EU Eastern Partnership - Can it Ever be Effective?

The European Union launched last year a new initiative to tie its “Eastern Partners” Ukraine, Belarus, Moldova and the three South Caucasus countries to itself. After the war in Georgia it felt it needed to offer these countries more interesting prospects. But this was a reluctant move. No one wanted to offer them EU membership. Key NATO members are also reluctant to go further East. Protectionist sentiment has been steadily on the rise – against imports, production shifts to the East, migration.

The resulting proposals were clad in the usual Emperor’s clothes: the bureaucratic paraphernalia called Association Agreements, Partnership Agreements, “deep and comprehensive” Free Trade Agreements, Summits, etc, and more Aid Money.

The credo is “shared values”, the process is “institution building”, “long-term goal of visa-free travel” (when, in 30 years?), “energy security” and exporting European laws and standards (nothing less!). This appears to be the same legal machinery the EU has used during the 1990s enlargement process, only with less tooth and bite, because enlargement is not the end goal.

Unsurprisingly, the process has stalled quickly. The EU hides of course behind the never-ending political infighting in Ukraine, and setbacks for democracy and free speech in Georgia to justify these failures. But the problem also very much has to do with the EU’s methodology. My key messages here are:

1)      If the EU is not going to enlarge, then it will need to drop its outdated tools of enlargement and use new ones

2)      If EU leaders believe they can engineer change in those countries from the top down through lengthy legal texts, its usual bureaucratic talking shops on sanitary-standards-alignment or human rights, then it is now time to understand that this is simply not going to fly.

We are no longer in the 1990s. Europe’s “Eastern partners” are part of a wider geopolitical and economic competition that involves a Russia that thinks in terms of zones of influence, an energy thirsty China looming, and a business-savvy Iran operating in the background. The EU is in a process of mild estrangement with a Turkey that now explores its “Eurasian” identity – if the EU does not capitalise on Turkey, this could play in its disfavour.

The “values” the EU wants to promote are going through harder times, especially in the Southern Caucasus. Georgia stands alone there. The war against Russia in 2008, and the country’s ensuing awareness that it is alone in that region for its security, definitely makes the case for democratizing further and sustaining this by solid ties with a camp in the West that supports the processs for real, more difficult to make.

The real sadness about how the EU deals with its neighbours is that it is not able to capitalise on what makes it attractive: its market. What the EU needs to understand– that it is not necessarily the centre of the world there. It is not the magnet it was for a Poland or a Hungary in the 1990s. I am not sure the key member states shaping the Eastern Partnership, our clever but too pampered Commission bureaucrats and the well-meaning but over-idealistic and inexperienced Members of our newly-empowered European Parliament have grasped this. A functioning and sensible common EU foreign policy is still a chimera, despite the coming into force of the Lisbon Treaty. Trying out a foreign policy response to the challenge of stabilizing the Eastern partners and tying them to a system of benign international rules and open societies could be dangerous too with the Russia we are having now. But where it could actually tilt incentives in its favour, the EU is failing. And this is through its trade and migration policies.

EU bilateral trade negotiations towards “free trade agreements” and/or “association agreements” are a burdensome process that puts strong demands on partners that have not much negotiating capacity, and for which it will be costly to implement EU laws, rules, and standards. The Southern Caucasus countries are not a major export market for the EU. There is no point in wasting time there with cumbersome FTA negotiations, unless Georgia insists on having one (it might soon be disillusioned with the process).

What the EU should rather do is strengthen its unilateral policies towards the region. This does not mean “giving away” anything to reluctant countries. On the contrary, these policies would simplify and depoliticize negotiation processes. The EU’s treacherous issue-linkage of trade and politics is poisonous and ultimately self-defeating. Trade liberalization is tied up in EU development and environmental, especially climate change catechism, mixed with policies tailored for its protectionist lobbies, in particular agriculture or steel, and the sometimes politically offensive interests of potential investors. Add to this pipeline geopolitics and then your Association agreement discussions will go sour. Alternatively, however, unilateral policies can be designed in such a way as to “reward” positively a country that goes in a direction conducive to EU values, while not unduly penalizing the unlucky populations of some autocratic regimes.

For example, the EU currently offers “GSP Plus”, a more generous form of trade preferences granted to small very poor economies to the South Caucasus countries. But the EU’s GSP system carves out swathes of agricultural products that could be the only major alternative exports of these poor quite agrarian countries to their usual hydrocarbons. Georgia in particular has a great potential there. GSP “rules of origin” are so complicated and stringent that they deter trade. A recent reform process of the RoO is advancing very slowly. What one can read from the drafts, the intial idea to simplify and liberalize them has been defeated by the return of exceptions or new complications for so-called sensitive products, especially in agriculture.

Furthermore, the EU still does not recognize the most of these countries as “Market Economies”. The rules the EU applies to decide whether a formerly Socialist economy has become a market economy are extremely legalistic and the standards so impossible to meet that inevitably even many non-formerly-Socialist economies would not qualify, not mentioning a great number of EU member states themselves. In the end, granting Market Economy Status has become a political decision. In the meantime, non market economy status exposes these economies that also have an export capacity in say, chemicals or raw metals, which is the case of practically all Eastern partners, to the EU’s laxer and more arbitrary antidumping rules applied to this group of countries. And chemicals and metals, which are extremely well organized lobbies in Brussels, is where most antidumping is happening.

Proposed visa-free travel – a crucial step to bring people and economies together – has failed from the beginning, mainly thanks to German reluctance. Brussels, with its increased powers on borders, migration and internal security, will need to pick a fight with Germany here. Why is it so difficult to offer visa-free travel? Fear of criminality? Restrictive visa regimes do not stop criminals and their human victims to effectively fill Germany’s profitable bordellos with Eastern beauties. It could probably be more effective to tie visa liberalization to closer police cooperation. This would allow e.g. poor Ukrainian women to seek legitimate work legally instead of falling into the hands of human traffickers who know how to circumvent border prohibitions, or men to chose crime syndicates.

The EU could also fine-tune trade and migration policies more effectively with a multi-tiered and gradual approach to adapt to the circumstances of an individual country. It could start with visa facilitation procedures for businessmen, and, for countries that are more serious about political and economic reform, continue with a gradual upgrade to better temporary movement of labour opportunities (so-called Mode 4 in trade parlance), or even negotiated temporary work permits (as Spain has done with some African countries).

Of course, there are many other cooperation opportunities the EU can offer – facilitating studying in the EU, cultural and educational programmes, technical assistance and "insitution building" here and there, helping out on infrastructure projects etc etc. But here it would probably be more effective to do this one by one, and not try to squeeze the policies into a framework Association Agreement that will take too long to negotiate. Keep it simple!

With Ukraine, contrary to the smaller, weaker other Eastern partners, the EU should go full steam ahead with a comprehensive, serious, deep free trade agreement. Here it should build on the EU South Korea agreement that eliminates tariffs on virtually all EU tariff lines. The EU should consider abolishing antidumping for Ukraine – a big metals and chemicals producer – to make it clear the Ukraine is now truly part of the European economic sphere. It should be more generous on Mode 4 in services. It can here leverage its offers to ask Ukraine to do more to open its services markets, reform in-depth its energy sector, step up investor protection (with the Lisbon Treaty the EU could certainly include investor protection clauses in there) and upgrade its legislation. But the EU should be ready to offer more liberal Rules of Origin that can cumulate with other Eastern Partnership economies. It should offer generous assistance for Ukraine to upgrade its sanitary or technical standards. The regime to provide standards accreditation should be fair and transparent. The EU should also offer Ukraine guarantees that new standards will be established in a transparent and proportionate manner – a little bit like it has done for SPS in its bilateral agreement with Chile in 1999. But to make Ukraine sign up and keep it interested, it must offer Ukraine a generous trade deal. This is also true for visas and work permits. New Ukrainian president Yanukovich, although notoriously in the country’s more Russia-friendly camp, is signaling it is putting the EU first, by making his first visit abroad to Brussels on March 1. Can Brussels seize on this clear message?

Pipe dreams? Certainly. But certainly not more than getting Nabucco done anytime soon or Association Agreements signed swiftly, let alone be effective.

Doing a limited number of trade moves would be quicker, more effective, and more likely to make the EU more interesting for a Ukraine that is wavering between East and West and considering to join Russia’s  revived “Customs Union”. It would also make the other Eastern partners more open to the European point of view on how a stable, open society at home and international order abroad should work. Association Agreements if not designed for Enlargement should be sent into to the dustbin of history.