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Introduction to DCFTA: Scope, Benefits, and Implementation Process

This presentation provides an overview of the scope and benefits of the DCFTA, explains the implementation process, and explores the importance of DCFTA to Ukraine's economic growth.

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Introduction to DCFTA: Scope, Benefits, and Implementation Process

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  1. An Introduction to the DCFTABasic Principles and Understanding for MoICourse number: EUI32/7A-12 Mark Hellyer A4U STE on DCFTA Policy Implementation March 2017

  2. Overview of the Presentation Scope &Benefit of DCFTA What is the DCFTA and scope and coverage? Main Elements of AA/DCFTA What areas of the AA/DCFTA affect MoI? Break Implementation Process Understanding the process of change and role of MoI Q&A

  3. Scope and Benefit of DCFTA A look at the trade part What is a DCFTA? Understanding of the difference between FTA and DCFTA Benefits of the DCFTA Why is DCFTA so important to Ukraine – economic growth The scope Understanding the components and definitions

  4. Outline of the AA signed on 27 June 2014 Implementation over 10 years IV. Trade III. Justice, Freedom and Security V. Economic Cooperation • Including • Foreign and security policy • Combating terrorism • Dialogue on Rule of law and human rights • Protection of personal data • fight against illicit drugs • Equal Treatment of legal workers • Gradual steps towards a visa-free regime • Dialogue on Money laundering CREATION OF THE DCFTA • Including • GMO monitoring • Road transport • Company law, corp. governance, accounting and auditing • Energy • Environment • Health and safety

  5. What Makes DCFTA Different? • Traditional FTAs • Title IV to create a DCFTA between 2 parties over 10 years – EIF 1st Jan 2016 • Market Access • Alignment of business acquis, no difference • Adoption of norms – efficiency gains • Difference with Title V: Sectoral (legislative convergence versus integration to the Single Market)

  6. Benefits of the DCFTA • Potential benefits: • 1. Market Access improvements = increase exports • 2. EU Business regime adopted in Ukraine • no difference (in regulation) selling in Ukraine or EU • leads to increase exports as its easier to comply for all business (esp SMEs) • 3. Imports of more competitive final and intermediate products • competition increases Ukraine’s competitiveness • Imported products, cumulation increase export competitiveness • inputs cheaper increases competitiveness and consumers get cheaper and wider range of products Better market access (> 500 million consumers) • Improved the business climate • Increase competitiveness cheaper safer products • Increased production and sales domestically, EU and globally DCFTA Analytical Papers

  7. Competitiveness Potential +15-30% productivity • AFNOR Study of Impact of Single European Market For Ukraine: • Adoption of EU standards – preparation, over time • Imported inputs (using tariff, RoO and cumulation) • Trade facilitation • Competition • No compliance cost in export to EU (same rules, local CABs)

  8. ATP/DCFTA Aggregate Trade Performance (takes time plus other Factors) • Ukr. X to EU declined from € 14.0 bn in 2012 to € 12.6 bn in 2016 • Exports declined by 10% between 2012 and 2016, despite DCFTA • Average X between (2012-3) and (2015-6) fell by 8.9%

  9. Actuality of AA/DCFTA instruments • Dialogue and cooperation with the EU in political reform, security, foreign policy, justice and freedom; • Adoption of commitments from the trade (DCFTA) components (revising tariffs, application and administration of rules of origin, administration of tariff rate quotas and other obligations); • Legal harmonisation and approximation across a broad range of economic, trade and political spheres, that is adoption selected elements of the EU acquis into Ukrainian legislation and regulation; • Institutional and administrative reform (including enforcement and effective redress) resulting from legal reform and adoption of commitments in both trade and economic; • The benefits to be derived only come when business increases business (both international and national trade) compliance with new business rules and procedures, as well as taking advantage of the opportunities.

  10. Scope of Coverage of DCFTA 1. Customs and tariffs • Progressive revision of tariff schedules and implementation of a TRQ system for selected agricultural products (Chapter 1) • Phasing out of Customs duties on exports (Article 31) • Dialogue on trade Agreements with other countries (Article 39) and; Administrative Cooperation and Coordination with Other Countries (Article 37) • Adoption and administrative application of rules of origin Article 40 • Adoption and implementation of a Mechanism for Safeguard Measures on Passenger Cars (Article 44) and; second hand clothing • Reform of customs and trade facilitation of legislation and procedures to ensure effective control and support facilitation of legitimate trade (chapter 5) 2. Trade Remedies • Dialogue on application of WTO compatible Anti-dumping and Countervailing Measures and trade remedies (Article 51) • Establishment of dispute settlement and Mediation mechanisms (chapters 14 and 15)

  11. Scope of Coverage (2) 3. Sanitary and Phytosanitary Measures • Gradually approximate its sanitary and phytosanitary and animal welfare legislation and enforcement procedures to that of the EU (Chapter 4) 4. Technical Regulations, Standards, and Conformity Assessment, including ACAA • Gradual alignment of sectoral and horizontal legislation, institutions and standards regarding Technical Regulations, Standards, and Conformity Assessment, including negotiation of an ACAA (Title IV Chapter 4)

  12. Scope of Coverage (3) 5. Services • Legal and regulatory approximation to EU acquis in the general Framework of trade in services including Temporary Presence of Natural Persons for Business Purposes, as well as specific sectors: Computer Services; Postal and Courier Services; Electronic communications; Financial Services; transport and; Electronic Commerce (chapter 6) • Complete the liberalisation of transactions on the capital and financial account of balance of payments equivalent to the liberalisation in the EU Party prior to the granting of internal market treatment in the area of financial services (chapter 7) 6. Public Procurement • Gradual Legislative approximation and institutional reform of key elements of the EU public procurement acquis and development of mechanisms for mutual • Market access (chapter 8) 7. Geographical Indications and Intellectual Property • Dialogue and cooperation in intellectual property (chapter 9) in line with WTO rules and regarding Geographical Indications, mutual recognition and enforcement of each parties Geographic Indicators, including transitional mechanism for selected sensitive protected EU titles in Ukraine’s market.

  13. Scope of Coverage (4) 8. Competition Policy • Approximation and enforcement, as well as co-operation and co-ordination between competition authorities to further enhance effective competition law enforcement, and to fulfil the objectives of this Agreement through the promotion of competition and the curtailment of anti-competitive business conduct or anticompetitive transactions. (chapter 10) 9. Trade-Related Energy • Reform of national legislation on trade-related energy (chapter 11) in areas including Domestic regulated prices; Prohibition of dual pricing; Customs duties and quantitative restrictions; Transit; Transport And; Cooperation on infrastructure 10. Transparency • Establishment of Enquiries and contact points for transparency (chapter 12) 11. Trade and Sustainable Development • Dialogues on trade and sustainable development (chapter 13)

  14. QUESTIONS

  15. Main Elements of AA/DCFTA What areas of the AA/DCFTA affect MoI? Technical Regulations Production and in use regulations for rail, maritime and vehicle safety Trade in Services More detailed explanations of Single market for Postal and Maritime services Public Procurement Sectoral Areas Road safety, rail and Maritime sectors (competition)

  16. Technical Regulations (including Rail, Maritime) • Ukraine is adopting the EU system for technical regulations, standards and conformity Assessment • Principles • Policy – essential requirements • Standards – convey conformity to essential requirements (developed separately by technical committees comprised of stakeholders, adopted by standards body • Conformity Assessment by risk • Self declared • Testing (accredited laboratories to product competence and metrology) • Conformity Assessment Bodies (EU notified bodies; Ukraine Designated bodies) – market for CABs • National/EU competent Authority –eg European Aviation Safety Authority, REACH

  17. Calibration Legal metrology Accreditation Certification Inspection Testing Metrology Conformity Assessment Separation of Functions – Where is MOI? – MOI role: Defining and setting Technical requirements TCs and facilitating process Policy Framework Standards Market Surveillance ?

  18. Technical Regulations Railways Five structural subsystems (infrastructures, traffic operation and management, energy, rolling stock, and control command and signalling) and two operational subsystems (maintenance and telematics Essential requirements on safety, health, reliability, environmental protection and technical compatibility for each rail system and subsystems Technical specifications for interoperability (TSI) are the specifications to meet essential requirements (some subsystems and parts only) Harmonised standards developed >100 Where no TSI or Harmonised standards, national regulations apply Conformity Assessment in EU is mandatory by Notified body for both TSI and harmonised standards ?? Technical standards for cableways for the carriage of passengers

  19. Technical Regulations for Maritime Sector Technical standards for marine equipment Life-saving appliances Marine pollution prevention Fire protection equipment Navigation equipment Radio-communication equipment CA by Notified Body Mandatory EU MRA Canada/USA/Australia Technical standards for recreational crafts related to design and construction characteristics, exhaust emissions and noise emissions CA by Notified bodies mandatory for some types of vessel/parts only > 75 harmonised standards ?? Technical standards for fishing vessels Technical standards for passenger ships

  20. Trade in Services • Integration of Ukraine into the EU Market for Postal and Maritime Services • The core principles governing the Single Market for services are: • the freedom to establish a company in another EU country • the freedom to provide or receive services in an EU country other than the one where the company or consumer is established • Focus on developing internal market and then allowing mutual access

  21. Postal Services Key Obligations of Directive defines the universal postal service to be guaranteed ( incl. rules for pricing, financing); fully opens to competition; Rules of licensing postal services; Sets quality of service standards; establishes complaints procedures for all users requires the creation of national regulatory authorities that are independent of postal operators Issues competition has emerged to a limited extent only Costs of UPS with declining volume Emerging e-commerce Further reading: https://www.lw.com/thoughtLeadership/overview-of-eu-national-case-law http://cadmus.eui.eu/bitstream/handle/1814/33780/RSCAS_2014_117.pdf?sequence=1 http://www.ratel.rs/upload/documents/Postanske_usluge/STUDY%20OF%20THE%20MODEL%20OF%20UNIVERSAL%20POSTAL%20SERVICE.pdf

  22. Maritime Services Summary of legislation Freedom to supply services, unfair pricing practices and free access to ocean trade Freedom to provide services within the Member States (ocean trade) Reporting formalities for ships at points of Community entry and exits Statistical returns on the carriage of goods and passengers by sea Registration of persons on board passenger ships Transfer of cargo and passenger ships between registers within the Community Issues in Some EU countries: Recognition of qualifications eg pilot exemption scheme Application of common standards (safety and environmental) Short Sea Shipping (concern third country operators in EU) Removing restrictions for port services (national treatment approach) Studies of EU https://ec.europa.eu/transport/modes/maritime/studies/maritime_en

  23. Public Procurement • Of eligible tenders, cross border awards • €2.3 bn in utilities (7.5%) • Open tendering by set procedures and open to EU participation

  24. Sectoral Alignment (Title V) – EIF 2014 Transport • Article 368 1. Cooperation […] shall aim to facilitate the restructuring and modernisation of Ukraine's transport sector and gradual approximation towards operating standards and policies comparable to those in the EU, […]set out in Annex XXXII, • …. This provision shall be without prejudice to any specific principles and obligations on regulatory approximation under Title IV • Annex XXXII – not legislation, see next session • Road safety 3-7 years EIF • Rail 8 years • Maritime 3-6 years

  25. QUESTIONS

  26. How to Improve Implementation of DCFTA Implementation Process Understanding the process of change and role of government Implementation Informed policy making, mitigation and transition periods Q&A

  27. AA/DCFTA Implementation Process (Not Just Legal Approx.) • Max. Opportunities and Min. Costs for business • Mitigation: • Transitional Periods; Phased application; Support to Business/Awareness/know how

  28. Summary of Role for MoI • Technical regulations in Rail and Maritime equipment • Developing essential requirements in the Ukrainian context • Ensuring enforcement for both national producers and imports • Mutual market access with EU • Trade in postal and Maritime services • Creating competition in the market • Establishing the regulator • Opening the market to EU competition • Sectoral transport • Opening up to competition • Road safety • Separation of regulator, policy maker and operators Risks EU firms are ready, competitive and understand the rules

  29. Implementation Adopting legislation does NOT mean immediate application, Ukraine has options: Transition periods, eg public procurement threshold revisions was applied 2 years after adoption, all TR are given 2 years transition Selected or phased in application (by size of company or sub-sector) • BUT BENEFITS COME LARGELY WITH IMPLEMENTATION • Mitigation policies • Helping industry prepare • Title IV vs Title V • Title IV is all or nothing – integration to the single market • Title V is national legislation approximated to EU, but greater flex and who checks?

  30. Workflow Informed Policy Debates: Policy objectives Impact assessment and readiness to compete (EU competition is ready now) Differences within industry – those that want to export now and those that want to keep their domestic market Coordination with others – customs on imports, Standards, MEDT…

  31. Example road safety driving hours: Balance debate – Analysis and consultation • Policy objective – reducing accidents in Ukraine from tired drivers; how many in Ukraine, how many reduced in Europe • Costs: • Equipment Tachograph (€300) plus tachograph station (€2000) • Analysis and submission to authorities • Drivers – in EU +10% drivers, increase transport cost – wider economy • Implementation • Availability of approved equipment • Institutions for issuing cards and analysis and checking • Scope who can do it now or phased role out by size of company, sector of operation etc

  32. Analysis Tools and Databases

  33. QUESTIONS

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