DC FTA – A digest of the Association Agreement between EU and Ukraine
The Association Agreement consists of a preamble and 7 titles:
1) Title I stipulates general principles. Principles to be respected: Democratic principles, human rights and fundamental freedoms, rule of law, sovereignty and territorial integrity, inviolability of borders and independence, free market economy, good governance, the fight against corruption, the fight against the different forms of trans-national organised crime and terrorism, etc.
2) Title II stipulates provisions on political cooperation and foreign and security policy. The following is included into this title: Aims and forms for political dialog, foreign and security policy, regional stability, conflict prevention, crisis managemen, combating terrorism, disarmament, arms controls, etc.
3) Title III stipulates provisions on justice, freedom and security. This title covers the following issues: The rule of law and respect for human rights; protection of personal data; cooperation on migration, asylum and border management; treatment of workers; mobility of workers; movement of persons; money laundering and terrorism financing; cooperation on the fight against illicit drugs; the fight against crime and corruption; cooperation in fighting terrorism and legal cooperation.
- Introduction of a visa free travel regime for the citizens of Ukraine in due course, provided that the conditions for well-managed and secure mobility are in place;
- Strengthening the judiciary, improving its efficiency, safeguarding its independence and impartiality, and combating corruption.
4) Title IV stipulates provisions on trade and trade related matters (DCFTA). This title consists of 15 chapters and is the biggest in respect of volume.
- Chapter 1 “National treatment and market assess for goods”:
- The Parties shall progressively establish a free trade area over a transitional period of maximum 10 years;
- Most customs duties on imports and exports will be removed as soon as the
Association Agreement enters into force. However, there are some customs duties that will be gradually removed with timeline up to 10 years.
- Chapter 2 “Trade remedies” covers traditional trade defence instruments (anti- dumping, anti-subsidy and global safeguard). Ukraine will be allowed to apply a well- defined safeguard measure for 15 years on cars imported from the EU.
- Chapter 3 “Technical barriers to trade”
- Ukraine shall take the necessary measures in order to gradually achieve conformity with EU technical regulations and EU standardization, metrology, accreditation, conformity assessment procedures and the market surveillance system, and undertakes to follow the principles and practices laid down in relevant EU Decisions and Regulations;
- Ukraine shall progressively transpose the corpus of European standards (EN) as national standards. Simultaneously with such transposition, Ukraine shall withdraw conflicting national standards, including its application of interstate standards in Ukraine (GOST), developed before 1992.
- Chapter 4 “Sanitary and phytosanitary measures” aims to facilitate trade in sanitary and phytosanitary related goods including animals, animal products, plants and plant products. This chapter includes provisions related to legislation approximation, trade conditions, certification procedure, import checks and inspection fees, safeguard measures, etc.
- Chapter 5 “Customs and trade facilitation”. The following actions shall be introduced:
- Usage of single administrative document for the purposes of customs declarations;
- Application of modern customs techniques, including risk assessment, post clearance controls and company audit methods in order to simplify and facilitate the entry and release of goods;
- Further reduction, simplification and standardization of data and documentation required by customs and other agencies, simplification of requirements and formalities wherever possible, in respect of the prompt release and clearance of goods;
- Elimination of any requirements for the mandatory use of pre-shipment inspections or destination inspection.
- Approximation of UA customs legislation to EU legislation (timeline up to 3 years)
- Chapter 6 “Establishment, trade in services and electronic commerce”. This chapter aims at integrating Ukraine as much as possible into the EU market. Unlike classical FTAs, it provides for both the freedom of establishment in services and non- services sectors, subject to limited reservations, and the expansion of the internal market for a set of key services sectors. The Ukraine is committed to take over the existing and future EU-acquis in postal and courier services, financial services and telecommunication services and, when it has done so, Ukrainian firms will be granted access to the EU internal market for the sectors concerned.
- Chapter 7 “Current payments and movement of capital” includes provisions on free movement of capital will include standard safeguards with a possibility to apply measures to ensure the stability of the financial system.
- Chapter 8 “Public procurement” includes general provisions related to: procedural issues (publication, selecting a winner, etc.), approximation of Ukrainian legislation to EU legislation, market access, etc. Key points:
- No later than six months from the entry into force of this Agreement, the Parties shall comply with a set of basic standards for the award of all contracts. These basic standards derive directly from the rules and principles of public procurement, as regulated in the EU public procurement acquits.
- During the process of legislative approximation, the extent of the market access mutually granted shall be linked to the progress made in this process. Insofar as a Party has opened its procurement market to the other Party, the EU Party shall grant access to contract award procedures to Ukrainian companies pursuant to EU public procurement rules. Ukraine shall grant access to contract award procedures for EU Party companies – whether established or not in Ukraine – pursuant to national procurement rules under treatment no less favourable than that accorded to Ukrainian companies.
- Chapter 9 “Intellectual property” covers provisions related to copyright and related rights, trademarks, designs, patents, etc. A separate section is devoted to enforcement of intellectual property rights based on the EU’s internal rules.
- Chapter 10 “Competition” includes prohibitions and sanctions for certain practices and transactions which could distort competition and trade. Anti-competitive practices such as cartels, abuse of a dominant position and anti-competitive mergers will be subject to effective enforcement action. Ukraine will align its competition law and enforcement practice to that of the EU acquis in a number of fields. Competition law will apply to state-controlled enterprises. This ensures that companies of both Parties have equal access to each other markets and there is no discrimination by monopolies. Approximation of Ukrainian legislation to EU legislation should be made within 3 years. Ukraine commits itself to adopting a system of control of state aids similar to that in the EU, ncluding an independent authority. It will prohibit certain types of particularly distortive subsidies.
- Chapter 11 “Trade-related energy”:
- Chapter 13 “Trade and sustainable development” includes very general provisions related to multilateral labour standards and agreements, multilateral environmental agreements, trade in fish and forest products, etc.
- Chapter 14 “Dispute settlement” introduces dispute settlement mechanism is based on the model of the WTO Dispute Settlement Understanding, but with faster procedures.
- Chapter 15 “Mediation mechanism” stipulates the mechanism of introduction of jointly chosen mediator to solve the problem between the Parties.
5) Title V stipulated provisions on economic and sector cooperation. This title consists of 28 chapters covering energy cooperation; macro-economic cooperation; management of public finances; taxation; statistics; environment; transport; space; cooperation in science and technology; industrial and enterprise policy; mining and metals; financial services; company law, corporate governance, accounting and auditing; information society; audio-visual policy; tourism; agriculture and rural development; fisheries and maritime policy; Danube river; consumer protection; cooperation on employment, social policy and equal opportunities; public health; education, training and youth; culture, sport and physical activity; civil society, cross- border and regional cooperation; participation in EU agencies and programmes.Key provisions:
- Energy cooperation will cover modernisation and enhancement of existing energy infrastructures of common interests, including energy generating capacities and the integrity, safety and security of the energy networks, progressive integration of the Ukrainian electricity network in the European electricity network and the establishment of new energy infrastructures of common interest in order to diversify energy sources, suppliers and transportation routes;
- Competitive, transparent and non-discriminatory energy markets will be development in convergence with EU rules and standards through regulatory reforms;
- Progress towards an attractive and stable investment climate by addressing institutional, legal, fiscal and other conditions, and encouraging mutual investments in the energy field;
- Development and support of renewable energies;
- Promotion of the Joint Implementation Mechanism under the Kyoto Protocol to reduce emissions of greenhouse gases through energy efficiency and renewable energy projects
- Gradual approximation of Ukrainian legislation to EU legislation (timeline up to 5 years);
- Cooperation in taxation issues shall be aimed at the improvement and development of Ukraine’s tax system and administration, including the enhancement of collection and control capacity, with a specific focus on Value Added Tax (VAT) refund procedures, to avoid accumulation of arrears, ensure effective tax collection and reinforce the fight against tax fraud and tax avoidance;
- In respect to company law and corporate governance the cooperation shall result in protection of shareholders, creditors and other stakeholders in line with EU rules in this area, gradual approximation with EU rules in the field of accounting and auditing etc.
- 6) Title VI stipulates provisions on financial cooperation. This title foresees financial assistance to be provided to achieve the objectives of the Association Agreement. The priority areas of the EU financial assistance shall be laid down in relevant indicative programmes reflecting agreed policy priorities. The indicative amounts of assistance established in these indicative programmes shall take into account Ukraine’s needs, sector capacities and progress with reforms.
- 7) Title VII stipulates covers institutional, general and final provisions. This title covers the following issues: creating of new institutions, approximation of Ukrainian legislation to EU legislation, monitoring and assessment of implementation of Association Agreement by Ukraine, dispute settlement etc. Key points:
- Several institutions will be created:
o Association Council is being created, consisting of members of the Council of the European Union and members of the European Commission, and of members of the Government of Ukraine. Association Council shall supervise and monitor the application and implementation of Association Agreement, carry out regular political and policy dialogue at ministerial level;
o Association Committee is being created for preparation of meetings of the Association Council, taking binding decisions if they are delegated by the Association Council. Association Committee shall consist of members of the Council of the European Union, members of the European Commission and of members of the Government of Ukraine. Additionally the Association Council may create sub- committees and other special bodies;
o Parliamentary Association Committee is being created, consisting of Members of the European Parliament and of Members of the Verkhovna Rada of Ukraine;
- Gradual approximation of Ukraine’s legislation to EU norms and standards. Specific timelines (vary between 2 and 10 years after signing) are set within which Ukraine should approximate its legislations to the relevant EU legislation;
- The Association Agreement is concluded for an unlimited period. The comprehensive review of the achievement of objectives under this Agreement shall be made within five years.
- The signing of the agreement took place on 27. June 2014 at the EU top meeting.