An Introduction to the AA/DCFTA · An Introduction to the AA/DCFTA Basic Principles and Understanding Mark Hellyer A4U STE on DCFTA Policy Implementation ... business (both international

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An Introduction to the AA/DCFTABasic Principles and Understanding

Mark Hellyer

A4U STE on DCFTA Policy Implementation

March 2017




Contents (3 Parts)

• Overview and Content

• The Scope and Benefit of the DCFTA

BREAK

• Delving into the Principles of the DCFTA

• Understanding of the policy objectives and motivations

(perspective for why legal approx. and sector policy)

• Broad understanding of the content of DCFTA

• Start to see the detail/topic and work of government in DCFTA

• LEVEL LEARNING• Different levels of participants




What is the AA/DCFTA?

Overview

EU Policy PerspectiveTo Understand

what the EU wants

from this

Agreement Ukraine Perspective

To Understand

what are Ukraine’s

ExpectationsAA and Policy Match

Outline Content

and process




The EU Neighbourhood Policy

• Main objective: Create an ring of stability, prosperity, democracy and security

• Establish an EU-ENP area of ‘regulatory convergence’: free movement of capital, goods and services; people-to-people contacts, lower production costs, less bureaucracy…

• Gradual integration into the EU internal market (market access)

• Regulatory convergence towards the EU acquis(legal and institutional reforms)

• Business climate: investments • Private sector development: SMEs




EU Tools to realise its ENP Objectives

Progressive deepening of relations:

1. Association Agreements (AA)2. ENP Action Plans3. Deep and Comprehensive

Free Trade Areas (DCFTA) (as part of new AAs)

=> Financial assistance: Support the implementationof Association Agreement; technical assistance,Twinning; Capacity building…




Ukrainian Ambition

1. Integration with the EU

2. Adoption of European Values (growth and prosperity)

What does that mean?• Using EU policy as a model for

economic reform (Integration into national policy reform process)

• Policy Results (based on clear aims and results)

• Transparency (certainty)

• Openness (only necessary regulation)

• Risk based controls (types of control based on risk and proportionality)




Outline of the AA

• signed on 27 June 2014

• Implementation over 10 years

III. Justice, Freedom and

Security

IV. Trade

V. Economic Cooperation

CREATION OF

THE DCFTA

Including• GMO monitoring• Road transport• Company law, corp. governance,

accounting and auditing• Energy• Environment• Health and safety

Including• Foreign and security policy• Combating terrorism • Dialogue on Rule of law and

human rights • Protection of personal data • fight against illicit drugs • Equal Treatment of legal

workers • Gradual steps towards a visa-

free regime • Dialogue on Money

laundering




Actuality of AA instruments• Dialogue and cooperation with the EU in political reform, security,

foreign policy, justice and freedom;

• Adoption of commitments from the trade (DCFTA) components(revising tariffs, application and administration of rules of origin, administration of tariff rate quotas and other obligations);

• Legal harmonisation and approximation across a broad range of economic, trade and political spheres, that is adoption selected elements of the EU acquis into Ukrainian legislation and regulation;

• Institutional and administrative reform (including enforcement and effective redress) resulting from legal reform and adoption of commitments in both trade and economic;

• The benefits to be derived only come when business increases business (both international and national trade) compliance with new business rules and procedures, as well as taking advantage of the opportunities.




A look at the trade part

Scope and Benefit of DCFTA

What is a DCFTA?Understanding of

the difference

between FTA and

DCFTA Benefits of the DCFTA

Why is DCFTA so

important to

Ukraine –

economic growth

The InstrumentsUnderstanding the

components and

definitions




What Makes DCFTA Different?

• Traditional FTAs

• Title IV to create a DCFTA between 2 parties over 10 years –EIF 1st Jan 2016• Market Access• Alignment of business acquis, no difference• Adoption of norms – efficiency gains




•Potential benefits:

•1. Market Access improvements = increase exports

•2. EU Business regime adopted in Ukraine

• no difference (in regulation) selling in Ukraine or EU

• leads to increase exports as its easier to comply for all business (esp SMEs)

•3. Imports of more competitive final and intermediate products

• competition increases Ukraine’s competitiveness

• Imported products, cumulation increase export competitiveness

• inputs cheaper increases competitiveness and consumers get cheaper and wider range of products

Better market access (> 500 million consumers)

• Improved the business climate

• Increase competitiveness cheaper safer products

• Increased production and sales domestically, EU and globally

Benefits of the DCFTA

DCFTA Analytical Papers 11




+15-30%productivity• AFNOR Study of

Impact of Single European Market

For Ukraine:

• Adoption of EU standards –preparation, over time

• Imported inputs (using tariff, RoO and cumulation)

• Trade facilitation

• Competition

• No compliance cost in export to EU (same rules, local CABs)

Competitiveness Potential

12




Aggregate Trade Performance

11,50

12,00

12,50

13,00

13,50

14,00

14,50

15,00

2012 2013 2014 2015

€ bn

• Ukr. X to EU declined from € 14.6 bn in 2012 to € 12.8bn in 2015• Exports declined by 7.56% between 2012 and 2015

• Average X between (2012-3) and (2014-5) fell by 6.87%

ATP/DCFTA




Export Diversification

•2013: 10.6% of exports account for 90% Ukraine’s exports to the EU

•2015: 12.7% of exports account for 90%• Slight diversification

•62% of products (HS 2-digits) increased exports• €1.6bn of losses from 3 commodities (mineral fuels,

ores and iron/steel• 44 of 98 products increased exports by over €1 mn




Major Growth of Exports under DCFTA (€ mn) 2013 2015 Absolute Growth

44 WOOD AND WOOD ARTICLES 547.6 768.6 220.9

15 ANIMAL OR VEGETABLE FATS AND OILS 464.3 649.2 184.9

10 CEREALS 1,516.7 1,685.6 168.9

85 ELECTRIC MACHINERY AND PARTS 907.0 1,029.7 122.7

23 WASTE FROM THE FOOD INDUSTRIES 415.1 496.1 81.1

02 MEAT AND EDIBLE MEAT OFFAL 0.5 65.4 65.0

94 FURNITURE; BEDDING, MATTRESSES 70.6 124.1 53.5

25 SALT; STONE; PLASTERING AND CEMENT 163.7 198.8 35.0

70 GLASS AND GLASSWARE 26.0 60.6 34.6

08 EDIBLE FRUIT AND NUTS 86.5 118.4 32.0

39 PLASTICS AND ARTICLES THEREOF 55.0 86.7 31.7

74 COPPER AND ARTICLES THEREOF 22.5 52.6 30.1

20 PREPARATIONS OF VEGETABLES, FRUIT 35.1 61.9 26.8

19 PREPARATIONS OF CEREALS, FLOUR 17.7 39.1 21.4

04 DAIRY PRODUCE; NATURAL HONEY 30.3 48.2 17.9

69 CERAMIC PRODUCTS 6.7 19.5 12.8

76 ALUMINIUM AND ARTICLES THEREOF 13.5 24.8 11.3

96 MISCELLANEOUS MANUFACTUREs 14.5 25.8 11.2

31 FERTILISERS 152.5 163.5 11.1

56 WADDING, FELT AND NONWOVENS 2.1 12.8 10.7

88 AIRCRAFT, SPACECRAFT, AND PARTS 5.7 16.3 10.6




Further Analysis

There can only be a price/tariff impact on products that have a tariff/TRQ benefit over GSP under the DCFTA, so analysis should aggregate only products

where a margin of preference was provided




Scope of Coverage1. Customs and tariffs

• Progressive revision of tariff schedules and implementation of a TRQsystem for selected agricultural products (Chapter 1)

• Phasing out of Customs duties on exports (Article 31)

• Dialogue on trade Agreements with other countries (Article 39) and; Administrative Cooperation and Coordination with Other Countries (Article 37)

• Adoption and administrative application of rules of origin Article 40

• Adoption and implementation of a Mechanism for Safeguard Measures on Passenger Cars (Article 44) and; second hand clothing

• Reform of customs and trade facilitation of legislation and procedures to ensure effective control and support facilitation of legitimate trade (chapter 5)

2. Trade Remedies • Dialogue on application of WTO compatible Anti-dumping and

Countervailing Measures and trade remedies (Article 51)

• Establishment of dispute settlement and Mediation mechanisms (chapters 14 and 15)

17




Scope of Coverage (2)

3. Sanitary and Phytosanitary Measures

• Gradually approximate its sanitary and phytosanitary and animal welfare legislation and enforcement procedures to that of the EU (Chapter 4)

4. Technical Regulations, Standards, and Conformity Assessment, including ACAA

• Gradual alignment of sectoral and horizontal legislation, institutions and standards regarding Technical Regulations, Standards, and Conformity Assessment, including negotiation of an ACAA (Title IV Chapter 4)

18




Scope of Coverage (3)5. Services

• Legal and regulatory approximation to EU acquis in the general Framework of trade in services including Temporary Presence of Natural Persons for Business Purposes, as well as specific sectors: Computer Services; Postal and Courier Services; Electronic communications; Financial Services; transport and; Electronic Commerce (chapter 6)

• Complete the liberalisation of transactions on the capital and financial account of balance of payments equivalent to the liberalisation in the EU Party prior to the granting of internal market treatment in the area of financial services (chapter 7)

6. Public Procurement • Gradual Legislative approximation and institutional reform of key elements of the

EU public procurement acquis and development of mechanisms for mutual

• Market access (chapter 8)

7. Geographical Indications and Intellectual Property• Dialogue and cooperation in intellectual property (chapter 9) in line with WTO

rules and regarding Geographical Indications, mutual recognition and enforcement of each parties Geographic Indicators, including transitional mechanism for selected sensitive protected EU titles in Ukraine’s market.

19




8. Competition Policy • Approximation and enforcement, as well as co-operation and co-

ordination between competition authorities to further enhance effective competition law enforcement, and to fulfil the objectives of this Agreement through the promotion of competition and the curtailment of anti-competitive business conduct or anticompetitive transactions. (chapter 10)

9. Trade-Related Energy • Reform of national legislation on trade-related energy (chapter 11) in

areas including Domestic regulated prices; Prohibition of dual pricing; Customs duties and quantitative restrictions; Transit; Transport And; Cooperation on infrastructure

10. Transparency• Establishment of Enquiries and contact points for transparency

(chapter 12)

11. Trade and Sustainable Development • Dialogues on trade and sustainable development (chapter 13)

Scope of Coverage (4)




QUESTIONS




What will Change in Ukraine

Examination of Main Principles

Implementation ProcessUnderstanding the

process of change

and role of

government Main Elements of DCFTAMore detailed

explanations of

market access,

SPS and technical

regulations

Ministry WorkplansExample: MEDT

Workplanning




DCFTA Implementation Process (Not Just Legal Approx.)

EU and Ukraine Obligations

(including approximation)

Control measures (enforcing legislative

changes)

eg SPS, Tech regs, GIs

Negotiations

eg for ACAA and Pan euro RoO

Market Access Changes

eg TRQ, tariffs on both sides, public procurement

23

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Min

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Preferential Market Access


Current GSP

EIF >10 yrs

All products

7,6 0,5 0,05

Agric.CH 1-24

19,8 0,6 0,24

NAMACH22-99

3,9 0,5 0,0

Tariffs (simple average %)1. Meat of bovine animals

2. Meat of swine

3. Meat of sheep or goats

4. Meat and edible offal, of the poultry

5. Milk and cream, yogurt

6. Milk in powder

7. Products from processed milk

8. Butter and dairy spreads

9. Products from processed butter

10. Birds' eggs and albumins

11. Honey

12. Garlic

13. Sweetcorn

14. Wheat and Cereal flours

15. Barley

16. Oats

17. Maize (corn),

18. Cereal groats, meal and pellets

19. Malt, whether or not roasted

20. Starches

21. Cane or beat sugar

22. Other sugars

23. Processed products from sugar

24. Chocolate and other food preparations containing cocoa

25. Prepared foods obtained from cereals

26. Tomatoes prepared or preserved

27. Mushrooms

28. Grape and apple juice

29. Sugar syrups (HS 2106)

30. Food preparation

31. Undenatured ethyl alcohol

32. Residues of starch manufacture and similar residues

33. Cigars and cigarettes

34. Acyclic alcohols

35. Dextrins and other modified starches

36. Finishing agents, dye carriers

TRQs




Rules of Origin• Origin is the "economic" nationality of goods in international

trade

• Originating products benefiting from preferential access must either • (1) be manufactured from raw materials or components

which have been grown or produced in the beneficiary country; or

• (2) at least undergo a certain amount of working or processing in the beneficiary country

• Under DCFTA proof is EUR 1 certificate of origin

• PEM and CUMULATION




• Only countries that have been authorised by the EU can export products subject to SPS measures.

• FVO• Verify compliance of EU food

regulations with practices in MS

• Verify equivalence in Third Countries

• Carry out inspections of the Competent Authorities

• Approved Facilities

• DG Sante database of countries and facilities by sector

• Exports must have Health certificate by approved bodies

• Selected Importers in EU

• Selected border posts, Advance notification

• Exports must have Health certificate by national bodies or testing from accredited laboratories

SPS Control in the EUExports of products of Animal Origin

Exports of products of Non-Animal

Origin

Ukraine Adopting Acquis – Approval for all over time




Control of Product Safety (compliance with Technical Regulations)

Risk Based:

• Certification by EU Institutions (eg ECHA under REACH) and entry points

• Approval by EU notified bodies for Conformity Assessment certification (NANDO)

• Testing from EU accredited laboratories

• Self Certification


Ukraine Adopting Acquis – ACCA - CABS and LABS (recognised)




• Protected for 10 Years

• Champagne

• Cognac

• Madeira

• Porto

• Jerez /Xeres/ Sherry

• Calvados

• Grappa

• Anis Portugues • Armagnac

• Marsala

• Malaga

• Tokaj

• Protected for 7 Years

• Parmigiano Reggiano

• Roquefort

• Feta

Geographic Indications

28

Article 208 Temporary measures

(3) For a transitional period of 10 years

from the entry into force of this

Agreement, the protection pursuant to

this Agreement of the following

geographical indications of the EU Party

shall not preclude these geographical

indications from being used in order to

designate and present certain

comparable products originating in

Ukraine




MEDT EUI Workplan

1. Monitoring of bilateral trade flows between Ukraine and EU under the DCFTA

2. Ukraine-EU DCFTA contact point

3: DCFTA Hotline for Business

4. Ukraine - EU High Level Dialogue On Industrial Policy

5. Accession Of Ukraine To The Regional Convention On Pan-Euro-Mediterranean Preferential Rules Of Origin (PEM)

6: Implementation of AA Trade And Sustainable Development Chapter

7. DCFTA Opportunity Studies

Analysis (analytical papers) on the implications for

business (evidence)

Consult with business on findings

Use Findings as appropriate in

implementation

Awareness raising and understanding




Further ReadingReference URL

The EU Ukraine Association Agreement Text http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2014:161:FULL&from=EN

CTA Economic & Export Analysts Ltd (2015) Encyclopaedia on Exporting to the EU under the DCFTA

http://www.kmu.gov.ua/control/uk/publish/article?art_id=248801643&cat_id=244276429%20

Institute for Economic Research and Policy Consulting (2015) Transparency system under The EU-Ukraine Association Agreement

http://www.ier.com.ua/files//publications/Books/EU_Transparency_politics_eng1.pdf

European Commission (2016) Blue Guide to New Approach Directives and Conformity Assessment

http://ec.europa.eu/DocsRoom/documents/18027/

European Commission (2008) User’s Handbook on the Pan Euro Med Rules of Origin

http://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/customs/customs_duties/rules_origin/preferential/handbook_en.pdf

European Commission (2004) From farm to fork - Safe food for Europe’s consumers

http://ec.europa.eu/dgs/health_food-safety/information_sources/docs/from_farm_to_fork_2004_en.pdf

http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2014:161:FULL&from=EN

http://www.kmu.gov.ua/control/uk/publish/article?art_id=248801643&cat_id=244276429

http://www.ier.com.ua/files/publications/Books/EU_Transparency_politics_eng1.pdf

http://ec.europa.eu/DocsRoom/documents/18027/

http://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/customs/customs_duties/rules_origin/preferential/handbook_en.pdf

http://ec.europa.eu/dgs/health_food-safety/information_sources/docs/from_farm_to_fork_2004_en.pdf




Analysis Tools and Databases

DG Trade Export Helpdesk http://exporthelp.europa.eu/thdapp/index.htm?newLanguageId=EN

EU TARIC Database http://ec.europa.eu/taxation_customs/dds2/taric/taric_consultation.jsp?Lang=en

TAXUD – Utilisation of TRQs http://ec.europa.eu/taxation_customs/dds2/taric/quota_consultation.jsp?Lang=en&Code=090009&Year=2015&Expand=false

GI Database (non-alcohol) http://ec.europa.eu/agriculture/quality/door/list.html

GI Database (E-bacchus for wines)

http://ec.europa.eu/agriculture/markets/wine/e-bacchus/index.cfm?event=searchPEccgis&language=EN

GI Database (E-Spirit for spirits)

http://ec.europa.eu/agriculture/spirits/index.cfm?event=searchIndication

New approach Standards http://www.newapproach.org

NANDO http://ec.europa.eu/growth/tools-databases/nando/index.cfm?fuseaction=directive.notifiedbody&dir_id=33

SPS Authorised Countries and Establishments

http://ec.europa.eu/food/safety/international_affairs/trade/third/index_en.htm

http://exporthelp.europa.eu/thdapp/index.htm?newLanguageId=EN

http://ec.europa.eu/taxation_customs/dds2/taric/taric_consultation.jsp?Lang=en

http://ec.europa.eu/taxation_customs/dds2/taric/quota_consultation.jsp?Lang=en&Code=090009&Year=2015&Expand=false

http://ec.europa.eu/agriculture/quality/door/list.html

http://ec.europa.eu/agriculture/markets/wine/e-bacchus/index.cfm?event=searchPEccgis&language=EN

http://ec.europa.eu/agriculture/spirits/index.cfm?event=searchIndication

http://www.newapproach.org

http://ec.europa.eu/growth/tools-databases/nando/index.cfm?fuseaction=directive.notifiedbody&dir_id=33

http://ec.europa.eu/food/safety/international_affairs/trade/third/index_en.htm




QUESTIONS




For further information, please contact: Mark Hellyer

Lead Expert on DCFTA Analytical Studies and Consultation with Business

T: +380 939 918 9557 or +44 7703 345694

E: [email protected]

Documents

An Introduction to the AA/DCFTA · An Introduction to the AA/DCFTA Basic Principles and Understanding Mark Hellyer A4U STE on DCFTA Policy Implementation ... business (both international