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Eastern Neighbourhood

23 - Relations with the eastern neighbourhood on trade

Grade: B+
Unity 5/5
Resources 4/5
Outcome 5/10
Total 14/20
Scorecard 2012: B+ (15/20)
Scorecard 2013: A- (16/20)
Scorecard 2014: B (13/20)

The EU used the prospect of trade agreements well during the Ukraine protests, but missed an opportunity in delaying implementation of Ukraine’s DCFTA.

EU markets were unilaterally opened for Ukraine in April, allowing Ukrainian exporters duty-free access, initially for six months and then until the start of 2016. Questionable Ukrainian statistics report that exports from Ukraine to the EU in the first half of 2014 increased by 25 percent, offsetting the reduction in Ukraine’s exports to Russia (down by 24.5 percent). Ukraine’s Association Agreement was finally signed in June. But then, in June, the EU delayed DCFTA implementation for a year.The initiative for the delay was Germany’s, and the idea was to encourage Russia to back off in Ukraine. However, it deprived the Ukrainian government of a crucial instrument with which to push through other reforms (and even blame the EU for the pain of transition). And it did not appease Russia, which simply pocketed the concession and demanded the renegotiation of the whole agreement.

The EU also fast-tracked the signing of Association Agreements with Georgia and Moldova in June to protect both states from Russian pressure. Moldova was, perhaps, marked too highly, given the perceived importance of backing the existing government before elections in November. With Georgia, the move came in spite of political prosecutions and a flat-lining economy.

Armenia has shown some signs of having second thoughts about joining the Russia-led Eurasian Union, largely because Yerevan did not want to set up a customs border with Nagorno-Karabakh. Armenia’s ruling elite is still tightly integrated with the Russian oligarchy and Armenia’s key concern is maintaining the Russian security umbrella.

Overall, trade has scored lower because, while Europe made rapid progress with DCFTAs in Ukraine, Georgia, and Moldova, the rest of the picture is mixed. The Czech Republic, France, Germany, Latvia, Lithuania, the Netherlands, Romania, Slovakia, Sweden, and the UK deserve mentions for their sustained bilateral assistance in the region. But there is a real question mark over the future health of the Ukrainian, Moldovan, and Georgian economies. EU trade agreements will not protect the three countries from Russian sanctions.