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EU: Negotiations With Easterners Reaching Tough Point

Prague, 22 March 1999 (RFE/RL) -- Accession negotiations between the European Union and the Eastern candidate countries are about to reach a difficult stage in which vital interests of some of the newcomers are at stake.

The EU is presently holding separate negotiations with the five front-running candidates for membership, namely Estonia, Hungary, Slovenia, Poland, and the Czech Republic. Since beginning last autumn, the negotiations have dealt mainly with easier aspects of harmonizing the laws and practices of the newcomers to EU norms.

But now the talks are arriving at the key heading of "external economic relations," and some hard realities are about to enter the picture. That's because four of the five applicants have asked for the EU to make exceptions relating to their existing non-EU trade ties. This in turn affects eastern neighbors like Ukraine, Slovakia, Russia, Latvia, and Lithuania.

Let's look first at Estonia. This Baltic state, which has adapted enthusiastically to the free market, has a successful free-trade agreement with Ukraine, and close economic integration with its Baltic neighbors Latvia and Lithuania.

In the EU's normal scheme of things, when Estonia -- and any other applicant -- joins the EU, such bilateral trade arrangements with "outsiders" must stop, and be replaced by the common EU external trading regime followed by all members.

Any newcomer therefore is given free access to the EU's huge internal market, but Brussels sets common terms for trade relations with the rest of the world. What worries Estonia is that as an EU member it would have to impose tariffs on Ukrainian goods, thereby ending the special relationship with Kyiv.

Estonia, however, very much wants to keep its valuable free trade with Ukraine. At a time when Estonia's overall trade balance is negative, the trade balance with Ukraine is solidly positive. The trade includes agricultural goods, chemicals, textiles, and other items. Estonia's Ambassador to the EU, Clive Kull, told RFE/RL that in fact more and more Estonian companies are developing relations with Ukraine:

"It is for us an important issue because of the economic impact and consequences. Our economy in general is having difficulties in gaining access to external markets, and when you are building up your own liberal trade regime [as Estonia is] then naturally you are seeking access to good prospective markets. Our companies have found that Ukraine is exactly such an opportunity for their exports and export development."

Kull says that by contrast, Estonian companies are having a hard time penetrating EU markets. He says their performance is improving, and some Estonian products have gained a visible profile, as he puts it. But they are facing resistance from established EU companies. In some cases, he says, EU companies are even raising the issue of unwanted Estonian competition at the political level.

Pointing to the delicacy of the situation, Kull says his team's strategy is not to tell the EU flatly that Estonia wants to "maintain" its free trade agreement with Ukraine, in contradiction to EU policy. It is merely "referring" to the pact's importance to Estonia, and how that fact can be taken into consideration. He says Estonia has in mind that Ukraine itself already has a partnership agreement with the EU:

"They have a provision in the partnership agreement which foresees the future possibility to establish a free trade agreement between Ukraine and the EU. So therefore we have in mind this fixed clause in their relations, and are putting on the table our interest and wish to discuss our opportunities, and what the EU intentions are towards Ukraine and how our interests could be taken into consideration."

Kull goes on to say however, that unofficial EU reaction to the Estonian request so far is negative -- in other words that it will not be possible to keep the free trade agreement.

The ambassador says however there is a slightly warmer unofficial reaction from Brussels to Estonia's other dilemma, namely what to do about relations with the other two Baltic states, Latvia, and Lithuania. The three Baltic neighbors have together built up what he calls a quite impressive trade and economic area. It would seem pointless to have to dismantle this tariff-free zone when Estonia joins the EU. After all, Latvia and Lithuania are also EU candidates, and can logically expect to be negotiating their entry terms with Brussels by the time Estonia enters the union.

Hungary is another of the front-rank applicants which has filed a request for a special exemption on external trade ties. But Hungary's case is very different from that of Estonia: it wants protection from its eastern neighbors, not free trade with them.

Budapest is seeking a period of four years after entry into the EU during which it is allowed to maintain national market protection against any massive and threatening flow of imports from the East. The measure would allow Hungary, if it saw fit, to continue imposing higher tariffs than EU norms, and if necessary, to impose quotas.

A senior government official in Budapest, who requested anonymity, told RFE/RL that the worry centers on imports from the CIS countries, the Balkans and some Asian countries. He did not want to single out any country by name, or mention the goods involved. However reports appearing in Brussels have mentioned Russia and Ukraine, and have referred to the goods involved as steel products, construction materials including cement, plus fertilizers and chemicals.

The same official recalled that the EU granted Austria a similar transitional "derogation" when that country joined in 1995. The impulse at that time was the same -- namely to have the power to protect local industries from cheap imports from over the border. It seems the fear of the east has simply moved further east.

The other two countries applying to the EU for transitional derogations are the Czech Republic, which wants to keep its customs union with Slovakia; and Slovenia, which wants to keep for 10 years its free trade agreements with Bosnia-Herzegovina, Macedonia, and Croatia.