Challenges to Ukraine’s Compliance with Obligations under the Association Agreement: Evidence from the Transport and Infrastructure Domain

Challenges to Ukraine’s Compliance with Obligations under the Association Agreement: Evidence from the Transport and Infrastructure Domain

Photo: ua.depositphotos.com / msk_nina
13 June 2023
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How is Ukraine implementing the EU-Ukraine Association Agreement in the sphere of transport and infrastructure? How to improve implementation and speed up Ukraine’s accession to the EU? In this article we discuss the need for in-depth qualitative research to learn the reasons for delays.

On 23 June 2022, Ukraine and Moldova were granted the long-awaited status of EU candidate countries. The importance of the European Council’s decision to shift from the ‘integration without membership’ to the accession track in the EU’s relations with these countries is difficult to overestimate. Most importantly, this shift is of high symbolic value amidst Russia’s war against Ukraine. It also shows the EU’s geopolitical ambitions towards the region. However, neither symbolic nor geopolitical reasons for  Ukraine and Moldova joining the ‘accession club’ should set expectations for their quick and easy accession.

The process of EU accession inevitably implies candidate countries’ fulfilling multiple obligations ranging from sensitive political reforms to approximating their legislation with the EU law in multiple domains, such as environment, consumer protection or transport and infrastructure. This article focuses on the transport and infrastructure case for two reasons: (i) the economic and social importance of this sector, especially in the context of Ukraine’s post-war rebuilding and (ii) the long-standing challenge of Ukraine’s low compliance rates with its AA obligations in this sector. 

Transport and Infrastructure in the Post-War Rebuilding Context

Russia’s ongoing war against Ukraine yielded extremely high material costs for the transport and infrastructure sector. As of the end of February 2023, the Kyiv School of Economics estimated damage to infrastructure at USD 36.2 billion and to transport at USD 3.2 billion. According to the policy report by the Center for Strategic and International Studies (CSIS), “a successful reconstruction would include a Ukraine that is connected and firmly embedded in the Euro-Atlantic community”. Thereby the recovery of damaged port infrastructure, airfields and rail networks, as well as the construction of new roads and railroads can be seen as a catalyst of post-war economic development. Connectivity is essential for the manufacturing sector to recover and for the small and medium-sized enterprises to have access to markets globally and Europe-wide. Infrastructure investments and resulting economic developments are also of social value, since they enable other reforms (e.g. decrease the travel time to schools and hospitals) and thus improve living conditions in Ukraine. Assuming that the war ends with Ukraine regaining its territory in the internationally recognized borders, experts stress the need for improving the East-West connectivity and reintegrating Crimea into the Ukrainian transport and infrastructure system (Bilotkach and Ivaldi, 2022, pp. 215-219). 

The transport and infrastructure recovery and modernization is inextricable to Ukraine’s European integration processes. Thus, ensuring Ukraine’s rail link to Europe is the top priority for the EU, when it comes to sustaining and broadening Ukraine’s export to the Union and beyond, including grain exports to the Middle East and Africa. Alongside the rails, civilian airports, ports and bridges help to fully utilize the advantages offered by the liberalization of EU-Ukraine trade in line with the Deep and Comprehensive Free Trade Agreement (DCFTA) as a part of the EU-Ukraine AA. Besides, easy connections to the EU will be conducive to the movement of people between the EU and Ukraine with all the economic advantages they bring. The focus on all aspects of connectivity with the EU bears a symbolic meaning too, signifying the decolonization (or ‘desovietization’) of Ukrainian transport and logistics sector and Ukraine’s de facto European integration.

Unveiling the economic and social potential of the transport and infrastructure sectors modernization requires Ukraine to fulfill its respective obligations under the AA. As classified by the Cabinet of Ministers’ “Pulse of the Agreement” system, these obligations include regulations of the transport sector  and organization of respective EU-Ukraine cooperation, road and railroad transport, aviation, maritime transport and internal waterways, as well as postal services. Today the government reports the completion of 54 percent of its AA obligations in the sector, with the lowest progress demonstrated by maritime, road and railway transport. Although 54% is an improvement compared to 44% in 2022, it is still significantly lower compared to other sectors (e.g. 88% in the public procurement domain or statistics, 87% with respect to technical barriers to trade, and 90% in the intellectual property sphere). 

Compliance in the Transport and Infrastructure Domain

This low level of Ukraine’s compliance with the AA obligations in one of the most important spheres was the motivation behind my article, co-authored with Oleksandra Egert, in the Journal of Common Market Studies (JCMS). We wanted to find out the reasons for this low compliance.

To understand why Ukraine falls behind in the implementation of its transport and infrastructure obligations, we use a comprehensive approach merging enforcement and management compliance frameworks. The enforcement framework looks at non-compliance as the state’s intentional premeditated decision based on a cost-benefit analysis. This framework emphasizes external incentives and sanctions for non-compliance as a vital instrument which the EU can use to stimulate a partner country to comply with its legislative approximation obligations (in case of Ukraine, such obligations are contained in the Association Agreement). In contrast, the management framework states that non-compliance can be accidental. There can be a misunderstanding because of, for instance, ambiguity of treaty formulations or the lack of administrative or financial capacity. Moreover, the management framework advises to consider the complexity of contemporary international agreements and the time that a third country may require to modify its laws and practices.

To see how the factors emphasized by the external enforcement and management frameworks have been influencing Ukraine’s compliance with its obligations in the transport and infrastructure domains, we reviewed documents and performed a number of interviews with Ukrainian officials, representatives of businesses and civil society, as well as the EU Delegation in Kyiv.

We found that the EU does not have enough leverage on Ukrainian businesses. Ukraine’s responsibilities under the Association Agreement, however, often imply dismantling of large enterprises’ monopoly stance in some markets (e.g. railroad transportation) and/or require significant investments into modernization of infrastructure, e.g. to comply with energy efficiency requirements. Faced by such prospective changes, businesses use their leverage on Ukraine’s high-level politicians (ministers, parliament) to delay the adoption of the needed legislation. Consider, for example, the lengthy adoption process of the Law of Ukraine “On Internal Waterways”. This law that aligns Ukrainian legislation with the EU acquis was under discussion for several years and was finalized in 2020. New regulations on internal waterways pinched stakeholder interests in various industries, such as transport, shipbuilding, post infrastructure, energy, environment, and agriculture. As some of these stakeholders sought to protect their existing monopoly on the use of internal waterways, they exercised their influence over MPs to block the law adoption or lobby for provisions that would contradict the EU law. Another example is so far unsuccessful attempts to approximate Ukrainian legislation on railway transport with EU laws, so that the Ukrainian railroad market becomes open to European carriers with their own locomotives. Here, the Ukrainian monopolist state carrier “Ukrzaliznytsia” is a key stakeholder opposing the adoption of the Draft Law No 1196-1 “On Ukrainian railway transport”. 

Poor coordination of authorities, inadequate financial capacity and constant shortage of personnel in the institutions dealing with European integration further complicate the adjustment of legislation.

Our study confirms that non-compliance of a third country with its commitments under an AA results from “interrelated and mutually reinforcing factors that shall in no case be viewed in isolation from one another”. On the one hand, institutional deficiencies can encourage domestic interest groups to defy a country’s obligations. On the other hand, inter-institutional discrepancy can exacerbate capacity issues. We also found that application of an in-depth qualitative method can both ensure deep understanding of challenges behind the AA implementation and help reveal loopholes for non-compliance based on small procedural problems. To the contrast, quantitative approaches that formally measure compliance progress do not allow to learn about issues and practices behind low compliance in a specific sector.

It is important to know not only in which spheres a country lags behind but also why it lags behind. Knowing the factors that delay fulfillment of a country’s commitment will allow governments and the EU to speed up the AA implementation. Key policy takeaways from the study for the European Commission and the Government of Ukraine are as follows:

  • avoid making the compliance assessment a ‘box-ticking’ exercise, since understanding of (non-)compliance requires a deep sector-specific perspective;
  • engage various categories of stakeholders (government, business, civil society, general public) into regular qualitative studies of Ukraine’s compliance with its obligations, both under the AA and other frameworks;
  • ensure the availability and diversity of venues for government-stakeholder consultations, including online venues and, when necessary, engaging EU representatives;
  • create a ‘Twinning for business’ initiative, whereby the EU would encourage businesses from Member States that joined the Union relatively recently to share their experiences of adapting to new rules;
  • cooperatively address the inter-institutional coordination challenges by strengthening the capacity of the Government Office for European and Euro-Atlantic Integration and the European Integration Committee at the Verkhovna Rada as central liaison bodies within the Ukrainian executive and legislative branches;
  • increase the salience of the compliance problématique in the public communication of the EU representatives and the Government of Ukraine.
Authors
  • Maryna Rabinovych, Senior Researcher at the Center for Sociological Research, Decentralization and Regional Development

Attention

The author doesn`t work for, consult to, own shares in or receive funding from any company or organization that would benefit from this article, and have no relevant affiliations