12 April 2024

Bruegel: Ukraine’s potential future accession

By Darvas, Dabrowski, Grabbe, Moffat, Sapir, Zachmann: This report evaluates the impact on the EU of a possible EU accession of Ukraine, focusing on economic consequences and institutional developments.

Executive summary
The process of Ukraine's accession to the European Union has started in the unprecedented circumstances of a full-scale war and associated damages and human losses. The accession process will likely overlap with Ukraine's reconstruction after the war, increasing the EU's influence in terms of fostering the institutional development of Ukraine, and providing strong incentives for Ukraine to move towards compliance with the accession criteria.

Following an introduction in chapter 1, chapter 2 provides a brief historical overview of economic and
governance reforms in Ukraine before the full-scale Russian aggression.
• Until 2013, Ukraine's record of economic and state reform was not impressive;
• The Euromaidan protest movement in 2014 marked a turning point and resulted in a shift towards a
Western orientation in politics and the economy, including the conclusion of the EU-Ukraine Association Agreement with a Deep and Comprehensive Free Trade Area;
• The pace of economic reform has slowed substantially since March 2020, while the role of the president has been strengthened since Volodymyr Zelensky became president in 2019;
• In terms of World Bank governance indicators and Freedom House's democracy scores, Ukraine ranks in the lower half of actual and potential EU candidate countries, and worse than any EU country;
• The most critical areas for further reform and EU accession negotiations include political governance,
the constitutional balance of power, the judiciary, the rule of law, decentralisation and fighting
corruption.

Chapter 3 sketches possible war scenarios.
• Ongoing war, frozen conflict and sustained peace are the three main scenarios, with the first being the most probable in the next few years, potentially replaced by the second in the medium term.
• Sustained peace would require either a regime change in Russia, or Ukraine's readiness to make a substantial territorial and geopolitical concession to Russia, both looking rather unlikely at time of writing.
• The ongoing war makes large-scale reconstruction and EU entry problematic , though it does not exclude the start of accession negotiations.
• A frozen conflict could allow reconstruction, and EU entry (as in the case of Cyprus), but at a high level of security risk.

Chapter 4 focuses on Ukraine's EU accession process and has six parts.
First, the EU-Ukraine Association Agreement (AA) and Deep and Comprehensive Free Trade Agreement (DCFTA) resulted in an intense economic relationship, but major gaps persist when measured against the possibility of EU single market membership.
• Goods: mostly free trade, but some tariff-rate quotas remain for agricultural products; also, there are
some differences between Ukraine and the EU in terms of rules and procedures, meaning customs
checks need to remain in place. The remaining tariffs were temporarily suspended after the invasion.
• Services: little additional liberalisation compared to WTO schedules.
• Capital: almost fully liberalised.
• Labour: decided by individual EU countries under bilateral agreements with Ukraine. The temporary
protection directive was activated after the invasion.
• Financial assistance from the EU budget to Ukraine would be much larger if Ukraine was an EU member.

Second, previous EU enlargements offer several lessons.
Report 02/24 | April 2024 4
• EU accession has the potential to transform would-be members by triggering reforms that not only prepare the country for EU accession, but also reinforce its democratic governance, economic prosperity and rule of law.
• However, the history of enlargement shows a mixed picture of successes and failures in achieving this potential, both before and after accession.
• In central Europe, a virtuous circle developed between domestic reforms, progress towards accession
and foreign direct investment.
• Such a virtuous circle has not developed in the Western Balkans (apart from Croatia), because the EU's commitment to accession has been too ambivalent and the process has moved too slowly, while in the region, the commitment to reform and boosting administrative capacity has been too weak.
• Credibility of the accession promise is vital to incentivise reform.
• An important success factor is coherence, meaning that reforms done for reasons of EU accession are
also perceived as necessary for the country’s development.
• Consistency from the EU side is key; criteria must be assessed objectively without favouritism or arbitrary changes. Vetoes by EU countries unrelated to merit tend to derail reform momentum, like in the Western Balkans.
• Interim incentives offered by the EU can unlock difficult reforms (eg police reform in Bosnia and Herzegovina was rewarded with visa liberalisation).
• The Cooperation and Verification Mechanism for Bulgaria and Romania to enforce conditionality after accession has had mixed outcomes.

Third, the European Commission’s 2020 Revised Enlargement Methodology (REM) includes useful
changes, but these failed to accelerate reform in the Western Balkan countries.

Fourth, the enlargement methodology should be adapted to Ukraine and to other candidate countries...

 more at  full paper

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