8 Public procurement • Chapter 9 Intellectual property • Chapter 10 Competition • Chapter 11 Trade related energy • Chapter 12 Transparency • Chapter 13 Trade and sustainable development • Chapter 14 Dispute settlement

31. Forms of international economic integration (under B.Belassa)

32. DCFTAart. 1(2.4) AA+ art. 25-336 AA Deep • Aim: Integration in EU Internal Market • How? Through legal approximation (art. 474 AА)+ proper implementation • + regulatory approximation – through EU standards ,metrology, competition rules, state aid, market supervision, accreditation etc. • Comprehensive Wide scope of regulation • Free movement of goods (95%) • Free or significantly liberalized movement of services • Free movement of capital and current payments

33. EU-Ukraine DCFTA

34. Main principles of DCFTA • Equal treatment • Fair competition • Limited state aid • Conditionality • Gradual liberalization • Transparency • Safeguard (protective) measures of Parties

35. DCFTA dispute settlement mechanism • Aim: avoid and settle, in good faith, any dispute between the Partieson interpretation and application of Part IV • Based on WTO Dispute Settlement Understanding • Offers dispute settlement under the WTO as alternative • Consultations • Arbitration • Binding decision • Does not cover disputes dealing with trade remedies, trade and sustainable development and antitrust and mergers; • quicker procedure for energy disputes • Mediation • Lighter and quicker mechanism • non-binding decision

36. Part 2 Elements of DCFTA (general legal analysis)

37. Element 1. Free movement of GOODS • Customs privileges • Up to 10 years, gradually • Status quo (art. 30 AА) – the minimum customs level. • Possible participation in other customs unions with no collision provisions to AA/DCFTA (Art. 39 AА) • Safeguard measures to protect national or public interest.

38. Customs privileges 1) No customs – 0% (agro products 82,2%, food 83,4%, manufactured goods94,7%): - animals, plants, fish, cheese, nuts, fruits…. 2) No customs in the frames of quotas (40 quotas, including 36 on agro products) – principle “who is the first”! Above quota – customs (limited or full) (beef meet, pork meet, lamb meet, poultry meat, milk, yoghurt, honey …) • Schedule in Annex І-А AА Unilateral additional customs privileges – Regulation of European Parliament and the Council 2017/1566

39. Requirements for goods • Food and feed safety • Animal health • Plant health • Public health • Marketing standards • Technical requirements • Ecological requirements • Sanitary and fit sanitary requirements • Respect for intellectual property and for geographical titles

40. Concept of “originating products”Protocol 1 AA Principle of state of origin vegetables animals goods of maritime fish production Principle of fulfillment of conditions of production • sufficiently worked or processed products (Annex ІІ to Protocol 1) • insufficientlyworked or processed products (art. 6(2) Protocol 1) • Special conditions: total value of 3rd country material does not exceed 10 % • principle of “double cumulation” EU-Ukraine • Pan-Euro-Med Convention (valid for Ukraine since 01.02.2018)

41. Documents for approval • Certificate EUR.1 Protocol 1 to AA, art. 17 Порядок заповнення та видачі митницею сертифіката з перевезення товару EUR.1 відповідно до Угоди про асоціацію між Україною та ЄС (Наказ Мінфіну №1142 від 18.11.2014 р.) • Declaration invoice • for export not exceed 6000Є • authorized exporter Protocol 1 to AA, art. 22 Про затвердження порядку надання та анулювання митницею статусу уповноваженого (схваленого) експортера (Наказ Мінфін від 07.10.2014 № 1013)

42. Element 2. Liberalization of movement of services • establishment of commercial activity (art. 87-91 AA); • cross-border supply of services (art. 92-96 AA); • temporary stay of natural persons providing services (art. 97-102 AA). Does not cover: mining, manufacturing and processing of nuclear materials; production of or trade in arms, munitions and war material; audio-visual services; national maritime cabotage and domestic and international air transport services etc. • computer services (art. 108 AA) • postal and courier services (art.art. 109-114 AA) • electronic communication services (art.art. 115-124 AA) • financial services (art.art. 125-133 AA), • transport services (art.art. 134-138 AA), • electronic commerce (art.art. 139-140 AA).

43. Reservations to free movement of services Annex XVI – A to Chapter 6 EU reservations on establishment Annex XVI – B to Chapter 6 List of commitments on cross-border services Annex XVI – C to Chapter 6 Reservations on contractual services suppliers and independent professionals (EU Party) Annex XVI – D to Chapter 6 Ukraine reservations to establishment Annex XVI – E to Chapter 6 Ukraine commitments on cross-border services Annex XVI – F to Chapter 6 Reservations on contractual services suppliers and independent professionals (Ukraine)

44. Part 3. DCFTA (general economic analysis)

45. Background conditions • economically unfavorable period for Ukraine; • serious macroeconomic and geopolitical challenges recently, including military conflicts; • the suspension of production in the occupied territory and the failure of financial and logistical support; • rapid depreciation of the hryvnia (32.8% in 2014 and 45.6% in 2015); • a relatively weak manufacturing sector (concentrated mostly in commodities (metals, fuels), agricultural and food products); • critically dependent on foreign trade for their economic growth and development; • large trade deficits; • exports to the EU represent about one third of their total exports

46. Trade balance Export and Import of Ukraine, 2005 – 2015, billon USD Source: UNComtrade

47. The geographic orientation of trade before signing AA/DCFTA

48. AA/DCFTA Agreement and Custom Union • Sovereignty (any customs union implies a loss of sovereignty in determining the rates for customs duties and their redistribution); • Customs duties (AA reduces customs rates in general); • Sales markets (AA provides for a significant liberalization of trade with the EU Member States and does not prohibit trade with Russia); • Modernization (AA commits Ukraine to approximate national legislation to EU legislation, to increase the standards of goods and services, environmental standards, food safety, consumer protection)

49. Myths about the AA implementation • Myth No. 1: “Ukrainian companies will not be able to cope with the implementation of EU standards and rules and lose competition to the EU companies” • Myth No. 2: “The signing of the Agreement will cause an influx of EU goods into Ukrainian markets. Ukrainian manufacturers will not be able to compete with them and will be forced out of the business” • Myth No. 3: “Today, the goods produced by Ukrainian companies do not meet EU standards, so they will not be able to export their products to the European Union. Therefore, the Association Agreement will bring more benefits to the European Union rather than Ukraine”

50. The other myths about the AA implementations ………………………………………….