IV.1 Approximation of legislation 10. IV.2 Trade 11. IV.3 Business and Investment 18. IV.4 Energy 20. IV.5 Environment 22. IV.

Transcription

1 -2,175( (,03/(0(17$7,212)7+(3$571(56+,3$1'&2 23(5$7,21$*5((0(17%(7:((17+((8$1'8.5$,1( &217(176 (;(&87,9(6800$5<, *(1(5$/35,1&,3/(6,,,32/,7,&$/',$/2*8(,9,03/(0(17$7,212)7+(3&$,135,25,7<$5($6 IV.1 Approximation of legislation 10 IV.2 Trade 11 IV.3 Business and Investment 18 IV.4 Energy 20 IV.5 Environment 22 IV.6 Transport 23 IV.7 Justice and Home Affairs 24 IV.8 Regional and cross-border co-operation 25 9,03/(0(17$7,212)7+(3&$,127+(5$5($6 V.1 Economic Co-operation 25 V.2 Cultural Co-operation and Education 32 V.3 Financial Co-operation 33 9,,167,787,21$/3529,6,2162)7+(3&$

2 , (;(&87,9(6800$5< 1. The Partnership and Co-operation Agreement between the European Communities and their Member States on the one part and Ukraine on the other was signed on 16 June 1994 and entered into force in March Trade related provisions of the PCA entered into force in February 1995 by way of an Interim Agreement. At the EU-Ukraine Summit in Copenhagen on 4 July 2002, Summit leaders recommended that the Co-operation Committee in a report to the next Co-operation Council evaluates the state of implementation of the PCA. 2. This report has been drafted jointly, with the participation of experts on both sides and drawing also upon information from the PCA subcommittees. It provides an overview of progress made during the operation of the PCA to date towards achieving and implementing its goals and objectives, taking into account in particular the revised priorities endorsed at the March 2002 Co-operation Council. The report also seeks to indicate where there is more work to be done for full use of PCA potential. At the same time it highlights possibilities for deeper co-operation. Finally, where there are differences between both sides assessments, these have been indicated. 3. Although the report does not refer to a clearly defined reference period, the approach has been to record discussions and developments over the last 5 years at the mid-way point of the initial ten year period of the PCA. Some recent Ukrainian measures from early 2003 are taken into account. However, it was jointly decided to limit the report to issues which have actually been discussed in the PCA structures, whereas other developments have been excluded no matter how important or useful they might be. 4. In some areas the PCA structures have been used for broader discussions than the scope of the PCA as designed in the early-90s. This was the case in particular with regard to the political dialogue where a full account of EU-Ukraine co-operation would be incomplete without reference to the field of European Security and Defence Policy (ESDP). Discussions on consequences of enlargement also took place without a specific provision in the PCA. A third field is Justice and Home Affairs (JHA) which, like EU enlargement, rose in significance on the political agenda of both sides only after the period the PCA was adopted. 5. Technical assistance is dealt with in this report in each relevant section, as appropriate, thereby continuing the approach in the PCA institutions where technical assistance has normally been raised in connection with particular policy fields. Section V.3: financial co-operation, contains an overall assessment, which provides some figures and explains that over time both sides have sought to make more efficient use of Tacis assistance, in a targeted way in support of PCA objectives. Ukraine stated its desire to focus on support to measures to be taken in accordance with its European choice and to get access to EU programmes under which resources may become available after the forthcoming EU enlargement. 6. Both sides agreed that good use has so far been made of the PCA, and substantial progress towards the objectives of the PCA can be recorded. In particular the sides advanced their co-operation in fields such as political dialogue, trade and investment, including progress related to WTO accession, and also on science and technology, customs, statistics and economics. On legislative approximation, energy, including nuclear safety issues, the basis of co-operation is firmly established, but the need for further intensified efforts has been noted. A positive basis for co-operation on Justice and Home Affairs issues has also been established, beyond the limits of the PCA provisions. A number of other fields have been assessed as requiring, or having scope for, further development under the PCA to deepen co-operation: environment, transport, space, 2

3 telecommunications. The freedom of the media in Ukraine is another area where further efforts are needed. 7. As regards differences between the Ukrainian and EU assessments of implementation under the PCA, a number of points have arisen, notably, in the trade and investment field. Increased levels of bilateral trade, intensified exchange to resolve certain trade irritants and disputes, and support of Ukraine s WTO accession process, including Ukrainian efforts to comply fully with WTO principles provided for in the PCA, have been highlighted by both sides as positive developments. Both sides welcomed Ukraine s efforts and commitments to overcome the remaining areas of non-compliance with PCA trade-related and investment provisions and expect concrete progress soon. 8. Discussions on enlargement consequences have been held in the PCA framework. The Parties stated their eagerness to make full use of the benefits of this process for enhancing their bilateral relationship, and confirmed their readiness to address the challenges arising from it. Ukraine positively perceives EU enlargement and welcomes it as the way to implement its own European agenda. However, both sides were unable to agree on how to describe the situation in this report in more detail. Ukraine has stated its concern that few actions have been taken to address the possible related problems, including: visa regime, trade-related effects, and impact on co-operation between business communities. Ukraine emphasised that a way forward would be for Ukraine to align its legislation, norms and standards as far as possible to the EU model, and for the EU side to consider an inclusive policy on involvement of Ukraine to European integration. The EU underlined that the opportunities created by the enlargement would outweigh the potential difficulties and that all necessary legislative, regulatory, and institutional adaptations would be made at the appropriate time when the accession process is completed. 9. The prospects for deeper co-operation aimed at stability and prosperity in Europe have been discussed under the PCA structures. The EU intention to consider a new proximity policy, and Ukraine s expectations for new forms and methods of co-operation will be reflected. The EU s experience with candidate countries could be drawn upon in this undertaking. Ukraine emphasised the desire for a new bilateral agreement similar to the current Europe agreements and considers that the experience of EU candidate countries gives a good example for a path which should be followed by both sides. 10. Overall on advancing the objectives of the PCA as laid down in Article 1, the joint assessment of the progress so far is as follows: q q q q SURYLGHDQDSSURSULDWHIUDPHZRUNIRUWKHSROLWLFDOGLDORJXHDOORZLQJWKHGHYHORSPHQW RIFORVHSROLWLFDOUHODWLRQV this has been largely achieved. Structures created have been functioning and the agenda has become progressively more substantialand operational. µwrsurprwhwudghdqglqyhvwphqwdqgkduprqlrxvhfrqrplfuhodwlrqv : Discussions and contacts have been intensified under the PCA, the goal is an open-ended one and the current state of implementation is mixed. Both sides have recognised that there is more potential to be used in this field and that certain specific provisions are not yet implemented in full. WRSURYLGHDEDVLVIRUPXWXDOO\DGYDQWDJHRXVHFRQRPLFVRFLDOILQDQFLDOFLYLOVFLHQWLILF WHFKQRORJLFDODQGFXOWXUDOFRRSHUDWLRQ. Whilst financial and science and technology cooperation saw steady progress, social and cultural co-operation have scope to be developed further, but specific instruments are not in place in this area. Also, these areas have remained lesser priorities. WR VXSSRUW 8NUDLQLDQ HIIRUWV WR FRQVROLGDWH LWV GHPRFUDF\ DQG WR GHYHORS LWV HFRQRP\ DQGWRFRPSOHWHWKHWUDQVLWLRQLQWRDPDUNHWHFRQRP\ : the consolidation of democracy objective has been supported inter alia by the political dialogue bearing in mind, that the achievement of this goal is the responsibility of Ukraine. As regards economic development and the transition towards a market economy, related discussions and 3

4 negotiations on Ukraine WTO accession have supported this process. For all objectives EU technical assistance should continue to be provided as a complementary tool for Ukraine in its steps to achieve required standards. Ukraine would like to receive more support and stronger instruments or mechanisms than foreseen in the PCA. 11. Each of the sections of this report contains a short summary of the prospects for future cooperation. The most salient proposals are: q On political dialogue, discussions should be intensified on future EU-Ukraine relations, based on the EU s Wider Europe initiative, as well as Ukraine s desire for a new level of contractual relationship similar to the Europe agreements; q On international and regional issues, dialogue should continue and appropriate action be pursued to promote the strengthening of stability in Europe, in particular support to the political and economic integrity of the Republic of Moldova, as well as solution of the Transdnistria conflict; q On legislative approximation, the current speed and scope of work needs to be intensified and the scoreboard to be established; q On trade, the pending problems should be solved without delay, the effects of enlargement need to be taken into account, and enforcement of trade-related legislation needs to addressed further; q On energy, the revision of some aspects of the K2R4 project is a key issue. Co-operation should be further developed concerning in particular transit of gas and oil, energy sector reform, energy efficiency; q On transport, Ukrainian increased presence in the European transport institutions should be expanded; safety issues in particular in maritime and aviation transport need to be addressed; q In Justice and Home Affairs co-operation should be intensified under the Action Plan and the related scoreboard; q On regional and cross-border co-operation, the context of INTERREG and Tacis funding of projects should be further exploited for increased co-ordination and synergies; q On Science and Technology, the S & T Agreement and the openness of the 6 th EU Framework Programme provide opportunities to be used; q On education, the use of the Tempus programme should be made more efficient. 12. In addition, both sides concluded that more efficient use should be made of the PCA bodies; solutions should be of binding nature; and Ukraine noted its need to strengthen its institutional capacity with assistance from the EU. Adoption of the rules on dispute settlement would be helpful to this end. 13. The Co-operation Council is invited to consider this report as a basis for its reflections on the future development of EU-Ukraine co-operation. In addition the report provides further guidance on specific commitments still to be fulfilled and on possibilities for deeper co-operation in particular sectors under the PCA. The subcommittees and other relevant bodies are invited to make use of this report in their further work. March

5 , *(1(5$/35,1&,3/(6 q Title I art. 2-5 outlines a number of general principles: - Respect for democratic principles and human rights - Market economy - Regional co-operation - Possibility of establishing a free-trade area - Review of, and appropriate amendments to, the PCA 14. According to the "General Principles" as laid down in Article 2 the parties of the PCA agree that respect for democratic principles and human rights, as well as for the principles of market economy, underpin their internal and external policies and constitute an essential element of partnership and of the PCA. These principles have been high up on the agenda of all formal meetings of PCA bodies as well as in regular political dialogue meetings, and in particular during the yearly Summits. 15. The EU side has also taken these occasions to inform Ukraine about developments in the EU and enlargement. There have been regular exchanges on international issues, including democracy and human rights, in different parts of the world. 16. On the basis of considerable progress made since Ukraine s independence, as well as since the entering into force of the PCA, both parties conclude that Ukraine progressively developed democratic principles and human rights and the rule of law. This has also been recognised by OSCE and the Council of Europe. 17. On the occasion of the Ukraine parliamentary elections in March 2002 progress was recorded in political culture and a higher level of engagement of the society in management of the State through political parties, development of civil society and the NGOs sector, and the freedom of assembly. The EU acknowledged these achievements but also called on Ukraine to address the shortcomings identified in this context. The July 2002 Summit noted that the elections had demonstrated Ukraine s commitment to achieving further democratisation of Ukrainian society ; it also supported the commitment of Ukrainian authorities to strengthen the judiciary, freedom of the media, human rights, and civil society, and agreed that co-operation and EU assistance in these areas should be intensified. Effective implementation of this commitment is of great importance to both sides in support of common European values. 18. In addition, the EU has raised concerns in relation to judicial reform and implementation of legislation. The EU has also continuously raised particular concerns in connection with rights and freedom of journalists. The EU underlined that actions that would amount to undue influence on journalists and owners of media outlets would hamper the democratisation of Ukrainian society. The EU called on Ukraine to address the deficiencies and shortcomings as identified in this context, notably the freedom of mass media and the protection of journalists. Media legislation needed to be implemented in accordance with OSCE and Council of Europe standards. 19. Ukraine has made considerable progress towards implementation of market economy principles and norms. A programme of economic and structural reforms to this end has been launched by the Ukrainian Government. General progress has been kept under review by the PCA bodies, and consistent support offered by the EU, including through Tacis, for structural reform and legislative approximation in various sectors, as addressed later in this report. Positive results in the implementation of economic reforms in Ukraine are reflected presently in positive trends for GDP growth, inflation and real incomes. Both sides welcome the reform efforts so far made, but recognise that there are a number of elements still to be implemented (amongst which finalisation of tax reform, and largescale privatisation). 20. Article 3 of the PCA stresses the importance of co-operation and good neighbourly relations in the region of former Soviet Union. In accordance with this article, Ukraine 5

6 has made a tangible contribution to developing prosperity and stability in the region through development of trade links, transport and energy networks. There have been positive developments in this respect, including in the framework of Black Sea cooperation and GUUAM. 21. Ukraine has actively participated in settlement of conflicts in the region. Ukraine is one of the mediators in the efforts to find a solution to the Transdnistria conflict and has regularly informed the EU about this process. Both sides have stressed at regular occasions the importance, in this context, of the political and economic integrity of the Republic of Moldova, as well as of a solution of the Transdnistrian conflict by political means. Other regional issues are the subjects of regular discussions and consultations. The sides concluded that there is necessity for more intensive dialogue in this respect, including elaboration of joint approaches and appropriate action, and monitoring of policy implementation. 22. Article 4 provides for a possible Free Trade Area with the EU. The Co-operation Council in June 1998 reviewed the situation in accordance with Article 4 and agreed that implementation of the PCA and WTO accession should be Ukraine s first priority. This remains the case. The joint study on an economic feasibility of an FTA completed in November 1999, showed that: (i) committed and sustained macroeconomic and administrative reforms were essential to create a healthy investment climate, which is a precondition for an FTA; (ii) there should be a significant level of implementation of the PCA before new agreements could be considered; (iii) significant progress should be made on WTO accession (notably on the regulatory aspects) before any new joint examination of a FTA. Ukraine transmitted in July 2002 a list of priority measures that must be implemented in preparation for a FTA which should be discussed at the next trade subcommittee. 23. Ukraine should give priority to ensuring full implementation of its trade-related commitments under the PCA. Significant progress in negotiations for Ukraine s accession to the WTO facilitates work towards the FTA. Technical assistance will continue to be provided through the TACIS programme as far as possible to assist Ukraine in complying with these objectives as well as to continue to improve its investment climate. 24. At the Summit in July 2002 both sides agreed that full implementation of the relevant PCA provisions and WTO accession would be the basis for eventually establishing a Free Trade Area. 25. Article 5 provides for review by mutual consent of the PCA in view of changes in circumstances, and in particular on accession to WTO, with a first review scheduled three years after entry into force of the Agreement (if, as is the case, this is earlier than Ukraine s accession to the WTO). This provision was the basis upon which an Additional Protocol was signed between the parties in April 1997 to enable Austria, Finland, and Sweden to become parties to the Agreement.,,,32/,7,&$/',$/2*8( 26. Articles 6-9 of the PCA provide for the establishment of a regular political dialogue, including at the highest level. This dialogue shall "support the political and economic changes underway in Ukraine and contribute to the establishment of new forms of cooperation" and is meant to bring about closest convergence and co-operation between the parties on the general principles in their domestic and external policies as laid down in Art. 2. The PCA also encourages the EU and Ukraine to co-operate on matters pertaining to the strengthening of stability and security in Europe. 27. While political dialogue between the EU and Ukraine has taken place since Ukraine's independence, and in particular was developed after the signing of the PCA in 1994, the entry into force of the PCA in 1998, as well as the adoption in 1998 of the Strategy of 6

7 Ukraine s integration to the EU and in 1999 of the EU Common Strategy on Ukraine, have contributed to a new level and scope of bilateral contacts. 28. The EU and Ukraine developed a wide ranging political dialogue at different levels and on different subjects. Within the institutional framework of the PCA, high level dialogue is conducted in the yearly Co-operation Council at ministerial level. Furthermore, while the first ever Summit was held in 1997 i.e. before the entry into force of the PCA, five yearly meetings have been held at Summit level since then. Meetings of the EU-Ukraine Ministerial Troika have been held once a year, alternating between Kyiv and the capital of the EU presidency, and, as appropriate, in the margins of the United Nations General Assembly. Other ad hoc meetings, including between the Presidents, have taken place at different occasions. Also, since 2000 the Secretary General of the Council of the EU / High Representative for CFSP and his staff have developed intensive contacts with Ukraine, including with the President. This process is supported by a range of senior officials and expert meetings of the EU Troika with Ukraine, including the EU Political and Security Committee, Political Directors, regional experts (COEST), experts on questions of OSCE and Council of Europe (COSCE), experts on illegal migration (SCIFA) and law enforcement co-operation (CATS), experts on non-proliferation and disarmament (CONOP/DODUN, COARM). These meetings are usually held once during each EU presidency. 29. The political dialogue has been the occasion for both sides to exchange views on matters related to foreign, security and defence policy, beyond the envisaged scope of the PCA, including exchange of information on the development of European Security and Defence Policy (ESDP), and perspectives for future co-operation with Ukraine. On the basis of the conclusions of the Nice European Council and the EU-Ukraine Summits of Paris and Yalta, the Council adopted in 2002 "Arrangements for consultation and co-operation between the European Union and Ukraine on crisis management" as an additional tool. Based on discussions in 2002 Ukraine concluded an agreement on its participation in the EU Police Mission in Bosnia and Herzegovina, which associated Ukraine with the provisions of the EU Joint Action on this matter. 31. Expert exploratory talks are under way on the issue of the use by the EU of Ukraine s long-haul aviation in ESDP operations. Ukraine expressed its wish for an early positive result that should be in the interest of both sides. 32. Ukraine and the EU have common or similar views concerning many international issues, and Ukraine aligned itself unilaterally with most of the EU CFSP statements. Ukraine s practice is appreciated and encouraged. Ukraine repeated the desire to be included in the number of states which aligned themselves with the EU CFSP statements, as well as to be closely associated with elaboration of common positions. 33. The EU-Ukraine Parliamentary Co-operation Committee (PCC) has been established in compliance with Art.9, of the PCA, and has met 5 times since the entry into force of the PCA. It provides a good opportunity for political dialogue at parliamentary level, in the presence of representatives of the Ukrainian government, the European Commission and the Presidency of the European Union. The PCC has discussed the state of implementation of the PCA, political and economic developments in Ukraine and the EU, and international issues. It has adopted recommendations to the Co-operation Council. 34. Both parliaments have also supported the above-mentioned strategies on EU-Ukraine relations, thereby re-enforcing the calls for a policy of European integration of Ukraine, and for full respect of the common values on both sides. (8HQODUJHPHQW 35. The different political dialogue formats have discussed the challenges and opportunities resulting from the forthcoming EU enlargement as well as the prospect for future EU- 7

8 Ukraine relations in this context. This dialogue supplements the more specific discussions within the appropriate PCA bodies on individual issues related to EU enlargement, including trade, assistance, border management, cross-border and regional co-operation, migration and visas, and intensified efforts to combat organised crime. 36. In the PCA framework the Parties stated their eagerness to make full use of the benefits of this process for enhancing their bilateral relationship, and confirmed their readiness to address the challenges arising from it. Ukraine positively perceives EU enlargement and welcomes it as the way to implement its own European agenda. 37. Both at the 2001 and 2002 Summit level meetings it was recommended to intensify discussions on the effects of enlargement in the framework of the relevant PCA bodies, including on issues related to trade, movement of persons and visas. In this context, EU and Ukraine s leaders encouraged also the development of regional and cross-border cooperation, including a human dimension. To facilitate contacts between the enlarged Union and Ukraine it was decided to work together to make border crossing by citizens of Ukraine and EU Member States as easy and efficient as possible. 38. However, the sides have been unable to present a common view on more specific aspects related to enlargement. The position of each side is as follows: 39. 8NUDLQH has expressed its concern that few actions have so far been taken to address the possible problems, which the EU enlargement would bring for Ukraine, and to prepare EU Ukraine relations to challenges to be met after the enlargement. The Ukrainian side is particularly concerned with introduction of visa regime by Ukrainian neighbours. Free movement of persons between Ukraine and its western neighbours was a big achievement of post Cold War Central and Eastern Europe and Ukraine has indicated it should be respected and renewed by common efforts as soon as possible. Ukraine noted that accession of the new members to the Schengen Treaties has already caused a reduction of cross-border trade and might undesirably influence the development of co-operation between business representatives, cultural exchange, tourism, and public relations. Introduction of a visa regime could also result in complications for regular transport connections between Ukraine and the enlarged EU and in a reduction of the passenger operations volume. 40. Ukraine is concerned about the ending of Free Trade Agreements with some candidate countries, and considers that the establishment of an Ukraine-EU FTA could mitigate this problem. The Ukrainian side is also concerned that the extension of the EU s antidumping measures to the new Member States may lead to the closure of traditional markets for Ukrainian exporting producers, and stressed that a constructive solution to this problem should be found. 41. Necessity of further development of Euro-regions with the candidate-countries and improvement of co-ordination between different EU assistance programs focused on transborder and regional co-operation has been stressed. 42. The position of Ukraine concerning factors, ways and specific measures for overcoming of the undesirable consequences of the EU enlargement in different spheres was stated in the document, handed over to the EU side in December Ukraine has emphasised that a way forward in context of the enlargement would be for Ukraine to align its legislation, norms and standards as far as possible to the EU model, and for the EU side to consider an inclusive policy on involvement of Ukraine to European integration KH(8 has indicated that prior to the end of the enlargement negotiations and the actual date of accession, there has not so far been a basis for taking measures on those issues where any legislative, regulatory, or institutional adaptations would be required in EU- Ukraine relations. Such adaptations would have to follow their own particular procedures in due course, and the PCA should serve as a framework for monitoring these developments. As regards the EU response to the Ukrainian concerns on the expected 8

9 economic effects of enlargement, the EU sees the new opportunities created as outweighing possible disadvantages. On the effects of enlargement in other areas, the processes underway jointly have already been summarised (in paragraphs above). The EU side has stressed that it believes that the current EU enlargement, by giving a new dynamic impulse to prosperity and economic development in Central Europe, should entail considerable potential benefits for the direct new neighbours, in particular Ukraine. (88NUDLQH)XWXUH5HODWLRQV Pursuant to Article 6 (political dialogue shall contribute to the establishment of new forms of co-operation ), Ukraine has at an early stage suggested to envisage the establishment of an association process with a prospect for EU membership. The EU Common Strategy on Ukraine acknowledged Ukraine s European aspirations and welcomed its pro-european choice. In 2002, the EU launched an internal discussion on future relations with its immediate new neighbours and has explicitly recognised the need for a differentiated approach considering each country s distinct political and economic situation, potential and aims. Against this background, the political dialogue started to include discussion on the future of EU-Ukraine relations, in which the Ukrainian side expressed its preference for defining a new contractual basis for bilateral relations, reflecting its strategy of a European choice, including a perspective for EU membership. 45. As an additional element in this context, the European Council in June 2001 decided also that Ukraine, together with Moldova, will be invited to the next meeting of the European Conference. The April 2003 European Conference in Athens will be the first meeting in the new format. $66(660( In general, the political dialogue between both sides has been intensive and partly gone beyond the scope of the PCA, such as when ESDP issues were involved. It has yielded some practical results and paved the way for further discussions, including on the future of bilateral relations and the effects of enlargement. There is a good basis for intensified co-operation on implementation of human rights and democratic principles as well as regional issues including support to processes of conflict prevention and settlement. 47. The EU has appreciated Ukraine s decision to align itself with a large number of declarations that the EU has made. It has also noted the emphasis laid by Ukraine on closer relations with European political institutions and it welcomed Ukraine s interest in contributing to future EU operations in the context of ESDP; the modalities regarding the participation of partner countries being in the process of being established. )857+(5&223(5$7, EU internal discussions on Wider Europe open a window for further elaboration with Ukraine of a common vision of further development of relations. 49. The political dialogue should further intensify in the near future, both in general and with regard to specific topics such as the challenges of EU enlargement and the future of EU- Ukraine relations. Both sides should take into consideration the views of their parliaments in this context. 50. With regard to enlargement in particular, further intensified attention should be paid to identifying the adaptation needs resulting from enlargement for EU-Ukraine relations, as well as to the implementation of necessary measures in due course. 51. Discussions on future bilateral relations have to be intensified with a view to developing common vision, taking into account the experience of the EU candidate countries. 52. In relation to the priorities set out in Article 6 of the PCA, including co-operation on strengthening security and stability in Europe and the observance of principles of democracy and respect and promotion of human rights, the political dialogue should be 9

10 pursued yet more intensively to enhance concrete progress in the key areas outlined above.,9,03/(0(17$7,212)7+(3&$,135,25,7<$5($6 IV.1 Approximation of legislation (article 51) q Objective of approximation of Ukrainian law to that of the EC, focussing in particular on a number of areas outlined in article 51(2). 29(59,(: 53. Legislative approximation is a joint priority under the PCA. Ukraine in the framework of its Strategy and Programme of Integration to the EU has created the organisational structure and legal base to support this objective, setting out since 2001 action and working plans for approximation of legislation. 54. In Ukraine, an Interagency Co-ordination Council for approximation of legislation to that of the EU was established in A single system for planning, co-ordination and control over preparation of draft laws and approximation of the legislation by the executive bodies in Ukraine was established in The Comparative Law Centre and the European Law Translation Centre operate within the Ministry of Justice of Ukraine. The organisational structure was reinforced in 2000 when a National Council on Approximation Ukrainian Legislation to the Legislation of the EU was established under the President of Ukraine. 55. The legislative approximation objective has been supported through EU technical assistance, particularly though the Tacis funded Ukrainian-European Policy and Legal Advice Centre (UEPLAC), but also a number of other projects including Legal studios and Environmental management standards for enterprises. In 2002, it was decided that UEPLAC should assist the Ukrainian authorities in the process of planning and prioritising further work on legislative approximation by establishing a scoreboard, which would allow progress to be monitored, including on enforcement. 56. In order to reinforce its efforts so far on legislative approximation, the Verkhovna Rada has recently adopted a Law On Conception of the Overstate Programme On Approximation of the Legislation of Ukraine to the Legislation of the EU (21 st of November 2002), which defines the goals, main tasks, elaborating principles, structure and organisational provisions of the Overstate Programme for adaptation of the Ukrainian legislation to the legislation of the EU. Under this law, a new Overstate Programme is to be drawn up by the end of April $66(660( Serious efforts have been made so far by the Ukrainian Government on the objective of approximation of legislation, assisted by the EC. In particular, progress has been made on legislative approximation in areas such as competition, financial services, banking, the Land Code and intellectual property rights. The Overstate Programme for adaptation of the Ukrainian legislation to the legislation of the EU currently under preparation by the Ukrainian Government would be a useful basis to take this work forward in an intensified way aimed at efficient implementation of legislative adaptation, notably on areas highlighted in article 51 of the PCA. 10

11 58. The EC has provided assistance for Ukrainian legislative approximation efforts, and has encouraged a prioritised and benchmarked approach as envisaged in the scoreboard concept. However, the Ukrainian side has sought an increase in efficiency of support to its approximation efforts. The Verkhovna Rada clearly has an important role to play in Ukraine s efforts to approximate its legislation to that of the EC. Enforcement of approximated legislation should be strengthened. )857+(5&223(5$7, Both sides agree that the current speed and scope of work needs to be intensified and improved, focussing on priority areas, and noted that the adoption of the Overstate Programme for adaptation of the Ukrainian legislation to the legislation of the EU, together with the scoreboard to be established, should provide a good basis and tools for the implementation of this priority objective. The Ukrainian side has emphasised that the implementation of the Overstate programme would now require more appropriate forms of assistance from the EU. IV.2 Trade 7UDGHLQJRRGV7LWOH,,,$UWV q This title of the PCA contains the basic GATT principles affecting trade in goods: most favoured nation clause; national treatment principle; freedom of transit; general prohibition of quantitative restrictions (except for textile and certain coal and steel products and nuclear materials, which will be governed by a separate agreement, and for those cases justified on the grounds listed in Article 20 of the PCA, e.g. public morality, public policy, health protection, etc.). q Parties engage to apply between themselves GATT Articles VII, VIII, IX and X; and agree to exempt from import duties and charges temporary imports of goods which are carried out in accordance with the international conventions in this field. q Parties can take appropriate measures if a product is imported into the territory of the other Party in such increased quantities or under such conditions that it causes or threatens to cause injury to the domestic producers of the like product. (safeguards) Art. 18 contains a consultation procedure before the imposition of any such measure. q Parties maintain their rights to apply anti-dumping or countervailing measures in accordance with the relevant GATT Agreements or related internal legislation. However, parties engage to inform interested parties concerned and to give priority to constructive measures, before imposing any anti-dumping or countervailing duties. 29(59,(: 60. Bilateral trade between Ukraine and the EU has increased in the last two years, with an increase of around 25% in The share of Ukraine in the EU trade is just 0.4%. The EU share in the trade of Ukraine is 22 %. 61. Ukraine has made efforts to solve outstanding breaches of the PCA in the field of trade and investment over the period under assessment and at the same it has tried to comply with WTO principles provided for in the PCA. 62. A number of outstanding trade issues have been solved or are in the process to being solved. However, Ukraine does not yet fully comply with a number of PCA trade-related and investment provisions, in particular those provided for in Articles 10, 14, 15 and (&,),&,668(6 63. Specific problems have arisen in the following areas in the period of implementation of the PCA to date, and have been the matter of dialogue between the Parties in the appropriate PCA bodies in an attempt to resolve the differences. However, in certain 11

12 cases, as highlighted below, adequate steps have not yet been taken to resolve the breach of the relevant PCA provisions. These should be an important focus of further efforts to fully implement the PCA provisions in this Chapter. Discriminatory measures affecting exporters, notably on VAT 64. Both sides remain concerned about the situation regarding VAT reimbursements to exporters, which is in the process of being solved. 65. The EC has also raised concerns about the restrictive application of the concept of "export" by Ukrainian authorities, which de facto, exclude certain transactions from the category of exports even when the final destination is outside Ukraine (i.e. FOB transactions). The Ukrainian side responded in September 2002 by issuing an instruction (no 418) by the State Tax Administration approving an interpretation applying zero VAT rates on export transactions out of customs territory of Ukraine. In accordance with this explanation the tax payer who is selling goods out of the customs territory of Ukraine has the right to use zero VAT rate and refund it from the budget after the goods factual crossed the customs border of Ukraine only (after registration of customs cargo declaration has been fully completed). It does not depend on terms and conditions of delivery of such goods in accordance with such INCOTERMS rules. 66. The Law of Ukraine No. 2899, passed on 20 December 2001 by the Verkhovna Rada, introduced a discrimination against all companies with foreign investment (i.e. where at least 10% of the capital is non-ukrainian), which cannot use any longer promissory notes to be redeemed against future VAT credits. An instruction of the State Customs Committee to resolve the issue, amongst others for EU Member States, has solved the issue in practice, although sporadic complaints arise. Nonetheless, the legislation has not yet been amended to eliminate the discriminatory elements. Import restrictions, including prohibitions, quotas and licensing systems 67. The law n. 468/97 of July 1997 on state regulation of agricultural imports, subsequently amended by the law n.32/98 of January 1998, restricts the imports of live stock products (to 10% of Ukrainian production) through DQQXDO TXRWDV, from 1997 until The Ukrainian side has informed the EU that this restriction expired on 31 December 2002, which is a welcome development. 68. The Cabinet of Ministers, on a yearly basis, issues a resolution defining those products that will be subject to LPSRUWOLFHQVLQJ. The EC welcomes the removal in January 2002 of the import licensing requirement concerning veterinary medicines, cosmetics and personal hygiene products (except those in aerosol form), and insecticides used for domestic pets. Pharmaceutical products were removed from this list in However, non-automaticimport licensing is still required, inter alia, for crop protection products and personal hygiene products in aerosol form. This is in addition to requirements for registration and certification. Cereals trade 70. In the middle of December 2002 the Council of Ministers of the EU approved a decision on establishing a tariff quota in the market of cereals starting from 1 st January Under this quota Canada and US receive a country allocation. In consultations held in November 2002 the possibility of a specific country allocation for Ukraine was discussed, as for the US and Canada. However, so far no country allocation has been granted to Ukraine. 71. Ukraine considers this as discrimination in trade and a violation of the MFN principle in Article 10 of the PCA, and as against the aim of co-operation of the sides in the agricultural sector envisaged by Article 60 of the PCA. 12

13 72. The EC considers that the modification of its import regime, made in compliance with WTO rules, allows Ukraine access to the erga omnes part of the quota and in a nondiscriminatory way and that Ukraine is able to benefit from this, even without a specific country allocation. Export Duties, Restrictions and Licensing 73. The law N. 180/96 of introduced export duties and a minimum export price on live animals, hides and skins. The EC requested the removal of these restrictions, however, the Verkhovna Rada approved in February 1997 a law modifying some individual taxes, but maintaining in general the export duties. 74. A new export duty on ferrous scrap ( SHUWRQZDVLQWURGXFHGDWWKHHQGRIDQG entered into force on 1 January On non-ferrous metal scrap the 1999 Ukrainian Law on Scrap Metal introduces restrictive conditions, including an export licensing mechanism, on trade of non-ferrous scrap. Since August 2000, the Ukrainian Cabinet of Ministers instituted a full ban on exports of non-ferrous scrap metal. 76. While the EC considers that this measure violates Article 20 of the PCA as it is not mirrored by any corresponding domestic restriction (domestic trade remains free, though regulated by administrative rules), and thus constitutes a disguised restriction on trade, the Ukrainian side notes that export ban on non-ferrous metal scrap is not a disguised restriction on trade but it is a decision of the Government motivated by reasons of economic safety of the state. 77. The Verkhovna Rada passed in June 2001 a law that decreased the seasonal export duty on sunflower seeds applied by Ukraine to 17% and at the same time banned outward processing contracts for sunflower seeds not subject to the export duty. The EC considers that the two measures represent a restriction to trade. Customs Regulations and Procedures (see also section V.1) 78. The new Ukrainian Customs Code, which was signed by the President in August 2002, will enter into force from January 2004 and should allow for an efficient and smooth movement of goods into and out of Ukraine and will eliminate the legal uncertainty and lack of transparency for economic operators under which the customs authorities are currently working. The EC expects that the new Customs Code should also simplify the procedures for customs clearance, e.g. by moving to a one stop system and thus, eliminating the current complex and time-consuming procedures for customs clearance. This would significantly facilitate trade. 79. )HHVDQGFKDUJHVIRUVHUYLFHVUHQGHUHG The EC has raised its concern about the Law of Ukraine No III "On Amendments to the Law of Ukraine On Application of a Single Fee Collected at the Points of Crossing of the State Border of Ukraine" adopted by the Rada on 12 July 2001, which sets unified rates per vehicle of the general fee to be collected at Ukrainian borders. The calculation of the single fee appears to be done on the basis of the vehicle type and to cover the performance of a number of controls at the border (sanitary, veterinary, phytosanitary, radiological and ecological). The EC welcomes the simplification of Ukraine s fees system, but would seek further discussions to clarify this issue in order to ensure that the current single fee is compatible with GATT Article VIII, which is incorporated by reference in Art 16 of the PCA. Registration procedures 80. Registration and pre-registration can be used as a market barrier in a fashion similar to certification, with foreign companies exposed to arbitrary administrative decisions and lack of notification of regulatory changes. Ukraine has made progress recently, in particular as concerns pharmaceutical products. It is important to continue development 13

14 of clear and transparent procedures for registration and pre-registration of goods in line with GATT principles contained in Article 16 of the PCA. Excise Taxes 81. Discriminatory rates applied in Ukraine on some products (notably on ethyl alcohol, certain alcoholic beverages, including wine, and cars) are infringements of the national treatment principle. 82. The law of Ukraine no. 311/13 of 11 December 1998 introduced some temporary lower rates for locally produced ethyl alcohol and alcoholic beverages. These discriminatory excise rates, which were due to expire in 2000, were extended for another three years and were extended in December 2002 until 31 December Discriminatory excise taxes applying to cars are set to remain in place until July Draft legislation eliminating the discrimination is currently being discussed by the Government. 84. In addition on alcoholic beverages, the EC is concerned about the difficulties for EU exporters of the application of the excise stamp. Technical Barriers to Trade 85. Ukraine has made significant efforts to adapt its regulatory system, derived from the former soviet model, to European and international principles. The EC has repeatedly welcomed this positive trend, whilst emphasising that continuous efforts for implementation of the legislative framework are necessary to improve the situation in the field. 86. In May 2001, Ukraine adopted three laws, on conformity confirmation, on accreditation and on standardisation, which had been developed with TACIS assistance. The State Committee on Standardisation planned to proceed in with implementation of these laws, including adaptation of standards (voluntary), development of the modular approach towards the conformity assessment, and the drafting of technical regulations based on the European new approach directives. 87. The Ukrainian side have informed the EU that eleven national technical regulations on conformity assessment were developed in 2002, based on the EU new approach directives. During 2002 these regulations were submitted to the Government for consideration. The technical regulation on conformity assessment introducing the modular approach towards conformity assessment, which provides for application of a conformity declaration was also proposed to the Cabinet of Ministers. Further introduction of the EU new approach directives is foreseen in the Plan of measures for 2003 on adaptation of the Ukrainian legislation to the legislation of the EU. 88. On conformity assessment, Derzhstandart introduced a new scheme of type certification in 2000, in order to simplify the certification procedures applicable to certain mass-produced goods (e.g. electrical appliances, construction materials, etc.) by removing the need for plant inspections and increasing the duration of some kinds of certificates of conformity 1. These changes need to be implemented effectively and, in order to increase transparency, detailed lists of the products that remain subject to mandatory certification should be regularly updated and it would be helpful to companies 1 According to the type certification scheme schema an applicant can receive a certificate on conformity for a term of up to 1 year without inspection of production capacities. The technical surveillance under this schema provides for a periodical control of samples concerned. Accordingly, extended terms for certificates foreseen: with inspection of production capacities up to 2 years; with production capacities certification to 3 years; certification of quality system to 5 years. 14

15 operating and exporting to Ukraine if they were also available in English (Derzhspozhyvstandart web site, in Ukrainian). 89. In fact, a common complaint from EU industry is that certification procedures in Ukraine often lack the transparency and that fees requested for conformity assessment are not always proportional to the services rendered. The Ukrainian side has indicated that in order to create not less favourable conditions for import products on the Ukrainian market than for domestic products, and in accordance with article VII of the GATT, new rules of determination of costs of conformity assessment have been introduced (Regulation of the Cabinet of Ministers No 485 of ). Rules take into account principles of proportionality, as defined in provisions of the PCA and the GATT, and are applied for local and foreign applicants. 90. Ukraine has indicated that it has also fulfilled its commitments regarding demarcation of duties between accreditation and conformity assessment bodies. According to the Law of Ukraine "On accreditation of conformity assessment bodies" the National Agency of Ukraine on Accreditation was created and from 15 July, 2002 the Derzhstandard stopped its activity on accreditation. 91. Ukraine is taking further steps to avoid the creation of multiple testing requirements by different public authorities (e.g. by establishing a one-stop shop). The Ukrainian side has indicated that a draft law is to overcome the problem of duplication of controlling functions in state bodies. In November 2002 it was adopted in the first reading by the Verkhovna Rada. The development of an effective market surveillance mechanism is important in the new system, the Ukrainian side has indicated that it is being developed. 92. The parties agree that the main challenge now facing Ukraine in this area is the establishment and implementation of the new system and legislation, which is essential to the improvement of business and investment conditions in Ukraine. EU enterprises operating in or exporting to Ukraine have indicated that there are still efforts to be made in this respect. 93. There are also specific sector issues for standards, technical regulations and conformity assessment in Ukraine, which should be a focus for further work. 94. In the automobile sector, Ukrainian side has to take measures in order to harmonize the procedures of compliance confirmation in accordance with international and European rules and regulations. Ukraine has now signed the 1958 UN-ECE Agreement, and since January 15, 2001 has introduced the Model Certificate with the validity term extended to 5 years, which is welcome progress. 95. Nevertheless, Ukraine should take steps to ensure that type approval certificates should remain valid for the whole production life of the vehicle type (unless the vehicle type changes and a re-approval or extension of the approval is necessary). 96. Ukraine has to introduce the technical regulations on confirmation of the road vehicles compliance, their components, parts, systems and units in accordance with the EU Directives and with the UN-ECE Regulations. In addition, all factories of car producers exporting cars to Ukraine are subject to inspections by the Ukrainians officials, with costs borne by the respective manufacturer. Ukraine should take into account that EU factories are regularly audited by the EU Type approval authorities when establishing the frequency of its own checks. 97. Ukraine currently operates mandatory certification for processed and unprocessed foodstuffs. Compulsory certification also applies in Ukraine to a list of detergents under the Law of Ukraine "On Protection of Consumer Rights" but since mid-2000, a certification scheme that does not require inspections for production facilities is applied to electronic and electrical appliances at the applicant's request. 15