European Affairs

The European Union, however, has not shown much enthusiasm over the prospect of admitting Ukraine, and the country has never formally applied for EU membership. Numerous European politicians, and even a few European Commissioners, have publicly ruled out Ukrainian EU entry. Romano Prodi, the former President of the Commission, famously argued that it would be just as impossible for Ukraine to join the European Union as it would be for New Zealand.

But that was long ago, before the Orange Revolution that swept Viktor Yushchenko into the Presidency in December 2004. One of the revolution’s central slogans was Ukraine’s “European choice.” Now, Ukraine has a reasonable chance to fulfill the three so-called Copenhagen criteria for membership, namely the embrace of democracy, a market economy and the rule of law. It will then be very difficult for the European Union to refuse the country membership.

European reactions to the Orange Revolution have said a great deal. The most enthusiastic supporters of Ukraine’s membership are the new EU member states that lie near it, notably Poland and Lithuania – not least because no country wants to form the Union’s Eastern outer border. The Scandinavian countries and the Netherlands, traditionally strong supporters of democracy, also favor Ukrainian entry. The Netherlands, as it happens, represents Ukraine on the Executive Boards of the International Monetary Fund and the World Bank.

Britain and Sweden have always been more interested in the enlargement of the Union than its deepening, while in Southern Europe, Italy, Portugal and Greece have admitted substantial numbers of Ukrainian migrant workers. Their preference for Ukrainian workers over immigrants from Africa makes them favorably disposed toward Ukrainian membership. The most resistant countries are Germany, France and Belgium, which prefer deepening to enlargement, and Spain, which opposes any further dilution of the funds it receives from Brussels.

The upshot is that a sizable majority of EU members now takes a much more favorable view of Ukrainian entry. Ukraine has already won a non-binding sympathy vote in the European Parliament, adopted by an overwhelming majority. Officials at the European Commission, however, are widely considered to be among the least enthusiastic about Ukrainian membership.

For President Yushchenko and the new government under Prime Minister Yulia Tymoshenko, Ukraine’s integration into Europe is of critical importance. The government even has a Deputy Prime Minister for European Integration, Oleh Rybachuk, who is Mr. Yushchenko’s closest confidant. The new Minister for Foreign Affairs, Boris Tarasiuk, is also a dedicated pro-European activist.

So far, Mr. Yushchenko, Mr. Rybachuk and Mr. Tarasiuk have been the main authors of the country’s European policies. These Ukrainian democrats are not approaching the European Union as a smorgasbord of selected courses. They want everything on the menu: full membership, democracy, a market economy, the rule of law and the free movement of goods, services, capital and people. Mr. Yushchenko has talked of lodging a formal membership application in the late summer of 2005.

The new government’s program makes its objectives perfectly clear. First, it plans to work out a “renewed national strategy for the European integration of Ukraine.” Next, it wants to “develop, together with the European Union, a new strategy for the ‘Ukraine-EU’ relationship, which would envisage the prospective membership of Ukraine in the European Union.” The big challenge for the European Union will be to come up with a mutually acceptable roadmap for the gradual integration of Ukraine into the European Union.

At present, institutional cooperation between the European Union and Ukraine is rudimentary. As with other post-Soviet countries, the European Union offered Ukraine a Partnership and Cooperation Agreement, which was concluded in 1994 and came into force in 1997. The agreement is valid for ten years and can be prolonged. Although its scope is comprehensive, covering political dialogue, trade in goods and services, economic, environmental, scientific, cultural and legal matters, it contains little of substance.

In the trade field, the agreement does little more than codify the principles of the World Trade Organization for non-WTO members.Whereas the European Union has concluded free trade agreements with dozens of other countries, the pact with Ukraine does not currently offer any trade concessions beyond those that the European Union accords to its WTO partners. Ukraine has been treated as one post-Soviet country among many. The only recent advance in trade policy has been the European Union’s conclusion of a textile agreement with Ukraine eliminating import quotas.

In March 2003, the European Commission sent a paper to the European Council and the European Parliament entitled Wider Europe – Neighborhood. A New Framework for Relations with our Eastern and Southern Neighbors. While this was meant to provide more benefits for EU neighbors, it disappointed pro- European Ukrainians, because the implication was that Ukraine would remain a neighbor rather than become a candidate for future EU membership.

The question of possible membership, however, was not fully answered by the neighborhood concept. Although Ukraine and Moldova are European and have persistently indicated their wish for EU membership, they were treated as members of a much wider pack. They were lumped together not only with Russia and Belarus, which have not asked for membership, but also with a number of North African and Middle Eastern countries, which are not European. Russia and Belarus have rejected the entire neighborhood concept altogether, while the three Caucasian countries, Georgia, Armenia and Azerbaijan, have accepted it.

The European Union’s intention was to negotiate individual action plans for each neighbor, which could vary substantially. The previous Ukrainian regime seized this opportunity, and agreed an action plan with the European Union that was to be accomplished over three years. After consultations with Brussels, Mr. Yushchenko has stated that the plan will now be implemented in one year. The vast majority of the roughly 300 actions envisaged are to be carried out by Ukraine alone, and they are actions that Ukraine needs to undertake anyway.

In parallel, Ukraine must become a member of the WTO, because otherwise there would be little basis for further trade liberalization with the European Union. Ukraine has already completed the bilateral negotiations with the European Union required to prepare for WTO accession, and the main remaining obstacle is a similar bilateral agreement with the United States. The two major stumbling blocks are the protection of intellectual property rights in Ukraine and some agricultural issues.

Ukraine must adopt a new law on intellectual property rights, a draft of which is waiting in the parliament, and agricultural questions are always the last to be settled. If these tasks can be completed, Ukraine could conclude its WTO entry negotiations before the end of 2005, with November as the target date.

Meanwhile, the European Union could officially recognize Ukraine as a market economy, implying milder treatment in anti-dumping cases, which are very important for Ukraine’s access to the EU market. This is a prominent Ukrainian demand, and the Commission appears prepared to comply with it, given that Ukraine is in fact a market economy. Ukraine is also seeking progressive increases in its steel exports to the European Union.

So far, however, Ukraine suffers from very limited access to the EU market. In 2002, only 19 percent of Ukraine’s exports went to the 15 member states that comprised the European Union before its enlargement in May 2004. According to the so-called gravity model, which assesses the extent to which countries should trade with one another, given the size of their economies and the distance between them, this share should have been about 60 percent of Ukraine’s exports.

Until two years ago, the share of Ukrainian exports destined for Russia and other post-Soviet countries steadily contracted, reaching a low point of only 17 percent in 2002. Instead, Ukraine is increasingly exporting to all kinds of distant new markets in Asia, notably China, and the Middle East. Although it is important that the country’s exports should grow, this kind of diversion of trade is not normal. There can be little doubt that it amounts to trade distortion, and Ukraine would benefit from increasing its exports to big markets in its own region.

The main reason for Ukraine’s limited exports to the European Union is that its exports are mainly composed of sensitive items, especially agricultural products, textiles, steel and chemicals, on which EU protectionist measures are concentrated. Such sensitive products accounted for 65 percent of Ukraine’s total exports in 2002, according to the World Bank, with steel comprising about 40 percent, agriculture 13 percent and chemicals eight percent.

Anti-dumping measures, usually a thinly veiled form of protectionism, are particularly common against steel and chemicals, which together represent nearly half Ukraine’s total exports. According to the WTO, Ukraine occupied tenth place in the league table of countries that were victims of antidumping measures between January 1995 and June 2002.

The obvious solution to Ukraine’s trade problems with the European Union is a standard bilateral free trade agreement, which is mentioned as a possibility in the EU neighborhood policy. The European Union in fact committed itself to start negotiations on a free trade agreement in its partnership and cooperation agreement with Ukraine.

Almost all the Mediterranean countries have free trade agreements with the European Union, and the only other EU neighbors without free trade agreements are Moldova, Belarus and Russia. As soon as Ukraine has become a member of the WTO, the European Union should offer Ukraine a free trade agreement, which would constitute a major breakthrough for the country’s economic integration into Europe.

Although the foremost European value for Ukrainians is democracy, they cannot enter the EU club without enduring the lengthy and laborious process of aligning their laws with those of the European Union, just like all other candidates for membership. This process could in fact be very beneficial to Ukraine. The adoption of EU rules and practices would help to modernize the functioning of the state and put Ukrainian companies on a more competitive footing.

The EU Should Welcome Ukraine as a Future Member Ukraine, however, should not opt for early convergence with EU rules, because the European Union is heavily over-regulated. Premature adoption of many EU regulations and policies - such as the common agricultural and fisheries policies, tax and social provisions and environmental rules - could harm Ukraine’s economic dynamism. It is to be hoped that the European Union will reform most of these policies before Ukraine becomes a member.

There are a number of other steps the European Union could take to facilitate Ukraine’s integration into Europe. In the field of education, Ukraine has already agreed to join the so-called Bologna process, which provides for the integration of higher education and the mutual recognition of other European countries’ degrees, in 2006. The European Union should also allow Ukraine to participate in educational exchange programs, notably the Erasmus exchange program for undergraduates. Another important area is visa policy, where much could be done to make it easier for Ukrainians to acquire European visas. For a long time, Ukrainians have declared their “European choice” in a loud voice without obtaining many practical advantages. The Orange Revolution has totally changed the situation by providing Ukraine with both a democratic breakthrough and a clear European orientation. The time has come for the European Union to welcome Ukraine and to accept the practical implications of the country’s “European choice.” For the sake of Ukraine’s future political stability, it is not the moment to disappoint these hopes.

The two parties should compose a roadmap, obliging the European Union to reward each Ukrainian action with a concession desired by Ukraine. Ukraine’s existing action plan is a good starting point. The European Union is unlikely to grant Ukraine membership in the near future. But the door should be kept open while an ever more fertile relationship is developed.

Anders Åslund is Director of the Russian and Eurasian Program at the Carnegie Endowment for International Peace in Washington. He co-chaired a Blue Ribbon Commission organized by the United Nations to draw up a reform program for the Ukrainian President.


This article was published in European Affairs: Volume number 6, Issue number 1-2 in the Winter/Spring of 2005.