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DCFTA Ukraine – EU: Lessons learned

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The presentation points out lessons, which can be drawn from EU-Ukraine DCFTA negotiations. European integration and a sensible approach with the EU market can be points of orientation for future agreements. Valeriy Piatnytskyi managed the Ukrainian team during the EU-Ukraine DCFTA negotiations. He is also former advisor to the Prime Minister of Ukraine.

Further information:
Stakeholder Dialogue in Cooperation with the AHK Tunisia - Negotiating ALECA – Lessons Learned from the DCFTAs with Ukraine, Moldova and Georgia.
Organizer: Bertelsmann-Stiftung in Cooperation with the AHK Tunisia
Date: Wednesday, 27-28 June 2018.

Published in: Economy & Finance
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DCFTA Ukraine – EU: Lessons learned

  1. 1. DCFTA Ukraine – EU : Lessons learned Valeriy Piatnytskyi Former DCFTA Chief Negotiator Ukraine
  2. 2. The EU-Ukraine Association Agreement Initial steps 2007 - Ukraine and EU reached political agreement on the conclusion of the AA; 2008 -2012 - 21 negotiation rounds on AA and 18 – on FTA; 2011 - the parties announced the completion of negotiations on the future AA; 2012 - the text of future Agreement has been initialed by both Parties; 2013 – Plan on Priority Measures for European Integration of Ukraine for 2013.
  3. 3. The EU-Ukraine AA Signing March 2014 - the new Prime Minister of Ukraine and EU leaders sighed the Political provisions of the AA. June 2014 - Economic and Sectorial part of the AA was signed by the new President of Ukraine. "In Kyiv and elsewhere, people gave their lives for this closer link to the European Union. We will not forget this.“ Herman Van Rompuy September 2014 - the AA was simultaneously ratified by the Parliament of Ukraine and the European Parliament.
  4. 4. The EU-Ukraine AA The EU-UA AA counts in total over 1200 p. and comprises of:  A Preamble as an introductory statement of the Agreement, setting out the Agreement’s purpose and underlying philosophy;  Seven Titles (General Principles; Political Cooperation and Foreign and Security Policy; Justice Freedom and Security; Trade and Trade related matters (DCFTA); Economic and Sector Cooperation; Financial Cooperation with Anti-Fraud Provisions; Institutional, General and Final Provisions);  43 Annexes “setting out the EU legislation to be taken over by a specific date”;  Three Protocols: definition of the concept of "originating products" and methods of administrative co-operation; mutual administrative assistance in customs matters; general principles for the participation of Ukraine in Union programs.
  5. 5. Provisions Values and Principles: common values - democracy and rule of law, respect for human rights and fundamental freedoms, market economy and sustainable development; Enhanced cooperation in foreign and security policy, with the focus on regional issues; A DCFTA, not only the mutual opening of markets for most goods and services, but also binding provisions on gradual approximation with EU norms and standards in trade and trade-related areas; Justice, Freedom and Security, based on the Visa Liberalization Action Plan; Energy (including nuclear) with particular focus on issues concerning security of supply, gradual integration of energy markets, energy efficiency, renewable energy sources and nuclear safety; Enhanced cooperation in 28 key sector policy areas, based on gradual approximation to EU acquis and, where relevant, with international norms and standards. The EU-Ukraine AA
  6. 6. EU - Ukraine DC FTA  Fully operational from 1 January 2016: “The Parties shall progressively establish a free trade area over a transitional period of a maximum of 10 years starting from the entry into force of this Agreement…”  Based on WTO principles and agreements, it enhances their meaning for the purposes of bilateral trade  Covers trade in goods and services, public procurement, IPR, sustainable development, competition policy, trade facilitation, etc
  7. 7. EU – Ukraine DC FTA (cnt’d)  Immediate elimination of import duties on over 97% of products exported from Ukraine to the EU, including ag.products (only 3% of certain agricultural products – TRQs at 0% rate).  Legal harmonisation/alignment with the EU acquis (TBT, SPS, etc)  Original English text available at: http://eur-lex.europa.eu/legal- content/EN/TXT/?uri=uriserv:OJ.L_.2014.1 61.01.0003.01.ENG
  8. 8. AA implementation, incl. EU acquis  September 2014 the Government adopted the Action Plan on implementation of the Association Agreement (488 actions for 2014-2017)  Q1 2015 the Government approved the implementation plans of different executive bodies to introduce pieces of the EU legislation
  9. 9. DCFTA Structure TRADE IN GOODS AND MARKET ASSESS TRADE IN SERVICES & CAPITAL MOVEMENT TERMS OF TRADE National treatment and market access for goods Trade remedies TBT SPS Establishment, trade in services and electronic commerce Current payments and movement of capital Customs and trade facilitation Public procurement Intellectual property Competition Trade-related energy Transparency DSTrade and sustainable development Mediation
  10. 10. Changes in Custom Duties Rates Average Custom Duties, % Before AA After AA in force 11th year Ukraine EU Ukraine EU Ukraine EU Total 4,95 7,6 2,42 0,5 0,32 0,05 Agricultural Products HS 01-24 9,24 19,8 6,77 0,6 1,38 0,24 Industrial and Processed Agricultural Products HS 25-97 3,67 3,9 1,12 0,5 0,00 0,0
  11. 11. DCFTA is to remove most tariffs and quotas… • Removal of import tariffs for majority of products • Introduction of substantial quotas on duty- free exports of key Ukrainian agricultural products • Elimination of export tariffs on oil seeds and skins at the end of 10-year transition period • Instead, temporary surcharge will be applied over the first 15 years of the Agreement implementation.
  12. 12. …and non-tariff measures • EU removes agricultural export subsidies • Considerable convergence of Ukraine’s regulatory framework in the Technical Barriers to Trade (TBT) and Sanitary and Phytosanitary Standards (SPS) area • Approximation to EU procedures in standardization, weights and measures, accreditation, and conformity assessment • Regulatory reform in competition policy, state aid, public procurement etc.
  13. 13. Tariff liberalization in trade with EU (1)  Ukraine within 10 years eliminates import duties.  For some goods (sunflower seeds, hides and skins, certain type of ferrous and non-ferrous scrap metal) special safeguard (additional surcharge) will be applied. Overall time - 15 years;  Ukraine within 10 years eliminates import duties on passenger cars (8703) by 1% per year.  BUT! safeguard measures can be applied (10% duty) IF/WHEN:  (і) import of cars originating from the EU > than a set limit;  (іі) share of imports originating from the EU in Ukrainian market > indicator of a certain year
  14. 14. Tariff liberalization in trade with EU (2) Ukraine applies special conditions for worn clothing : Ukraine introduces entry prices (in Euros per kilo net weight). Entry price = 30% from average price in 2 precedent years of customs value of ready-made new apparel according to a list Year DCFTA of entry into force From 1st to 5th year after entry into force 6th Applied duty rate for the current moment (Х) minus 0,1 percentage point from duty rate Х (annually) 0% Entry prices are published each yeas and are valid for the current year
  15. 15. Tariff liberalization in trade with EU (3) Elimination of EU import duties on the majority of goods from the 1st year of entry into force (99% tariff lines).  Transition periods 3-10years for elimination of duties by Ukraine  For some goods from EU Ukraine reduces duties only partially (by 20% - 60% during 5 – 10 years).  EU repeals export subsidies for agricultural goods in trade with Ukraine
  16. 16. TRQs Meat of swine, meat of the poultry, sugar
  17. 17. 1. Meat of bovine animals 1. Meat of bovine animals 2. Meat of swine 3. Meat of sheep or goats 4. Meat and edible offal of the poultry 5. Milk and cream, yogurt 6. Milk in powder 7. Products from processed milk 8. Butter and dairy spreads 9. Products from processed butter 10.Birds' eggs and albumins 11.Honey 12.Garlic 13.Sweetcorn 14.Wheat and Cereal flours 15.Barley 16.Oats 17.Maize (corn), 18.Cereal groats, meal and pellets 19.Malt, whether or not roasted 20.Starches 21.Cane or beat sugar 22.Other sugars 23.Processed products from sugar 24.Chocolate and other food preparations containing cocoa 25.Prepared foods obtained from cereals 26.Tomatoes prepared or preserved 27.Mushrooms 28.Grape and apple juice 29.Sugar syrups (HS 2106) 30.Food preparation 31.Undenatured ethyl alcohol 32.Residues of starch manufacture and similar residues 33.Cigars and cigarettes 34.Acyclic alcohols 35.Dextrins and other modified starches 36.Finishing agents, dye carriers TRQs (EU)
  18. 18. UKRAINE 2015: TRADE STRUCTURE Geographical structure Commodity structure 29,68 % 35,15 % 18,39 % 5,33 % 3,94 % Base metals Agricultural goods and foodstuffs Machinery and equipment Minerals Chemical industry Wood, goods from paper Miscellaneous manufactured goods Light industry goods Jewelry 7,51 % Exports Imports 28,3% 30,9% 10,5% 11,3% 29,5% 16,1% 12,5% 11,2% EU-28 Asia CIS Africa America Others
  19. 19. Ukraine’s Foreign Trade Balance, $ bln 1.6 1.5 2.1 4.4 4.6 4.2 6.5 10.3 8.8 10.6 -1.9 -6.7 -11.4 -18.6 -5.7 -9.3 -14.2 -15.9 -13.7 -0.5 -20 -15 -10 -5 0 5 10 15 Agricultural products Other products 14% 13% 14% 17% 25% 20% 19% 26% 27% 32% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 the share of agricultural products in total exports ХХ
  20. 20. Ukraine’s Agricultural Trade Turnover, 2014 2.7 64% 36% Export Import 85% 15% AsiaEU 77% 23% CIS 5.0 0.8 2.6 1.2 6.6 90% 10% 2.7 5.0 Africa 4% 96% LatAm 0.5 0.03 2… 71% Other countries 0.8 0.3 ХХ ХХ Agricultural Imports to Ukraine, $ bln Agricultural exports from Ukraine, $ bln
  21. 21. 5.0 2.7 2014 4.8 3.3 - 1 2 3 4 5 6 7 8 2013 Import Export Agricultural Turnover between Ukraine and EU $8.2 bln $7.7 bln 36% 34% 12% 18% Cereals Oil and seeds Food industry remains Other products
  22. 22. Protection of geographical indications  Ukraine has 16 registered GIs.  EU has over 3200 GIs.  For Ukraine : some products are granted transition periods 7 to 10 years (the EU will provide technical and financial).  During transition periods indications, which coincide or represent the EU GIs, will be removed. Nevertheless, there is no prohibition on production of such product  No right to mark a product by a EU GI.
  23. 23. Protected for 10 Years  Champagne  Cognac  Madeira  Porto  Jerez /Xérès/ Sherry  Calvados  Grappa  Anis Português • Armagnac  Marsala  Malaga  Tokaj Protected for 7 Years  Parmigiano Reggiano  Roquefort  Feta Geographic Indications DOCUMENT TITLE 25 Article 208 Temporary measures (3) For a transitional period of 10 years from the entry into force of this Agreement, the protection pursuant to this Agreement of the following geographical indications of the EU Party shall not preclude these geographical indications from being used in order to designate and present certain comparable products originating in Ukraine
  24. 24. Removing technical barriers to enter the EU market  Adopted 5 acts out of 5 EU acquis  improved/updated/adopted Laws of Ukraine: “On general safety of non- food products”, “On state market surveillance and control of non- food products”, “On accreditation of conformity assessment bodies”, “On standards, technical regulations and conformity assessment procedures”, “On metrology and metrological activity ”, etc  Adopted 25 out of 27 EU technical regulations  24 entered into force, 3 will be enacted by 2020. Horizontal legislation Vertical legislation
  25. 25. Ukrainian technical regulations adopted and entered into force under Ukraine – EU AA 0 2 4 6 8 10 12 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1 1 3 11 0 1 1 1 5 0 0 0 0 0 00 0 0 2 6 2 4 3 0 4 1 0 1 0 1 entering into force addoption
  26. 26. Trade in Services  поступова взаємна лібералізація заснування підприємницької діяльності  транскордонне надання послуг  співпраця щодо електронної комерції  засади торгівлі іншими видами послуг, зокрема комп’ютерними, поштовими та кур’єрськими, телекомунікаційними, фінансовими, транспортними тощо  лібералізація заходів сторін стосовно в’їзду та тимчасового перебування на їх території надавачів послуг: ключового персоналу, бізнес- відвідувачів, керівників, спеціалістів, випускників- стажерів продавців бізнес-послуг, незалежних фахівців.
  27. 27.  International standards and a number of EU directives relating to banking, insurance and other financial services;  Free movement of capital in certain areas, such as direct and portfolio investments and cross-border loans from the EU;  Free movement of capital should be followed by liberalization of the foreign currency control restrictions currently in force;  Prudent regulatory framework for financial market supervision equivalent to existing in the EU;  Free access of financial institutions to payment and clearing systems;  New financial services. EU-Ukraine DCFTA (Services)
  28. 28. Successful Negotiations are Based on:  Knowledge  Good understanding of the objective  Stable professional team (& good interdepartmental coordination)  Political will/support  Efficient communication (government & business)  Clearly formulated tasks and assignments for the team  Commitment to a sustainable result
  29. 29. EU Market Access Negotiations: what you need to know? (1)  Customs duties and trade regimes/agreements: duties applied to third countries on a general basis (ERGA OMNES) Preferential duties, TRQs, depending on terms and conditions of a trade agreement or applied trade regime Antidumping duties and safeguard measures Rules of origin and confirmation of origin VAT and excise duties Domestic support to agriculture Trade, financial and output statistics
  30. 30. EU Market Access Negotiations: what you need to know? (2) Requirements of general and specific character: General - procedures, imports are to be complied with (customs docs, invoices, insurance, etc) Specific - labeling, packaging of goods for entry the EU market, technical standards, safety of products, marketing standards for each specific product, etc. NB! The requirements are harmonized for all 28 EU Member-states
  31. 31. EU market requirements  Legislative: each product sold in the EU is subject to regulations that ensure the products are safe, protect human health, protect the rights of consumers and are not damaging to the environment (SPS and TBT)  Market demands: a product will be subject to consumer and/or customer demands e.g. product specications, price, quantity, timeliness of delivery.  Private standards: a product intended for a supermarket chain may have to comply with private standards (as part of market demands).
  32. 32. Progress in negotiations Negotiating Business/experts Team Interests and needs of producers Consultations with business/experts • Analytical and position papers; • Round tables; • Conferences; • Consultations with producers; • Cooperation with the mass media; • etc
  33. 33. Coordination Mechanism for European Integration 35 Ukraine - EU Summit Sub-committees Association Committee Association Council Parliamentary Association Committee Civil Society Platform
  34. 34. 36 Association Agreement between the EU and Ukraine Action Plan for implementation of the GoU Action Programme Plans for Implementation of the EU legal acts GoU Action Plan for AA Implementation for 2014 - 2017 EU-Ukraine Association Agenda GoU Action ProgrammeNBU’s Action Plan for AA Implementation European Integration: Strategic documents
  35. 35. Thank you for attention! Valeriy Piatnytskyi E: pyatnytskiy@yahoo.com E: piatnytskyi@gmail.com

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