EU Associate Status a Threat to Ukraine’s Sovereignty and Solvency

October 23, 2013
Anthony T. Salvia
Director, American Institute in Ukraine

Whilst in Kiev recently, EU expansion czar Stefan Fuele dismissed as “utter nonsense” the “myth” that if Ukraine becomes an associate member of Europe “you will lose your sovereignty and that it will be expensive.”

This statement is bizarre. When you join “Europe,” whether in the guise of full or associate membership, you surrender sovereignty to the infinitely remote, unaccountable Brussels technocracy. That’s the whole point of it; it has no other. You sign on to what José Manuel Barroso, President of the European Commission, referring to the EU, called “the world’s first non-imperial empire.” If you are not prepared to do that, steer clear.

The Association Agreement is as much about Ukraine’s strategic re-orientation (against Russia, of course) as it is about trade. Title II binds Ukraine to work for “gradual convergence on foreign and security matters with the aim of Ukraine’s ever deeper involvement in the European security area.”

Clearly believing Ukraine’s associate membership of the EU is likely to happen, NATO Secretary General Anders Fogh Rasmussen recently chimed in to remind Kiev that it was welcome to join the Atlantic Alliance at any time. Kiev’s (prudent) declaration of non-aligned status in 2012 means nothing to those who run NATO and the EU. No “sovereign” decisions that do not dovetail with the interests and priorities of the magic circle of progressive humanity are ever final. They are always in play.

The economic provisions of the agreement also trample on national sovereignty. The Association Agreement comprises 900 pages of demands that Ukraine harmonize all of its laws on just about everything you can think of – from funeral services to safety standards on fishing vessels to navigation of the Danube estuary to space exploration to consumer protection -- with pre-existing EU “regulations, directives, decisions, recommendations and communications.”

Mr. Fuele’s suggestion that the cost of compliance will not prove “expensive” staggers belief. Prime Minister Azarov said last week it would amount to €165 billion over ten years! That is the equivalent of Ukraine’s entire Gross Domestic Product (GDP) for one year! And it comes at a time when Ukraine’s economy is shrinking -- by 1.3% year-on-year.

And how to calculate the other costs -- those incurred when Ukraine begins competing with stronger foreign (i.e., European) competitors; when it fails to take advantage of duty-free access to the market of its largest trading partner, a country, unlike Europe, that is growing, has pent-up demand for practically everything, and has a tradition of buying Ukrainian goods? What of the costs of foregoing steep discounts in the price of imported oil and gas?

And what about the cost of Brussels demanding that Ukraine stop subsidizing industries it (Brussels) regards as inefficient and superfluous resulting in the firing of substantial numbers of Ukrainian workers?

Mr. Fuele has nothing to say about any of this. Instead, he makes bold claims without troubling to substantiate them: "If the agreement is signed, very quickly [Ukraine] will see serious benefits from it...”

What sorts of benefits? Mr. Fuele invokes an unspecified “study” that projects annual GDP growth of “more than 6%.”

Is this at all realistic in view of Europe’s seemingly intractable economic malaise – a growth rate of -0.8% year-on-year, 20 million unemployed, sovereign indebtedness at more than 90% of GDP, and inflation running ahead of interest rates across the continent? No wonder “Europe” has been called (in the British press) “a Soviet-style economic dead zone.”

Two days after Mr. Fuele made his remarks in Kiev, the Zagreb daily Poslovni Dnevnik reported that Croatia’s exports had declined 11% since it joined the European Union (as a full member) last July, and 19% in the month of August alone.

The article attributes the loss to “the impact of EU accession… which has exposed Croatia to greater international competition, and the loss of privileges associated with the Central European Free Trade Agreement (CEFTA).”

That may well be true. For an economy as weak and wracked with corruption as Croatia’s, to adjust to wholly new market conditions is by no means easy. Austria had to adjust painfully from a large, imperial market to a greatly shrunken one after the Great War. The converse is at least as hard – small states suddenly having to make a go of it in large markets.

That is no doubt what Croatia is experiencing now. And that is what makes Mr. Fuele’s happy talk about Ukraine’s prospects as an associate member of the EU so incredible – literally.

Ukraine’s foreign exchange reserves are dwindling – down 7.4 % over the past year. According to Moody’s, the US-based ratings agency, Ukraine has enough reserves to pay for just 2.3 months of imports – the lowest level since 2006. Talk of default is in the air. The last thing Ukraine needs is to experience a collapse in its foreign-exchange-generating export markets as Croatia has.

Ukraine’s elite are playing with fire. With any luck they will come to their senses and stand up for the national interest, which happens to bound up with close ties to the Eurasian market.

In doing so, they will corroborate this paraphrase of the well-known dictum of Abraham Lincoln:

“You can Fuele some of the people all of the time, and you can Fuele some of the people all of the time, but you can’t Fuele all of the people all of the time.”