Brexit success by “Association”? Why the Ukraine Model could be the winning way

PLMR’s Sabine Tyldesley examines the EU’s Association Agreement model and its potential applications for Brexit.

Whilst much public discussion has focussed on the Norway and Canada trade models, others have been evaluating a rather different, and less well-known options for Britain’s post-Brexit relationship with the EU – association agreements. The so called “Ukraine model” has so far been considered quietly by political analysts in the backrooms of think tanks such as the European Policy Centre, the Centre for European Reform (CER) and UK Trade Policy Observatory … until now.

The European Parliament on Wednesday recommended such an association agreement be considered with the UK, laying a resolution to that effect ahead of the 22-23 March summit of EU heads of state, which is expected to approve revised guidelines for negotiations on the UK’s future relationship with the EU. Michel Barnier, EU Chief Negotiator, said he was “quite comfortable with the framework.”

While Prime Minister Theresa May insisted “existing models will not work”, the ‘Ukraine Model’ is hailed as a real option to facilitate the “deep and special partnership” the UK Government is seeking. And after Guy Verhofstadt, the European parliament’s Chair of the Brexit Steering Group, suggested any future agreement should be “balanced, ambitious and wide-ranging”, we understand association agreements are now being seriously considered in Whitehall.

CER explains in a briefing that the EU already has over 20 such agreements with non-member-states, including a ‘Deep and Comprehensive Free Trade Agreement’ (DCFTAs) with Ukraine. This model offers an “unprecedented level of integration”, according to the European Commission, liberalising trade in goods and eliminating over 90 per cent of tariffs on both sides. Furthermore, rather than the free movement of people, the DCFTA instead includes a visa liberalisation and work permit scheme, which would make it attractive to Brexiteers and those UK citizens concerned about immigration.

The option of “internal market treatment” also makes it attractive to the financial services sector – important, given Chancellor Philip Hammond signalled the UK would reject any deal that did not include financial services. The Eastern Partnership countries also have full access to Horizon 2020 and Euratom, further sticking points in recent debates about a viable future UK-EU relationship.

Might this be the perfect “third way”?

The greatest point of contention will likely be the language that describes product standards for trade. The aim of DCFTAs is “convergence” with the EU; offering access to markets while promoting “extensive harmonisation of laws, norms and regulations […] to EU standards”. The draft agreement currently speaks of “regulatory alignment”, a concept of ensuring standards for products remain similar, if not the same as the EU’s, to facilitate trade.

This distinction has caused problems in the past, with the DUP rejecting any Brexit deal leading to “divergence” of standards between Northern Ireland and the rest of the UK. This led to the rephrasing of the first draft of the agreement to refer to “alignment” instead. “Convergence” as envisaged by the DCFTA however may be seen by some as mission creep, leading to continued membership in all but name.

Standards and dispute resolution therefore could become the greatest stumbling block to this solution. While the FT reported the majority of British businesses favoured “alignment”, Leave campaigners warned against becoming a “rule taker” and instead favour “mutual recognition”. Mutual recognition would allow “divergence” on standards while retaining trade relationships, but this would require the EU to recognise any new UK technical standards, and the associated regulatory bodies that would create and validate such standards.

May’s Government further has a red line on the continuing direct jurisdiction of the European Court of Justice to arbitrate where disputes arise in these cases, making an agreement more difficult. Finally, outside of a customs union with the EU, border checks become necessary, raising the Irish border issue again.

A way to make the Ukraine model more palatable is noted by the UK Trade Policy Observatory, suggesting it offers “buy in” to other EU policies, such as national security. This would be attractive to the UK, following the Westminster, London Bridge and Manchester Arena attacks causing newspaper headlines that stoked fears of the post-Brexit loss of access to Europol and databases to enable cross border crime fighting.

Michael Emerson, Associate Senior Research Fellow at CEPS suggests the association agreement model also avoids “cherry-picking” – a red line for key EU member states. Germany for example has stood firm that the Brexit process should not allow the UK to pick the best parts of EU membership without taking any responsibility. And Xavier Bettel, Luxembourg’s premier assessed the UK’s approach as: “They were in with a load of opt-outs. Now they are out, and want a load of opt-ins.” This model could enable a compromise.

Brexit has entered a lot of jargon into political discussions. Following this next round of negotiations ‘association’ could become the newest expression to replacing the fashionably ambivalent ’A customs union’. Let’s see how long it sticks.