Brexit resources | 06 Jun 2018
Brexit: EU Association Agreements Q&A
- What is an EU Association Agreement and why is it relevant to Brexit?
- What does the EU Association Agreement with Ukraine cover?
- What does the dispute resolution mechanism in the Ukraine Agreement involve?
- Could the EU-Ukraine Agreement be a model for Britain's future relationship with the EU?
- How likely is the EU to agree to a Ukraine-style Agreement for the UK?
- How long would and Association Agreement take to negotiate?
- Is the Association model similar to the Continental Partnership model suggested by the think tank Bruegel?
What is an EU Association Agreement and why is it relevant to Brexit?
An association agreement is a treaty between the European Union and a non-EU country which creates a framework for co-operation between them. This often involves establishing a free trade area and an agreement to collaborate on issues such as defence and security, education, environmental protection and migration. The EU has over 20 association agreements, mainly with neighbouring countries. Their original purpose was to prepare non-member countries for EU accession but some now focus on improving trade and strengthening political ties with countries which may not be immediate candidates for accession. A full list of EU association agreements can be found here.
Against this background, association agreements have been suggested as a potential model for the future EU-UK relationship after Brexit. For example, in March 2018, the European Parliament passed a resolution recommending the use of an association agreement as a starting point for the future EU-UK relationship. A number of commentators/think tanks have also suggested association agreements as a possible model, including the Institute for Public Policy Research, the UK Trade Policy Observatory, the Institute for Government and former UK MEP Andrew Duff. Particular attention has focused on the EU-Ukraine Association Agreement, which is one of the most recent and wide-ranging association deals that the EU has entered into.
Although the aim of association agreements is to bring non-EU countries closer to the EU, in principle there is no reason why they could not be used to diverge from it. This is what commentators mean when they use terms such as "reverse-Ukraine" or "inverted association agreement" in connection with Brexit.
What does the EU Association Agreement with Ukraine cover?
Ukraine signed an association agreement with the EU in 2014. This established a deep and comprehensive free trade area (DCFTA) with the EU, eliminating over 98% of tariffs. Ukraine is not a full participant in the Single Market or the EU Customs Union, but instead has different levels of EU market access, depending on the degree of regulatory harmonisation in each sector. Where fully aligned (which effectively means adopting EU law), Ukraine's market access is on a par with that enjoyed by non-EU countries in the European Economic Area (EEA), such as Norway (see our Q&A on the EEA). In effect, this gives Ukraine the benefit of free movement of goods and services in sectors where the EU has agreed that there is full alignment. However, a key difference between the EEA Agreement and the EU-Ukraine Association Agreement is that the latter does not provide for free movement of people.
What does the dispute resolution mechanism in the Ukraine Agreement involve?
The EU-Ukraine Association Agreement has two dispute resolution regimes. The first is of general application, whereby the Association Council settles disputes by agreement (without ECJ involvement). The Association Council in the Ukraine Agreement consists of members of the European Council and of the European Commission on the one hand, and members of the Ukraine government on the other. For the deep and comprehensive free trade area (DCFTA), there is also a system of binding arbitration modelled on the WTO system of dispute resolution. There are three arbitrators: one representing Ukraine, another the EU and the third from another country as chairperson. Disputes over the interpretation of EU law must be referred to the ECJ for an opinion; as such, the ECJ remains involved, although strictly speaking it does not have jurisdiction over Ukraine.
The role of the ECJ in this model is potentially problematic given that it would cross a red line set by the UK government. It may be that for any UK-EU association agreement, use of the EFTA Court (which is one of the institutions of the EEA Agreement) could provide a compromise solution (as suggested by former President of the EFTA Court, Carl Baudenbacher – see further this article).
Could the EU-Ukraine Agreement be a model for Britain's future relationship with the EU?
Compared to the EU's free trade agreement with Canada, an association agreement like the one with Ukraine would allow the UK substantially greater access to the Single Market in respect of services (potentially including financial services), subject to maintaining regulatory alignment in each sector.
Close regulatory alignment could also mean fewer border controls and would involve less "unravelling" of existing UK laws. In addition, as a Ukraine-style agreement would not involve a customs union with the EU, the UK could still strike its own trade deals with third countries (as is also the case for non-EU members of the EEA Agreement, such as Norway).
More generally, the UK has repeatedly stressed its desire to continue close co-operation with the EU in areas such as defence and security. An association agreement would allow for the establishment of such a framework.
How likely is the EU to agree to a Ukraine-style Agreement for the UK?
If you take the view that the vote to leave the EU was primarily motivated by concern over high levels of immigration from the EU, the EU-Ukraine Agreement may appear an attractive option, since it does not require free movement of people. As such, the EU-Ukraine Agreement provides a precedent for the EU not insisting on the indivisibility of the 4 freedoms (see also the discussion of the Swiss-EU arrangements in this article).
There are, however, important differences between the position of the UK and the position of Ukraine. The exclusion of free movement of people from the EU-Ukraine Agreement was, arguably, an act of pragmatism by the EU, since it wished to avoid high levels of immigration from Ukraine (where living standards and wages are typically lower than in the EU). The same issue does not arise in relation to the UK; on the contrary, it is the UK which wants to restrict the ability of EU citizens to live and work here.
The starting positions for both agreements are also radically different: whereas Ukraine is moving closer towards the EU acquis, the UK is attempting to depart from it. In addition, the EU will be keen to avoid any UK-EU association agreement being seen as an attractive alternative to membership, since this risks undermining the EU as a whole.
In view of these factors, the EU may well take the view that an association agreement which gives the UK all the advantages of Single Market membership but without free movement of people is not something that it can agree to. However, there are many different options for what a final UK-EU association agreement could look like. It could potentially only apply to free movement of goods, not services, for example. It could also be combined with an EU-UK customs union (although this would constrain the ability of the UK to sign its own free trade deals, at least in relation to goods).
More generally, an association agreement may be attractive to the EU as it would provide an over-arching framework which can be developed more easily in future, in contrast to the "patchwork" of bilateral agreements governing the EU's relationship with Switzerland (which the EU is keen not to replicate). The fact that the European Parliament has signified its support for an association agreement is also encouraging, should the UK wish to pursue this option in preference to a Canada-style free trade deal. For all these reasons, some form of association agreement with the EU would appear quite likely – although how far it will resemble the agreement with Ukraine is much more difficult to predict.
How long would and Association Agreement take to negotiate?
The EU-Ukraine Agreement is classed as a 'mixed agreement', meaning that (once agreed) ratification is required at the member state level. In theory, this puts it in the same category as the free trade agreement with Canada, which took five years to negotiate and several more before it came into force.
In practice, negotiations could well be conducted more quickly because significant parts of existing association agreements could be used as a template, thus saving time. Association agreements in general also provide for a significant degree of 'provisional application' from the moment they are signed, without needing to wait for full ratification by all EU member states and the European Parliament.
Is the Association model similar to the Continental Partnership model suggested by the think tank Bruegel?
Shortly after the Brexit referendum, the European think tank Bruegel proposed a model for Britain's relationship with the EU known as the "Continental Partnership". In this model, Britain would participate in the mobility of goods, services, capital and some temporary labour and there would be enforcement of common rules to promote a fully integrated market. In these respects, the "Continental Partnership" appears very similar to the association agreement model. However, Bruegel also recommends that the UK would be part of discussions on EU policy, which implies a greater degree of influence than is the case with association agreements. As a result, Europe would consist of an inner, deeply-integrated circle, and an outer, less integrated circle. Bruegel's paper suggests that in the future this could be a positive way for the EU to structure its relations with other countries on its periphery such as Turkey and those in North Africa i.e. by integrating them economically, but without having to offer free movement of people. The association model, with its flexible approach to Single Market access and its framework to cooperate on political and economic issues, may well be a useful starting point if there is a desire to pursue the approach put forward by Bruegel. There is, however, currently no clear indication that this proposal has political support in either the UK or the EU.