Institutional harmonization and its costs and benefits in the context of EU cooperation with its neighbors

Seminar supporting the project «EU Eastern Neighbourhood: Economic Potential and Future Development», (ENEPO)

Implemented within Sixth Framework Program of the European Commission

Dmytro BoyarchukCASE Ukraine

January, 2009

The materials express exclusively the views of the authors and cannot be identified with the official stance of European Commission.

1.1. Concept of institutional harmonisation and its applications Concept of institutional harmonisation and its applications to European integrationto European integration

2.2. What institutional harmonisation with the EU may mean - What institutional harmonisation with the EU may mean - lessons from existing arrangementslessons from existing arrangements

3.3. Agenda for institutional harmonisation of EU Eastern Agenda for institutional harmonisation of EU Eastern NeighborsNeighbors

4.4. Institutional harmonization – our researchInstitutional harmonization – our research

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AgendaAgenda

Concept of institutional harmonisation and Concept of institutional harmonisation and its applications to European integrationits applications to European integration

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Institutions are an important factor of economic growth like Institutions are an important factor of economic growth like labour, capital, natural resources etc.labour, capital, natural resources etc.

Institutions are formal rules, informal constraints, and Institutions are formal rules, informal constraints, and enforcement mechanisms that provide the basic structure by enforcement mechanisms that provide the basic structure by which human beings create order and attempt to reduce which human beings create order and attempt to reduce uncertainty in exchangeuncertainty in exchange

Ukrainian institutions are of poor quality and for Ukraine and Ukrainian institutions are of poor quality and for Ukraine and other CIS countries poor institutions are the main impediment other CIS countries poor institutions are the main impediment for European integrationfor European integration

Concept of institutional harmonisation and Concept of institutional harmonisation and its applications to European integration its applications to European integration (continued)(continued)

Ukrainians understand integration as market access, labor Ukrainians understand integration as market access, labor mobility (simplified visa regime) and increase in salaries (to mobility (simplified visa regime) and increase in salaries (to European level).European level).

For the EU integration means institutional harmonization – For the EU integration means institutional harmonization – named Europeanizationnamed Europeanization

All instruments of European integration (technical assistance, All instruments of European integration (technical assistance, twinning etc.), first of all, target harmonizing institutions with twinning etc.), first of all, target harmonizing institutions with European standardsEuropean standards

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What institutional harmonisation with the EU may What institutional harmonisation with the EU may mean - lessons from existing arrangementsmean - lessons from existing arrangements

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Institutional harmonisation with the EU can have different degree of Institutional harmonisation with the EU can have different degree of arrangements. The major economic difference among the arrangements. The major economic difference among the forms of integration is the scope and degree of market access. forms of integration is the scope and degree of market access. In order to get a wider and deeper market access, countries In order to get a wider and deeper market access, countries have to do more harmonization.have to do more harmonization.

Accession to the EU (membership) – states give each others’ Accession to the EU (membership) – states give each others’ laws and standards the same validity as their own.laws and standards the same validity as their own.

European Economic Area – full markets integration with the EU European Economic Area – full markets integration with the EU without membership (do not adopt selected EU without membership (do not adopt selected EU acquisacquis))

What institutional harmonisation with the EU may What institutional harmonisation with the EU may mean - lessons from existing arrangements mean - lessons from existing arrangements (continued)(continued)

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EU-Switzerland cooperation – based on a free trade agreement EU-Switzerland cooperation – based on a free trade agreement and a range of sectoral agreements (“cherry-picking”)and a range of sectoral agreements (“cherry-picking”)

EU-Turkey Customs Union – full trade liberalization EU-Turkey Customs Union – full trade liberalization accompanied by an application of a single external tariff accompanied by an application of a single external tariff (Customs Union)(Customs Union)

Free trade area (FTA) – the depth of harmonisation is Free trade area (FTA) – the depth of harmonisation is insignificantinsignificant

Agenda for institutional harmonisation of Agenda for institutional harmonisation of EU Eastern NeighborsEU Eastern Neighbors

European Neighbourhood Policy (ENP) is a search of an European Neighbourhood Policy (ENP) is a search of an optimal arrangement for the Eastern neighbors of the EUoptimal arrangement for the Eastern neighbors of the EU

ENP Action Plans is the main instrument guiding first steps of ENP Action Plans is the main instrument guiding first steps of harmonisationharmonisation

Action plans envisage harmonisation across sectors, as well Action plans envisage harmonisation across sectors, as well as so called horizontal issuesas so called horizontal issues

ENP Action Plan prepare the ground for the conclusion of ENP Action Plan prepare the ground for the conclusion of comprehensive Free Trade Agreements (FTA)comprehensive Free Trade Agreements (FTA)

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Institutional harmonization – our researchInstitutional harmonization – our research

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The major question of the study: measuring the costs and The major question of the study: measuring the costs and benefits of institutional harmonization in CIS area in the benefits of institutional harmonization in CIS area in the context of creation of deep FTAscontext of creation of deep FTAs

Studies on European Integration mainly concentrate on trade Studies on European Integration mainly concentrate on trade issues issues

Numerical estimate of institutional harmonization benefits Numerical estimate of institutional harmonization benefits

Problems of institutional harmonizationProblems of institutional harmonization