Strengthening the periphery: How Brexit could better relations between Ukraine and the EU

By Vladislav Inozemtsev, Mykhailo Kukhar

 

In March 2019, the British Parliament expressed its final opinion on the plan for a country to leave the European Union. Whatever final form Brexit takes, it will lead to a serious reformatting of the European Union. And this is not about the domino effect and the start the EU’s demise, about which there is much speculation in Moscow, but rather about the triumph of the “Multi-speed Europe” concept talked about by Old World politicians since the mid-1990s.

 

European neighbors 

Besides the (as yet) 28 EU members in the European zone of influence, there are also three states — Switzerland, Norway and Iceland — which enter the common customs space and the Schengen zone, coordinate their legislative activities and security issues with Brussels, but are not EU members and do not participate in elaboration of its policy. In 2018, the population of these three countries amounted to 3.1% of the population of the EU-28, accounting for 6.8% of the bloc’s GDP. EU countries accounted for 57% of their total turnover and up to 50% of their accumulated foreign direct investment. If the UK, after parting with the EU, replenishes this particular group of states, the population of the EU’s “close neighbors” will reach 20.3% of the EU-27, and total GDP — 27.4%. The European Union will gain a full-fledged and “peripheral” interface.

 

Periphery states, not receiving appropriations and subsidies due to EU members from the union’s budget (its total expenses in 2018 amounted to €148.2 billion), contribute to the pan-European treasury in proportion to the size of their economies (now, cumulatively for Norway, Switzerland and Iceland, they are less than €600 million per year). They are within the jurisdiction of the European Court, whose decisions are binding on their territory, and often implemented in national laws. Finally, they almost automatically recognize the majority of technical, phytosanitary, environmental and other standards and norms in force in the EU, while not participating directly in their development and approval.

 

As a result of Brexit, the emergence of a larger “periphery” located mainly on the EU’s northwestern flank could be an important event for the EU’s eastern neighbors. Eastern Partnership states, which include Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine, should think about how they can become full participants in this European “periphery,” instead of spending decades seeking full EU membership.

 

An idea for Kyiv

 

The example of Ukraine’s EU integration is an example to consider. Following the introduction in 2017 of visa-free travel for Ukrainian citizens to the EU, new successes for Kyiv could be five, ten or even more years down the road. Aside from Brussels’ reluctance to exacerbate conflict with Russia and internal fatigue from EU expansion during 1995–2013, reasons for the delay are clear. They are threefold:

  1. the EU’s unwillingness to incorporate a country with a population of 42 million people and per capita GDP 12.4 times lower than the EU average (this would allow Ukraine to claim more than €2 billion in transfers and subsidies from the union annually),
  2. fears about the significant influence of the new member on pan-European affairs (if Ukraine were admitted to the EU tomorrow, at the May 2019 elections to the European Parliament, the country would have 45 of the 751 mandates, and then two European commissioners) and
  3. the threat of “importing corruption” from a state where much oligarchic business remains.

 

But if the goal of the Eastern Partnership countries is not to join the EU, but expand the EU’s “periphery,” the set of proposals coming from them could be fundamentally different. They would be reduced to replacing the status of a participant in the “free trade zone” with joining the EU Customs Union, transitioning from a visa-free regime to membership in the Schengen zone and getting permission for Ukrainian citizens to work in the EU countries on terms that are valid for Europeans. At the same time, however, the newcomers would not claim either for subsidies from the European budget, or for participation in the management of the EU, or for determining directions its development.

 

Europeans would have two undeniable advantages. Firstly, the zone of application of EU legal norms would expand. In the new situation, no one would have to wait for Ukrainian authorities to approve the creation of a High Anti-Corruption Court, because any Ukrainian company could file a lawsuit against its own government with the European Court, the rulings of which would become binding under Ukrainian law. In addition, European social legislation would gradually begin to spread to the east.

 

Secondly, “periphery” participants would not ask for money from Brussels, but start paying themselves for partial participation in the Union: Ukraine’s contribution would be (based on the rules by which Norway or Iceland pay) €80–100 million, Belarus — €20–30 million, Moldova — €5 million per year. These are not such large sums for the budgets of the Eastern Partnership countries, but they would radically change the basis of relations with the EU. For example, Ukraine from the rhetoric of stories about the importance of protecting Europe from Russian aggression could turn to the language of defending interests, which are understood much better in the Old World.

 

By protecting investors by introducing European legislation and excluding local courts from making final decisions in disputes between business and the state, Ukrainian authorities would improve the investment climate, and the need to pay a fee for a partnership with Brussels would contribute to greater attention to tax revenues. Today, the costs of doing business in Ukraine, where the average salary is €310 per month (against €1,130 in Poland and €3,900 in Germany, or in Belarus — slightly higher than €460 per month) is extremely low by European standards. Strengthening the legal framework would attract significant new investment. The main focus of development will change from political (ensuring accession to NATO and the EU) to economic (accelerated economic growth and integration into global markets), which will undoubtedly reduce general tensions in Europe.

 

In our opinion, one thing is clear now: the political elites of Eastern European countries should end their intellectual hibernation and offer Europe something more original than endless requests for financial support in exchange for “friendship” and “common values.” Formulating such a proposal could change significantly the course of European history and allow future generations to say it wasn’t an accident that UK left the EU on March 29, 2019 and Ukraine held presidential elections two days later.

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