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Eastern neighbourhood

42 - Relations with the eastern neighbourhood on trade

Grade: B
Unity 4/5
Resources 4/5
Outcome 5/10
Total 13/20
Scorecard 2013: A- (16/20)

The failure to sign a DCFTA with Ukraine was a big setback for the Eastern Partnership, but member states remained united.

In 2013, Europeans focused on trade, and particularly the establishment of a “common economic area”, in the run-up to the Eastern Partnership summit in Vilnius in November. But one week before the summit, the Ukrainian government decided not to sign the DCFTA with the EU. The main reason was economic: Ukraine has huge budget problems and is struggling to pay back foreign debts as its currency reserves decline. Russia offered Ukraine lower prices for gas and more economic co-operation if it joined its own customs union instead of signing the DCFTA and Association Agreement with the EU. The failure to sign the agreements was a setback for the EU, but EU member states at least showed unity by refusing to lower their offer to President Viktor Yanukovych.

The EU completed negotiations on Association Agreements and DCFTAs with Moldova and Georgia. Armenia’s decision to join the customs union with Russia in September made it impossible to sign a DCFTA for the time being (DCFTAs between the EU and Eastern Partnership countries are incompatible with membership of the customs union). In August, the European Investment Bank signed a Framework Agreement with Azerbaijan to enable the bank to start financing projects there. The bank is now able to finance projects in all Eastern Partnership countries. In July, it announced new funding for small and medium-sized enterprises.

However, the focus on trade agreements have somewhat sidelined issues of democracy and human rights. Enlargement Commissioner Štefan Füle said that free trade is the primary “instrument for political association and economic integration”. Association Agreements, which will include free trade agreements, will replace partnership and co-operation agreements with Moldova and Georgia.