Netherlands and Ukraine’s EU free trade and association deal – what to expect next?

Netherlands and Ukraine’s EU free trade and association deal – what to expect next?
Euromaidan protestors wave EU and Ukrainian flags.
By Iana Dreyer in Brussels September 27, 2016

Prime Minister Mark Rutte told the Dutch parliament’s lower house on September 22 that he didn’t think it very likely that the Netherlands would ratify Ukraine’s free trade and association deal with the EU. So, is this the end of the deal? Not quite: negotiations with the EU and Ukraine have only recently begun and some areas have already been applied provisionally after the deal was ratified by the EU institutions. But should the Dutch follow through with their veto, a messy reordering of the agreement lies ahead.

The Association Agreement that contributed to triggering the Ukraine crisis and confrontation with Russia was voted down in a consultative referendum by the Dutch in early April. The implications of a Dutch definitive ‘no’ to the deal could be politically wide ranging for the EU’s ability to conclude international agreements in future. If only one member state can topple a carefully negotiated international agreement, the EU’s credibility as an international actor will be damaged.

The Association Agreement is being ratified under the EU’s ‘mixed agreement’ procedure, which requires adoption by the member states in the Council, ratification by the European Parliament, and further ratification back home in the member state capitals. The areas of exclusive competence of the EU such as customs union, commercial policy, or competition policy may be applied provisionally after the deal was ratified by the EU institutions, whereas the other areas of the agreement need to wait until all members have ratified them to come into force. The Ukraine agreement includes a free trade deal (the DCFTA), as well as many clauses on political and financial cooperation in areas of competency that the EU shares with member states. Currently, close to 85% of Ukraine’s deal, mainly its commercial pillar, is being provisionally applied.

The Netherlands has already ratified the deal, but its government needs to formally enact the ratification. Alternatively, it can repeal it. The Dutch House of Representatives has vowed to respond to the signal sent by the Dutch population. The referendum was initiated by a eurosceptic movement. It was declared valid after 32% of voters turned out and more than 60% of those rejected the agreement.

Talks with EU institutions and also with Ukraine began after the Dutch government set out its “concerns” over the agreement at the last Council meeting late June 2016. The areas of concern include military and political cooperation, financial commitments to Ukraine, movement of people, and the risk perceived by the Dutch population that the association deal might be the next step toward EU accession. The Dutch government wants an outcome that is both legally binding and acceptable “to all parties involved”.

So far, the deal under discussion was essentially a declaration attached to the Association Agreement about Ukraine’s membership prospects. But such a move cannot satisfy either Ukraine nor other member states in Central and Eastern Europe. “It is going to be very difficult”, a Dutch government spokesperson told Borderlex about prospects for a deal.

Yet talks are continuing. A new meeting with Ukrainian President Petro Poroshenko is planned in October in Brussels. Failure of the talks would dent the EU’s credibility vis-à-vis Russia in its approach to Ukraine. In such a context, the Netherlands is bound to face significant international pressure to allow the deal through.

Politics intrude

PM Rutte told Dutch MPs that the parts of the Ukraine agreement that are currently applied provisionally would still apply, even if the Dutch government did not ratify the deal. But not everyone seems so relaxed about the matter. Franz Mayer, a law professor at University of Bielefeld in Germany believes that if the Dutch do not ratify the deal, it is in fact the end of the treaty. “If they stay out for good, then it’s over,” he told Borderlex.

There is no guidance in EU law on how long a deal can be provisionally applied without being ratified by all. Also, few believe that the Association Agreement per se would cease to be applied. Mayer told Borderlex that EU leaders “can try to reframe the Association Agreement as an EU-only treaty, leaving out all the  areas that are in member state competence, then go through the entire ratification process (at EU level) again”.

The Dutch government is facing a general election in March 2017. Its popularity is low and this has recently slumped, which explains the Rutte’s government’s reluctance to take an unpopular step at home. Accused by MPs of biding his time on the topic, Rutte said he aimed to conclude a deal by the end of this year.

For now, some observers expect a prolonged legal limbo over the Ukraine agreement, if the Dutch government agrees to prolong negotiations that are set to last beyond December, given the political sensitivity of the topics discussed with Brussels, the member states and Ukraine. But a definitive Dutch ‘no’ could could lead to a messy and lengthy reordering of the deal, which Rutte would leave to the next government in the Netherlands to sort out.

The fate of the Ukraine agreement is seen setting a precedent for other trade deals. The EU is also launching a ratification process under the mixed agreement for the Canada-EU CETA trade deal is bound to prove very rocky. Failure to ratify CETA could in turn put in question major EU projects such as the transatlantic pact TTIP currently under negotiation with the United States whose failure would have major negative economic and geopolitical ramifications for the EU.