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RomanianJournal of European AffairsVol. 17, No. 1, June 2017

European Institute of Romania

Founding Director – Niculae IduDirector – Gabriela DrăganEditor-in-Chief – Oana MocanuAssociate Editors – Bogdan Mureşan, Mihai Sebe, Eliza Vaş

Editorial BoardAlina Bârgăoanu, PhD – Professor of Communication, National University of Political Studies and Public Administration, BucharestSteven Blockmans, PhD – Professor of EU External Relations Law and Governance, University of AmsterdamFlorin Bonciu, PhD – Professor, Romanian-American University, senior researcher, Institute for World Economy, BucharestValentin Cojanu, PhD – Professor, Bucharest University of Economic StudiesDaniel Dăianu, Member of the Romanian Academy, Member of the Board of the National Bank of Romania and former finance minister of RomaniaEugen Dijmărescu, PhD – Professor, Romanian-American UniversityGabriela Drăgan, PhD – Professor, Bucharest University of Economic Studies, Director General of the European Institute of RomaniaAndrás Inotai, PhD - Professor emeritus, Institute or World Economics, BudapestMugur Isărescu, PhD – Governor of the National Bank of RomaniaKerry Longhurst, PhD – Jean Monnet Professor at Collegium Civitas, WarsawAlan Mayhew, PhD – Jean Monnet Professor, University of Sussex, UKGabriela Carmen Pascariu, PhD - Professor, Director of the Centre of European Studies, A.I. Cuza University, Iaşi, RomaniaJacques Pelkmans, PhD – Senior Research Fellow, Centre for European Policy Studies, Brussels Cristian Popa, PhD – former Vice-president and Member of the Management Committee, European Investment Bank; former Deputy Governor, National Bank of RomaniaTudorel Postolache, PhD – Member of the Romanian AcademyHelen Wallace, PhD – Honorary Professor, University of Sussex ,UK

© European Institute of Romania, 2017

Romanian Journal of European Affairs is published by the European Institute of Romania7-9, Regina Elisabeta Blvd., Bucharest, Code 030016, RomaniaTel: (+4021) 314 26 96, 314 26 97, Fax: (+4021) 314 26 66E-mail: rjea@ier.ro, Web: http://rjea.ier.ro

Graphics and DTP: Monica DumitrescuPrint: Global Print BDV SRL, https://www.tipografia-global-print.ro/

ISSN print: 1582-8271ISSN online: 1841-4273

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Contents

Guest article:Romania: Ten Years of EU Membership ...................................................Gábor Hunya

The Influence of the EU Council Presidency on National Coordination Mechanisms for European Agenda ..........................................................Johana Galušková

Associate Statehood for Scotland as the Way to Stay in both the United Kingdom and the European Union: the Liechtenstein Example ...............Hakan Kolçak

EU and US Export Control Regimes for Dual Use Goods: an Overview of Existing Frameworks ............................................................................Hamed Alavi, Tatsiana Khamichonak

The Race towards the Future: Geopolitics versus Technology. Implications for Romania .........................................................................Florin Bonciu

Can EU Act as a Democracy Promoter? Analysing the Democratization Demand and Supply in Turkey - EU Relations ..........................................Çiğdem Üstün

European Integration of Ukraine: Tool for Internal Reform, Source of Problems or Pass Ticket to EU Membership? .......................................Oleh Poshedin, Maryna Chulaievska

Guidelines for Authors

Romanian Journal of European Affairs (RJEA) is a publication issued by the European Institute of Romania, which deals with a wide range of topics pertaining to the realm of European Affairs. Its articles focus on issues of significance in the EU today, such as: institutional building, economic and monetary affairs, internal market, energy, migration, security, neighbourhood policy, the effects of the European integration process on the new member states (with a particular focus on Romania), as well as the EU’s relations with other global actors. Starting 2017, its frequency is biannual (June and December).

The recognition of RJEA’s role in the European studies area has been confirmed by its admission in several international scientific databases, such as: ProQuest, EBSCO, SCOPUS, Index Copernicus, DOAJ, HeinOnline, Cabell’s Directory, ICAAP - International Consortium for the Advancement of Academic Publications, Gesis, Open J-Gate etc. The articles of the Romanian Journal of European Affairs are also indexed in World Affairs Online (WAO), accessible via the portal IREON. Since 2015 it is also included in INFOBASE INDEX and CiteFactor.

We warmly welcome submission of articles or book reviews.The articles (written in English or French) must have between 4,000 and 8,000 words,

followed by a 200-word abstract in English, a very brief autobiographical note, keywords and JEL classification (if the case). Book reviews should be no longer than 2, 000 words.

The articles will be presented in Microsoft Office Word format, Times New Roman, 12, at 1.5 lines, and will be sent to the address rjea@ier.ro mentioning “For RJEA”. Oxford citation system is highly recommended.

Starting 2010, the submission of an article implies commitment from the author to comply with the copyright policy of the Romanian Journal of European Affairs. The Copyright Agreement is available online here: http://www.ier.ro/documente/rjea_pdf/copyright_agreement_for_RJEA_articles.pdf

Peer-review process:Each article received for publication enters a thorough selection procedure before being

accepted or rejected. All articles under analysis are made anonymous and handed over to two referees whose reports shall be synthesized by the editorial team and provide the basis for acceptance or rejection.

Within the evaluation procedure, there are several factors, both quantitative and qualitative, that are taken into consideration. The main selection criteria are: scientific excellence, originality, novelty and potential interest for the journal’s audience.

The editors reserve the right to ask for changes, both in form and scope, to decide upon publication, to edit the articles or to modify/eliminate some fragments, observing the original sense.

For more general information on the journal, please visit http://rjea.ier.ro or contact us at rjea@ier.ro.

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ROMANIAN JOURNAL OF EUROPEAN AFFAIRS Vol. 17, No. 1, June 2017

Guest article:Romania: Ten Years of EU Membership

Gábor Hunya1

Abstract2: By joining the European Union as of 1st of January 2007, Romania made use of a window of opportunity which may not have been open later. In the ten years that followed, advantages and challenges of the membership have in part been overshadowed by the impact of the global financial crisis. The country went through a boom-bust-boom economic cycle. The swing from overheating to depression and back again to overheating has been amplified by pro-cyclical economic policy. Romania has been a selective policy taker in the EU often delaying fiscal and legal actions resulting in lost benefits. By reviewing the current political uncertainties in Europe, the conclusion emerges that more effective governance and more active foreign policy is necessary under the current Europe-wide orientation loss. The country may need to develop a mobilising strategy and policy beyond the direct benefits provided by the EU, one that also contributes to the success of the European integration.

Keywords: EU integration, economic development of Romania, macro-economic policy, EU membership

JEL classification: F05, E06, O52

A story of mixed success

Ten years after its accession to the EU, Romanians keep showing a high rate of confidence in the European Union (68% tend to trust).3 They see the benefits of EU membership primarily in the freedom to travel and work abroad. ‘Enthusiasm’ was especially upbeat in the first two years of membership when more than 600,000 people left the country; another almost 300,000 emigrated in the following seven years (net migration balance according Eurostat). The number of those working or studying abroad temporarily is estimated at an additional 2.5 million.

Despite large emigration, Romania’s economic growth has been remarkable: the volume of GDP grew by 30% between 2005 and 2015 in real terms, which is the third highest rate

1 Gábor Hunya is senior economist at the Vienna Institute for International Economic Studies, wiiw. His main fields of research include foreign direct investments and the Romanian economy. E-mail: hunya@wiiw.ac.at. 2 An earlier version of this article appeared in the wiiw Monthly Report No. 1/2017. 3 Standard Eurobarometer 83, Spring 2015.

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among the Central and East European EU members (EU-CEE) after Poland and Slovakia.4 Reflecting the effects of migration, price level and economic growth, per capita GDP at purchasing power parity (PPP) rose from 34% to 57% of the EU28 average in the same period. This fast pace of catching-up is especially remarkable compared with the previous ten years when the development gap hardly narrowed (32% in 1995 and 34% in 2005).

Closing the development gap between Romania and the EU cannot take place overnight, however, nor in a decade or two. In the EU-wide ranking, Romania has overtaken only Bulgaria, making it the second least developed Member State. Although we lack calculations of the contribution of EU membership to the improved macroeconomic performance, it is most likely that the accession has improved the legal stability, FDI inflow and financial transfers from Brussels have decisively contributed to Romania’s economic growth. When going into detail, however, one discovers several shortcomings in the economic policy, doing business conditions and the rule of law. Many of these have to do with the premature EU accession and the slowdown of the pace of reforms in the post-accession period. Romania’s institutions and administration are still not functioning well enough, therefore there is enough room for the country to fully benefit from EU membership.

Premature EU accession

The negotiations between 2000 and 2004 were spent with the transposition of the community rules and standards into the Romanian legal system and there was neither time nor capacity for their proper internalisation and implementation. In the 2006 monitoring report, the European Commission (EC) stated that ‘the country made sufficient progress and would not put at risk the EU’s core policies and its regulatory framework’.5 This positive view reflected the interest of the EC being in an enlargement-friendly mood similar to the EU member states which were ratifying Romania’s accession treaty. When the European Court of Auditors (ECA) opposed the accession of Romania and Bulgaria on the grounds that EU money would not be spent efficiently, it was seen inopportune to change the process of accession.6 It was left to the new member states to step up reforms in their own interest.

The concern that Romania needed more time to prepare for accession, so that EU transfers could be absorbed in a more efficient way, has proved to be correct. Lack of institutional capacity and wide-spread corruption has hindered the country to fully benefit from EU funds. Out of the EUR 15.5 billion allocated to Romania under the EU cohesion policy in 2007–2013 (supplemented by EUR 3.4 billion national co-funding), only 75% could be spent by April 2016.7 The total sum used in Romania amounted to 1.5% of the cumulative GDP over

4 We do not stick to the 2007-2016 period in this analysis as most of the processes related to EU accession started earlier when the decision about membership was made, and also because no final data for 2016 are available at the time of writing. Data are from Eurostat. 5 Communication from the Commission – Monitoring report on the state of preparedness for EU membership of Bulgaria and Romania, Brussels, 26.9.2006, COM(2006) 549 final. 6 http://www.euractiv.com/section/enlargement/news/auditors-romania-and-bulgaria-were-not-ready-for-accession/. 7 Applica, Ismeri Europa and Cambridge Economic Associates, ‘Country report Romania – Work Package 1 Ex post evaluation of Cohesion Policy programmes 2007–2013, focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF)’, September 2016.

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seven years, one of the lowest shares among the new EU members. There have been some remarkable results nevertheless, including the expansion of water and sewage infrastructure and the modernisation of public heating systems, while the large amount of funds spent on road construction resulted only in a fragmented motorway network. (In the 2014-2020 period the allocated funds are two times higher comparing to the previous one.)

Boom and bust economic cycle overshadowed the benefits of EU membership

An overarching account of Romania’s economic development since 2007 is primarily the story of managing the impact of the global financial crisis amid recurring political strains and only to a lesser extent an impact assessment of EU membership itself. The Romanian economy underwent a full-fledged boom-bust-boom cycle in the past ten years (Figure 1). Rapid capital inflows and pro-cyclical fiscal spending resulted in consumption booms both in 2006–2008 and in 2015–2016. Increasing instability in the first boom period triggered high inflation and currency devaluation, making the country highly vulnerable to the global financial crisis. That growth trajectory proved unsustainable thus GDP contracted in 2009 and 2010, then stagnated in 2011 and 2012.

The modest but balanced post-crisis recovery of 2013–2014 was followed by an expansionary fiscal policy in 2015 leading to rapid GDP growth especially in 2016. The difference between the two boom periods is that this time inflation was negative due to the VAT cuts and low international commodity prices, while the external balance was in much better shape than in the earlier period. In other words, capital inflows have become more cautious and do not finance excessive current account deficits. As a result, the rate of economic growth in 2015–2016 has been only about half of what it used to be in 2006–2008.

A more detailed analysis reveals that the economic policy aggravated the impact of the global financial crisis, and the stabilisation steps were taken too late and too harsh8. In 2008 Romania was heading towards unsustainable current account deficits – already before the financial crisis. Also, fiscal deficits were on the increase on account of high public sector wage increases that the liberal government handed out to win the 2008 elections. It failed to win despite a rise of fiscal expenditures on wages by 87% in nominal terms over two years. In 2009, fiscal deficits expanded to 7.5% of GDP, also on account of recession. The government had no credible economic policy of its own; none of the three governments in office during 2009–2010 had been able to come up with a fiscal programme that could be trusted and implemented. The authorities shifted the bulk of the uneasy task of economic policy-making to the IMF. In order to forestall a further deterioration of the situation, the government called the EC-IMF-WB troika for help. On 4th of May 2009, the Executive Board of the IMF approved a ‘24-month Stand-By Arrangement for Romania to support an economic program to cushion the effects of the sharp drop in capital inflows while addressing the country’s external and fiscal imbalances and strengthening the financial sector’9. The programme combined short-term budget cuts with longer-term fiscal policy reforms as a condition for loans worth EUR

8 The author’s detailed analysis of Romania’s economic development of the past decade can be found in the forecast reports of wiiw published on a semiannual basis. http://wiiw.ac.at/wiiw-forecast-reports-ps-50.html. 9 http://www.imf.org/external/np/sec/pr/2009/pr09148.htm.

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20 billion. As a result, the country entered a downward spiral of economic contraction and fiscal austerity. Expenditure cuts were enforced as of July 2010 in the form of public sector wages slashed by 25%. Additional fiscal revenues were accrued by the increase of the VAT rate from 19% to 24% and by broadening the scope of social security contributions. Fiscal stability was achieved, but the economy stagnated for another two years. Based on ex-post calculations, less fiscal restriction would have caused less recession and achieve the same stability at a higher GDP level.

Figure 1

Romania: Contribution to real GDP growth

Source: wiiw Annual Database incorporating national and Eurostat statistics, 2016 wiiw forecast, author’s calculations.

Romania emerged from the financial crisis with an export-led economic growth in 2013. The fiscal stance was kept restrictive and household consumption recovered only modestly. Abundant liquidity on capital markets and increasing trust brought down the cost of market financing. This happened although many of the structural reforms stipulated by the IMF accord remained pending. Fiscal arrears could be reduced, but the privatisation and restructuring of loss-making state-owned enterprises made little progress. Still, based on the improved financial situation, further fiscal austerity did not seem justified in the following years. Nevertheless, the Medium-Term Objective (MTO), an obligation under the preventive arm of the EU Stability and Growth Pact and the new IMF precautionary stand-by agreement, prescribed to bring down the structural budget deficit to 1% of GDP in 2015. The socialist-led government broke the commitment in order to increase both wages and investments which proved successful in the given circumstances. But the major aim of the 2016 tax reform implemented ahead of the December elections was mainly political – to bring back

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the VAT rate to the June 2010 level and increase public sector wages by at least as much as they had been cut in the austerity period. Fiscal policy swung back to expansion by which the ten-year cycle was completed. The political benefit could be reaped this time, bringing back a socialist-led coalition after a year spent under a caretaker government. A rare window of opportunity for improving institutional efficiency and structural change has opened up based on the achieved economic stability and parliamentary majority.

Romania’s economic growth of 4.8% in 2016 was one of the highest in Europe. Soaring household consumption was the main component of growth and government consumption also contributed positively, while fixed investments and the foreign balance were on the negative side. As to 2017, the government took measures to speed up economic growth by further generous incomes policy measures. It is not all that clear why consumption needs further stimulation as its growth has been robust enough. Expanding fiscal deficits at a time of high economic growth is a pro-cyclical policy which proved disastrous ten years before. Overshooting in the austerity period is now matched by an overshooting in growth stimulation. The response of the economy to fiscal stimulation has at least not been all that harmful yet as demand increased more for than for imported consumer goods. The domestic production of goods and services absorbed most of the surge in household demand thus the trade balance did not deteriorate to a large extent.

The longer-term prospects of the Romanian economy will be sobering if investments do not recover. The government’s 2017 budget law is based on the ambitious assumption of 5.2% GDP growth driven by both consumption and investments. This assumption may be based on the desire of keeping the fiscal deficit below the 3% of GDP. Demand stimulation will not be enough to reach that economic growth rate; an investment miracle must take place. Not only EU funds need to be absorbed at a faster pace but also the private sector needs to expand and modernise capacities. But what if growth will not achieve the forecasted level, which is very much likely? The government may find itself in the unfavourable situation with a deficit above 3% of GDP as it will not be able to generate the expected revenues. In this case, it will have to cut expenditures which have been tied by wage commitments. It will be public investments that will again fall victim to the necessary austerity.

The current role of EU institutions is, among others, to safeguard the Romanian government from falling into fiscal overspending which would harm the country as well as the international partners. The 3% of GDP fiscal deficit rule has its own fallacies but it cannot be considered out of place in times of high economic growth. It is actually a maturity test of an EU member state to control the political cycle of economic policy. The European Commission may find it necessary to impose an excessive deficit procedure to bring back the government to a balanced economic policy path.

Structural change generated by FDI

Meanwhile the real economy underwent remarkable structural changes away from agriculture and light industry to more sophisticated manufacturing and services. Improved competitiveness of the Romanian economy is expressed in expanding export volumes of both goods and services and the growing export shares of machinery and transport equipment

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(Figure 2). This is to a large extent due to the activity of foreign investors that came to the country after the announcement of EU accession. FDI stocks per GDP increased from 27% in 2005 to 40% in 2015, and Romania climbed from the penultimate to the seventh place among the EU-CEE countries.

Figure 2

Romanian goods exports by SITC commodity groups, fob

Source: wiiw Annual Database incorporating national and Eurostat statistics.

Nevertheless, a balanced relationship between the foreign and the domestic sector has been maintained at least at the macro-economic level. The share of majority foreign owned companies is less than 50% of the output and about one quarter of the employment is in the business sector (financial sector excluded - Eurostat FATS). This is lower than in the highly foreign dependent economies such as Slovakia or Hungary, but higher than in Poland. Strengthening local SMEs, but especially the medium-size segment may be necessary in order to keep up the balance.

Most of the larger FDI projects especially in the manufacturing industry were implemented before the global financial crisis (Figure 3). In the post-crisis years, FDI inflow has not recovered to its pre-crisis level of 7% of GDP; it has stagnated at 2% of GDP in recent years. This is actually in line with the European trend of sluggish investment activity. Also the announced greenfield projects of recent years are smaller in value, and focus on the services sectors (www.fdimarkets.com). As a result, Romania has emerged as an important hub in terms of ICT offshoring which has important positive impacts on the services balance of the current account. Economic openness in terms of free movement and goods and capital has been a major achievement of EU membership.

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Guest article:Romania: Ten Years of EU Membership

Figure 3

Investment capital pledged in announced greenfield FDI projects, 2003-2016, EUR million

Remark: partly estimated

Source: fDi Markets database: fdimarkets.com

Fierce fight against corruption with mixed results

There have been numerous further changes in Romania that can be attributed to EU membership, including political and legal conditions based on democratic values and the rule of law. The adaptation of liberal democratic political and legal rules and values had been thrust upon Romania in the accession process leaving internalisation and implementation for the own efforts of the new member state but under continuous guidance and assessment.

Continuous EU pressure, learning by doing as well as a generation change improved the administrative capacity over time. To safeguard the reform process after accession, the EC imposed continuous monitoring on areas not meeting the required standards such as the reform of the judicial system, elimination of corruption and the struggle against organised crime. Despite progress, the Cooperation and Verification Mechanism (CVM) is still in place. The recent CVM Report10 finds several issues pending including transparency and professionality of public institutions.

10 Report from the Commission to the European Parliament and the Council – On Progress in Romania under the Cooperation and Verification Mechanism, Brussels, 27.1.2016, COM(2016) 41 final.

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The fight against corruption received much lip-service around the EU accession date, but policies and attitudes hardly changed for years. The turning point was marked when former Prime Minister Adrian Năstase, was sentenced to prison for corruption in 2012. The next decisive step was taken in 2013, the upgrading of the activity of the National Anticorruption Directorate (DNA), founded in 2003. Since then, this institution has been actively investigating and prosecuting corruption-related offences such as bribery, graft, patronage and embezzlement. In 2015, the DNA finalised investigations concerning over 1,250 private and legal persons, including five ministers, 16 members of the chamber of deputies and five senators.11 In addition, Prime Minister Victor Ponta was indicted on charges of forgery and money-laundering which indirectly led to his resignation in November 2015.12 In 2016 the DNA’s activity took on a more nation-wide character, expanding to the regional administration.

The anti-corruption fight remains incomplete as long as transparency and coordination of legislation and jurisdiction is not fully provided. Under the current fuzzy system it is hardly possible for decision-makers to act in full accordance with the law and public interest which has a paralysing effect. In practice these problems could be fixed by coordinated efforts with the support of the CVM. More attention is necessary as the current government does not have the fight against corruption on its agenda13 and curtailing the power of the DNA is on the agenda.

In a wider sense, there is a conflict between the traditional political establishment and a new generation of persons, movements and institutions representing ‘European’, democratic values. The political establishment of almost all parties is widely inflicted by clientelism. The promoters of liberal democracy grow in number and become more organised as being shown by the demonstrations early-February 2017.

Putting unconditional trust into the DNA is disputable. The positive results have been overshadowed by transparency of how the target persons of investigations are selected14 and how far the whole process can extend15. The anti-corruption prosecutors are not faultless and often act arbitrary especially in cases of influence peddling or embezzlement.16 Publicity is used for deterrence without presuming innocence. Leaders in public administration may have the widespread impression that they can be any time prosecuted for any decision they have taken, therefore public procurement, and public investment activity in general, have slowed down. The task for the future is not only to implement law but also to improve and

11 http://www.pna.ro/results.xhtml. 12 See for details https://www.theguardian.com/world/2015/nov/04/woman-leading-war-on-corruption-romania. 13 http://gov.ro/en/objectives/programme-for-government 14 http://globalriskinsights.com/2016/07/romanias-anti-corruption-fight-sends-mixed-messages/. 15 The political scientist Alina Mungiu-Pippidi, president of the Romanian Academic Society, hailed the DNA for prosecuting the corrupt political class what she called the trans-party mafia; http://www.bbc.com/news/blogs-eu-31537338. The historian Stefano Bottoni warned that Romania may become similar to Italy in the early 1990s, when the anti-mafia fight wiped out the former political class, destabilised the party system and gave rise to the rule of Berlusconi. Bottoni concludes that corruption and economic interests ruling in politics has not changed in its intensity but in its form; http://www.miscareaderezistenta.ro/actualitate/36389-dna-critici-kovesi-bottoni. 16 https://www.theguardian.com/world/2017/jan/10/romanias-corruption-fight-is-a-smokescreen-to-weaken-its-democracy

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harmonise the legislative framework itself. Avoiding false accusations of corruption is just as important as fighting it. The Justice Services Improvement Project of the World Bank supported by EUR 60 million funding approved on 31 January 2017 may be of some help.17

A road ahead under growing uncertainty

Global and European economic and political uncertainty has increased over the past year. The Economic Policy Uncertainty Index18 provides one indicator of this apparently sudden and dramatic increase in uncertainty: it has surged high, with particular spikes in June-July (Brexit referendum) November (Trump election) 2016 as well as the rising EU-scepticism. Especially the economic, political, military and cultural role of the US means that it is a matter of concern for everyone, including the EU-CEE countries.

The perception of insecurity had already been on the rise on account of Russia’s annexation of Crimea and its involvement in the conflict in Eastern Ukraine, as well as the impact of the migration crisis in 2015. The continuation of the EU and NATO in their current form and the maintenance of the post-war economic and security architecture are being openly questioned. Romania’s interest seems to be challenged in both of these aspects.

A US paradigm shift from globalization toward protectionism, and an isolationist security policy may disrupt the international order. Many EU-CEE countries have extremely open economies, thus leaving them particularly vulnerable to a downturn in global trade volumes. A rise in global protectionism would harm also the Romanian economy. Mr Trump’s apparent antagonism towards Germany and European integration is of particular importance. German, French etc. industry has long supply chains stretching deep into the CEE region. By its exports and FDI structure, Romania is plugged into the European supply chains in the automotive and related industrial sectors while it is exactly this industry which is in the focus of Mr Trump’s protectionist intentions. Romania would suffer if German exports were curtailed by the imposition of tariffs (20% of Romanian exports go to Germany).

Brexit negotiations can also have important implications for the EU budget and on migration flows in and out of CEE countries. Questions are related to fiscal transfers less developed member states and the free movement of labour. Romania is strongly affected in both. As a newcomer, it could not benefit from the 2007-2013 financing period in full and would need the transfers of the 2014-2020 period to catch up with basic infrastructure. Due to delays already obvious, drawing on the funds will cumulate in the years after 2020 when the whole financing scheme is getting increasingly fragile. By the exit of Britain, one of the main net payers will leave the EU budget reducing the available funds for cohesion policy.19 The country’s net financial position to the EU budget amounts to 0.4% of its GNI which could drop to a half, had Norway’s contribution be the pattern of the new British-EU relations. This would leave about 10% less to be distributed than envisaged.

17 http://projects.worldbank.org/P160751?lang=en 18 www.policyuncertainty.com 19 Richter, S. (2016), ‘Brexit, the EU budget and the EU-CEE countries’, In: Labour Shortages Driving Economic Growth?, wiiw Forecast Report, No. Autumn 2016, Vienna, November 2016, pp. 29-34.

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Brexit disregarded, Western Europe’s commitment to the process of transition and catching up of the new members will not be as strong as it used to be. It is not only the talk about ‘two-speed’ Europe which is more or less a fact by now as not all member states participate in euro and Schengen. Poland and Hungary in particular have governments opposing deeper integration and care mainly for financial benefits. Such countries will have to decide how much of free riding they really want to enjoy within the EU. If they want less EU and the multi-speed EU is their logical answer, then transfers and single market may have to be traded for nationalist policies.

A rise in the number and support of anti-EU and anti-euro parties has been apparent in many EU member states. The polarisation of mainstream parties and business people keeping the faith in the EU on the one hand and nationalist parties and protectionist tendencies on the other is based mainly on sentiments. The attractiveness of the latter goes against experience: the post-2008 recovery has been based on the growing access to the EU markets, and also the financial system proved resilient.

Romania can either join the more and more EU-sceptic V4 group or remain a strong supporter of deeper integration. In the first case it may have strong alliance in the neighbourhood which loosens its EU ties. In the second case, it needs to work to tighten alliance with Germany. Breaking the fiscal convergence rule is not a good starting position for such an endeavour.

Romania should be more active in developing EU integration

Romania’s role has not been destructive in the EU; the country has denied policy coordination with the Visegrad countries and does not support the nationalist line of Hungary and Poland. But even if not outspokenly, Romania’s policy has never gone beyond nationalist self-interest. Even the undercurrent of EU-scepticism comes to the surface time to time in the form of demonstration of national pride and refusal of international control mechanisms. It would be in Romania’s interest to become active in shaping the European agenda if it wants to enjoy the benefits of the cohesion policy beyond 2020. The country may need to develop a mobilising strategy and policy beyond the direct benefits provided by the EU, one that also contributes to the success of the European integration in a wider sense. Going beyond the position of a policy-taker is especially necessary under the current lack of orientation in the EU as a whole.

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REFERENCES:

Official documents:

• Communication from the Commission – Monitoring report on the state of preparedness for EU membership of Bulgaria and Romania, Brussels, 26.9.2006, COM (2006) 549 final;

• Report from the Commission to the European Parliament and the Council – On Progress in Romania under the Cooperation and Verification Mechanism, Brussels, 27.1.2016, COM (2016) 41 final;

• Standard Eurobarometer 83, Spring 2015.

Reports:

• Applica, Ismeri Europa and Cambridge Economic Associates, ‘Country report Romania – Work Package 1 Ex post evaluation of Cohesion Policy programmes 2007–2013, focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF)’, September 2016;

• Richter, S. (2016), ‘Brexit, the EU budget and the EU-CEE countries’, In: Labour Shortages Driving Economic Growth? wiiw Forecast Report, No. Autumn 2016, Vienna, November 2016, pp. 29-34.

Online references:

• Bringing in the scalps: the woman leading Romania’s war on corruption, https://www.theguardian.com/world/2015/nov/04/woman-leading-war-on-corruption-romania;

• Istoric italian, atac la Kovesi: “DNA slăbeşte sistemul imunitar al societăţii”, http://www.miscareaderezistenta.ro/actualitate/36389-dna-critici-kovesi-bottoni;

• Our results, http://www.pna.ro/results.xhtml; • Press Release: IMF Executive Board Approves €12.9 Billion Stand-By Arrangement for

Romania, http://www.imf.org/external/np/sec/pr/2009/pr09148.htm; • Romania and Bulgaria were not ready for accession, EU auditors confess, http://www.

euractiv.com/section/enlargement/news/auditors-romania-and-bulgaria-were-not-ready-for-accession/;

• Romania anti-sleaze drive reaches elite, http://www.bbc.com/news/blogs-eu-31537338;• Romania’s anti-corruption fight sends mixed messages, http://globalriskinsights.

com/2016/07/romanias-anti-corruption-fight-sends-mixed-messages/; • www.policyuncertainty.com; • https://www.theguardian.com/world/2017/jan/10/romanias-corruption-fight-is-a-

smokescreen-to-weaken-its-democracy;• http://gov.ro/en/objectives/programme-for-government.

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ROMANIAN JOURNAL OF EUROPEAN AFFAIRS Vol. 17, No. 1, June 2017

The Influence of the EU Council Presidency on National Coordination Mechanisms for European Agenda

Johana Galušková1

Abstract: This article2 examines the degree to which holding the Presidency of the Council of the EU (Presidency) influences CEE countries’ national systems of European affairs coordination. It utilizes process tracing to map out the coordination mechanisms for individual countries along three dimensions: centralization, selectivity, and coordination tools (both technical and personnel-based). Making use of the critical junctures concept, which presumes disruption of fluent institutional development, the study explores whether the Presidency may indeed be one of these disruptive moments. It points out the significance of the Presidency not only at the European level, but particularly at the national level, as well. This national-level influence comes in varying degrees, depending both upon the dimensions involved and the individual states concerned. It confirms that personnel changes are the rule, and an influence on technical tools is also frequently exhibited. But it is more exceptional for centralization and selectivity to be affected, and this was confirmed for the Czech Republic (CR), partly for Poland and Lithuania.

Keywords: Presidency of the Council of the EU, coordination, centralization, comprehensiveness, tools, critical junctures, ECC countries

Introduction

Substantial attention has been given to the coordination of European issues (Kassim – Peters – Wright 2000; Kassim et al. 2001; Sepos 2005; Dimitrova and Toshkov 2007; Gärtner – Hörner – Obholzer 2011). An important part of the coordination process is the Presidency, which forms a symbolic milestone in the evolution of EU agenda coordination systems, tests the state’s ability to function as a rightful member of the European Union (EU) (Drulák, 2008, p.136) and allows the degree of compatibility with European principles to be investigated (Kaniok, 2008). In the late 1990s, Schout (1998, p.2) pointed to a lack of information on the significance of the Presidency and the underestimation of its functioning. But over the past decade, scholars have attributed to the Presidency various important roles (Elgström, 2003; Talbberg, 2006; Thomson, 2008; Kaniok, 2008; Bunse 2009; Batory and Puetter, 2013; Alexandrova and Timmermans, 2013).

1 Johana Galušková is PhD student of European studies at the Department of International Relations and European Studies of the Faculty of Social Studies at Masaryk University in Brno, Czech Republic. E-mail: 360836@mail.muni.cz. 2 This article has been written under the grant Europe in Changing International Environment II (MUNI/A/1113/2015).

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The Influence of the EU Council Presidency on National Coordination Mechanismsfor European Agenda

This study aims to contribute to what is known as the Presidency’s significance, and to demonstrate its impact on national coordination mechanisms3. It utilizes a theoretical concept drawn from historical institutionalism (HI) which is known as critical junctures. Critical junctures are key moments in the development of an institution and the question is whether changes made to accommodate the Presidency are maintained in the coordination system, or whether the system reverts to its original status once the Presidency has ended. Evidence is provided that the Presidency had a significant impact in the CR and, to some extent, in Poland and Lithuania, as well. In addition, the Presidency reached the 100 percent influence in the area of personal tools created for the purpose of the Presidency and substantial influence in technical tools.

Those conclusions are showing that holding the Presidency affects the EU policy making, not only at the European level, but also at the national one. More importantly, this article expands our knowledge of the EU policy making at the national level and findings about coordination process of EU affairs and its formation. In addition, the article contributes to the understanding of the administration and organization of Presidencies in CEE countries, from both analytical and theoretical standpoint. At the theoretical level, the article is verifying the functionality of critical junctures and confirms that institutions are a stable part of historical development.

In terms of methodology, the paper uses process tracing, involving the study of individual countries followed by a comparison of five Central and Eastern European (CEE) countries. These five countries—Slovenia, the Czech Republic (CR), Poland, Hungary, and Lithuania—are diverse in character: both large (Poland) and small countries (Slovenia and Lithuania) are included; countries positive on European integration (Slovenia) and Eurosceptic ones (CR); and countries whose public administration is highly politicized (Hungary, CR or Poland). Finally, the group includes countries that have held the Presidency under both pre-Lisbon (Slovenia and the CR) and post-Lisbon rules (Hungary, Poland, and Lithuania).4 It is expected that smaller countries will suffer from the lack of administrative staff for the management of the Presidency and some reforms in this sense will be needed (Panke, 2010; Thorhallsson, 2015). Another assumption would be that Eurosceptic countries will tend to centralise the system (Jensen, 2014) during the Presidency to be able to control the participating institutions. Countries holding the Presidency are more likely to become more comprehensive in EU affairs topics because of the mass media attention during the Presidency (Vizi, 2011, p.131). Finally, CEE countries which took the Presidency later than the others will be better stuffed with technical tools and therefore better prepared for the Presidency.

The paper is divided into five sections including this initial introductory section. Section 2 summarizes the research that has been done to date, and what knowledge exists about the Presidency. Sections 3 and 4 focus on the theoretical background, in

3 For the purposes of this research, a coordination system is understood to mean institutional facilities that administer the European agenda within a national state at both political and administrative levels. Attention is paid to the centralization/ decentralization of the coordination system as a whole, to main coordination bodies, to the personal staff and their trainings and to the technical tools established for the Presidency. 4 The Lisbon Treaty introduced Presidency trio which increased continuity of the Presidency and weakened its national character (Kaniok, 2010, p.19; Dostál, 2010).

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particular the HI critical junctures concept, and methodological anchoring. Section 5 then employs process tracing and contains studies of selected coordination systems. Results are compared in the concluding section.

Reflection of the Research To-Date

Although scholars have undeniably paid attention to the Presidency (Kassim, Peters and Wright, 2000; Elgström, 2003; Tallberg, 2004; Schalk et al., 2007; Bunse, 2009; Batory and Puetter 2011) their interest has mostly been focused at the European level. Hayes and Renshaw (2007) deal with procedures and reforms of the Presidency in general. When it comes to the contain assessment of the Presidencies, it is the Journal of Common Market Studies that regularly publishes articles assessing achievements and failures of Presidencies (Kajnč, 2009; Beneš, Karlas, 2010; Ágh, 2012; Pomorska, Vanhoonacker, 2012; Vilpišauskas, 2014).

Deeper research into the national level is less extensive, as the studies of the impact of the Presidency on the domestic environment are. The research done to date has also been limited to descriptive and statistical studies that lack theoretical anchoring. But this is not to say that no studies have investigated the national level: Czech and Slovenian Presidencies have been explored from an Europeanization standpoint (Kaniok and Šteigrová, 2014; Klemenčič, 2008) or with a focus on the impact on public opinion (Kaniok, 2012). The Swedish Institute for European Policy Studies also evaluate individual Presidencies and monitor changes in organization of public administration staff (Fink-Hafner, Lajh, 2008; Kaczynski, 2011; Romsics, 2011; Šešelgyte, 2013).

Also monographs, complexly evaluating Presidencies, have been published for some CEE countries. Drulák and Šábič (2010) are assessing Presidencies in the terms of both goals of the Presidencies and national coordination. For Poland, Karolewski, Mehlhausen and Sus (2014) appraise the Presidency, but the domestic level has been left out entirely. In the CR, Kaniok (2010) analyses the Presidency paying attention to the domestic preparations and administrative stuff. For the rest of the countries such monographs are missing.

The research carried out to date demonstrates that the Presidency is a key event in the “life” of an EU member state, one whose influence extends to both the domestic and European levels. Kaniok and Šteigrová (2014, p.341) claim that studying of midrange impact of the Presidency presents a research challenge. Therefore, analysing the influence of the Presidency on the coordination of the EU agenda and the functioning of public administration offers a fresh perspective that may clarify which dimensions of national coordination are decisively impacted by the Presidency.

Theoretical Background

The theoretical basis taken here is that of HI, which considers institutions to have arisen as part of historical development (Hall and Taylor, 1996, p.9), defining them as “macro historical structures and regularities” (Schmidt, 2010, p.5) in which structures and

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customs are the objects of study. HI stresses the development of institutions and their path dependency and also admits unexpected backlashes and unintended consequences that might occur during the development of institutions (Schmidt, 2010, pp.5, 10).

HI also makes use of critical junctures. The subsequent development of path dependency is based upon these turning points and it is difficult to reverse a process once set in motion (Capoccia and Keleman, 2007, p.342). According to Capoccia and Keleman, critical junctures represent “relatively brief periods with increased probability that decisions by actors will impact future development” (Capoccia and Keleman, 2007, p.348). Since they occur within an overall development process, critical junctures exist for a briefer period than the process itself, and their duration is determined by the will of the actors (Capoccia and Kolman, 2007, pp.348, 350-351). Ebbinghaus (2005, p.16) warns that critical junctures cannot be depended upon to occur.

In the present article, the Presidency is considered such a critical juncture; it interrupts the fluent development of path dependency in national coordination mechanisms. I assume that changes made while preparing and implementing the Presidency will influence the development of coordination. But the international and political significance of the Presidency is not the only important factor: also noteworthy is whether the requirements that have been placed on the country holding the Presidency are met. The Presidency tests the readiness of the national coordination system and represents a logistically and administratively demanding task that can only be executed with long-term preparation (Kaniok, 2010, p.72).

I inquire into whether the Presidency may be designated a critical juncture in the development of coordination systems in the countries I have chosen, with the aim of revealing whether causality exists between the Presidency and the subsequent form of coordination. To be specific, the research question (RQ) is: Can the Presidency be designated as critical juncture in the development of national mechanisms for coordinating the European agenda?

Methodology and Data Processing

The cases examined here consist in the coordination systems of the five countries of CEE that had held the EU Presidency by the end of 2013. They are: Slovenia (January to June 2008), the Czech Republic (January to June 2009), Hungary (January to June 2011), Poland (July to December 2011), and Lithuania (July to December 2013). The first step will be to observe their coordination systems via process tracing. A comparative methodology will then be utilized to assess their similarities and differences.

Beach and Pedersen (2013, pp.2-3; 14) define process tracing as a tool for the study of causal relationships. Process tracing tests theoretical assumptions and seeks out causal relationships between some X and Y: in the present context, the Presidency and the form taken by the coordination system.

To define the coordination systems, Kassim’s (2003) typology will be utilized; for countries that acceded to the EU in 2004 and later, the typology has been extended

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by Gärtner, Hörner and Obholzer (2011). Kassim differentiates four types of systems: comprehensive centralizers, selective centralizers, comprehensive decentralized systems and selective decentralized systems (Kassim, 2003, p.103). Kassim’s centralization dimension may be determined by examining the position of the institutions concerned. Centralized systems have a single key institution5 that bears responsibility for the general coordination and “unified voice” of governmental bodies. Decentralized systems, by contrast, are typical when actors act independently and coordination is left to line ministries. Kassim’s second dimension focused on comprehensive versus selective approaches to coordination. Comprehensive systems are expressing on all documents deriving from the European level, and various governmental and nongovernmental actors are involved in the discussion. Selective systems are less ambitious, with a focus on highly topical and preferred themes (Gärtner, Hörner and Obholzer, 2011, p.84).

Kassim’s model has been completed by dimension of tools that had been expressly created for the Presidency to provide its fluent functioning— personal tools such as staffing and capacity available for the national coordination effort, and technical tools such as databases and videoconferences between the government and the Permanent Representation.

Specifically, I map out the development of the coordination systems and determine whether the changes made during the preparatory phase and the implementation of the Presidency persist after its end. The critical junctures concept will be considered applicable if the changes are shown to endure for at least one year after the termination of the presidency.

The anticipated model of behaviour (in the first dimension) includes the centralization of some components within the institutional coordination structure (a ministry, the Office of the Government, or some other entities created for coordination purposes); or coordination competencies will be distributed among several institutions, thereby increasing their autonomy (for example, individual ministries or the Permanent Representation in Brussels).

With the second dimension, there may be a shift towards a more comprehensive system that comes about with the involvement of novel actors (interest groups and social partners) in the formulation of the national position. New ministries become involved in the coordination effort and the government actively expresses its opinion on all European themes. A shift towards selectivity, by contrast, will reduce the number of such actions and reinforce the government’s position in formulating the national position.

Within the third dimension, that of tools, changes occur in personnel. Administrative staff is trained and then remain active in public administration either in keeping with plan or as a by-product of the Presidency. This results in an increase in the number of employees and represents a change in the personnel area that is both quantitative and qualitative. New technical tools are created to facilitate coordination and improve efficiency.

5 Dimitrova and Toshkov (2007, p.974) further differentiate four locations for the key coordination body: independent institutions, bodies operating under the auspices of the Prime Minister’s office, bodies operating as part of the cabinet, and bodies operating under the MFA.

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The following indicators and values will be examined:

Table 1: Possible values of individual indicators (dimensions)

Degree of centralization Shift away from centralization to decentralization or vice versa.

No influenceDegree of selectivity Shift away from selectivity to comprehensiveness or vice versa.

Personnel tools Creation of new tools and maintaining themTechnical tools

Source: Author.

The study also considers alternative interpretations. The first is due to Rational Choice Institutionalism (RI), which asserts change as the result of political decisions. Niemann and Mak (2009, p.9), characterize the Presidency as a calculation on the part of political actors who use it to promote their interests. To be able to ascribe potential changes to RI principles, these actors’ ties to political decisions or changes in the government must be established.

Another alternative is sociological institutionalism (SI), under which changes follow from the logic of appropriateness. Institutions behave in the manner they consider proper and expected. There is an effort to fulfil expectations and thus to satisfy demands originating at the European level (Niemann and Mak, 2009, p.10). Coordination changes are also ascribed to institutional isomorphism, i.e., the adoption of coordination models from other countries (DeMaggio and Powell, 1983, p.149). For the Presidency to be considered a critical juncture, alternative influences must be excluded.

The analysis presented here was carried out using data from journals and articles on coordination, from Presidency evaluation reports, from documents originating in the individual ministries, the Office of Government or Permanent Representations. A few interviews (via email) correspondence were conducted during Autumn 2015, namely with Slovenian diplomat from MFA, Hungarian diplomat from Permanent Representation to the EU in Brussels, Polish Director of Presidency Coordination of the MFA and Director of the EU Economic Department of the MFA and with Lithuanian diplomat from Permanent Representation for the EU in Brussels. Questions were formulated to find which technical tools had been created for the Presidency and whether they remain in the structure after its termination and how many people hired for the presidency stayed in the EU affairs administration after the Presidency.

Slovenia

The Presidency, in the first half of 2008 represented, according to Klemenčič (2008, p.2), a key Europeanizing event. From a centralization standpoint, a watershed moment had

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already occurred in the 1997 when coordination centre shifted from the MFA (Dimitrova and Toshkov, 2007, p.974) to the newly established Government Office for European Affairs (GOEA), led by a minister without portfolio.6 Fink-Hafner and Lajh attribute the change to an effort to differentiate the EU affairs coordination from ordinary diplomatic matters (2003, pp.94, 99). Kassim’s typology would classify Slovenia as a decentralized system 7 (Gärtner, Hörner and Obholzer, 2011, p.89) because of fragmentation within individual ministries (Fink-Hafner and Lajh, 2008, p.27) and the uncertain position held by the GEOA in inter-ministerial disputes (Gärtner, Hörner and Obholzer, 2011, p.89).

Along the centralization dimension, the Presidency cannot be considered as a critical juncture. Coordination was placed in the charge of the GEOA and the MFA. The coordination model chosen to prepare the Presidency remained unchanged (Fink-Hafner and Lajh, 2008, p.37) until late 2012.8

In terms of selectivity, Gärtner, Hörner and Obholzer (2011, p.89) consider the system relatively comprehensive because attention is given to all European themes. European affairs were coordinated by all ministries, but the attention shown by the minister prior to 2005 and the State Secretary for European Affairs thereafter was inadequate (Klemenčič, 2008, p.23). The change and more active approach resulted from the Presidency. Klemenčič (2008, p.23) describes the dramatic change that occurred early in the preparations within the Working Group for European affairs led by the State Secretary and composed of representatives from individual sector ministries. The working group was dynamic; ministries began to emphasize European themes and included them in their regular agendas. The experience of the Presidency formed the basis for a “shift from passivity to more proactive coordination, at least in some policies” (Gärtner, Hörner and Obholzer, 2011, p.89).

Further evidence of increasing comprehensiveness of coordination came in the form of an agreement on communication between the government and nongovernmental organizations (Fink-Hafner and Lajh, 2008, p.43). Aimed at strengthening dialogue and improving the efficiency of the coordination effort, this channel remains unutilized, and neither parliament increases its involvement in the coordination process (Lajh, 2010, pp.122-123). Because of the openness and transparency of the system, the Presidency did not represent a critical juncture. To the contrary, Lajh observed a drop in communication between the executive and legislative branches of the government, as well as between the executive branch and civil society (2010, p.122).

6 In 2004, the government (led by the Slovenian Democratic Party) considered the dissolution of the GOEA but in the end, only office management was replaced by the State Secretary and thus the Prime Minister’s role in coordination was reinforced. Stability of the coordination after the 1997 reform was attributable to the continuity of the liberal-democratic government, which did not change until 2004 (Dimitrova and Toshkov, 2007, p.976). 7 The key elements of the coordination system are: the Prime Minister and GOEA, who coordinate the European agenda on the inter-ministerial level and provide technical coordination (Fink-Hafnerová and Lajh, 2008, pp.27-28). At a lower level, the MFA and the Ministry of Finance bear the lion’s share of responsibility for financial decision-making, and the Ministry for Public Administration is responsible for training public administration employees (Fink-Hafnerová and Lajh, 2008, p.29). 8 In 2012, the GEOA was dissolved and its key coordination competencies were transferred to the MFA (Ministry of Foreign Affairs, 2013).

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Within the tool dimension, preparation for the Presidency launched a training wave among civil servants that led to increased awareness on European themes. From November 2006 until April 2007, 3472 civil servants took part in 144 seminars organized by the Academy of Sciences (Klemenčič, 2008, pp.21-23). Between 2005 and 2008, 310 temporary positions were created, one-third of which were utilized by the ministries to coordinate the Presidency; the remaining two-thirds were used to handle more general tasks within the coordination system. An example would be the Permanent Representation: its personnel capacity increased by 170 positions, 121 of which were devoted to the Presidency (Fink-Hafner and Lajh, 2008, p.42).

Krajnč and Svetlič (2010, pp.102-103) observed the influence of the training and increased personnel capacity on the coordination system two years after the end of the Presidency. Their study found that 66 percent of public servants focused on the Presidency remained employed in the area of coordinating European affairs.

To simplify the coordination and make it more effective, several technical tools were introduced such as regular video conferences between the Permanent Representation, the GEOA and the Prime Minister, and a system for inter-ministerial coordination involving regular ministerial meetings discussing thematic files. Both the personnel and technical tools were preserved in the coordination structure (Interview with a Slovenian diplomat of the MFA, 2015) after the Presidency.

Motivated by the Presidency, the administrative ranks of the country were complemented by a significant number of trained employees. The Presidency thus represented a critical juncture not only in the personnel area, but also in terms of technical tools. The first two dimensions, by contrast, remained out of play. The coordination model maintained its decentralized character, and the comprehensive form of the system was also conserved. Although great emphasis was put on a number of policies, communication with nongovernmental partners was weak.

Czech Republic (CR)

The CR held the Presidency in early 2009. Gärtner, Hörner and Obholzer (2011, p.90) place the CR in a group of (relatively) decentralized systems, although they admit that entities central to the coordination effort do exist.9 These entities coordinate the European agenda irrespective of theme. Currently, they include the Committee for the EU at the governmental and working levels, the Section for European Affairs, and the Government of the CR; formerly, the Deputy Prime Minister for European Affairs was also involved (Karlas, 2009, p.6). There are also Ministry Coordination Groups, which are symbolic of the fragmentation and decentralization present (Souček, 2011, p.197). Typical for this coordination model is a shift of competencies along an axis running from the MFA to the Government of the CR, and this is perceptible in the post of chairperson of the EU Committee (Galušková, 2012, p.31). The shift was reflected in the preparatory phase initiated in 2004 under Government Resolution 2299/2004, dated 16 November of that year. During that period, the coordination role was in the hands of the MFA. Then in

9 Cf. Karlas (2009, p.4) who defines the Czech coordination system as semi-centralized.

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2006 it shifted to the newly-created position of State Secretary for the Coordination of the CR Presidency and in 2007, came to rest with the position of Deputy Prime Minister for European Affairs, occupied by Alexander Vondra, the Deputy Prime Minister (Kaniok, 2010, pp.73-75).

As regards centralization, the position of the Deputy Prime Minister for European Affairs was a key-position, because it served as the centre of the entire coordination effort during the Presidency (Ifrah et al., 2008, p.19; Beneš, Karlas, 2010, p.70). Once the position had been created, the Government of the CR and the MFA began to battle for control over the area, and the centre shifted to the Government of the CR. When a new coalition involving ODS, VV, and TOP 09 was formed in May 2010, the position was abolished (Týden, 2010). Karel Schwarzenberg, then-Minister of Foreign Affairs, called the post of Minister for European Affairs redundant “since the CR has already terminated its Presidency to the Council of the EU […]“ (Mediafax, 2010).

The Czech case is unique and its HI potential must be assessed in the context of other events. Political discussion of the abolition of the position of Minister for European Affairs took place immediately after the new coalition was formed (in keeping with RI). In September 2011, the post of Minister for European Affairs was abolished in favour of separate positions both titled State Secretary for European Affairs, one under the Government of the CR and the other under the MFA. These changes induced a wave of decentralization in the system, but one still may not speak of a return to the pre-Presidency model, since the Section for European Affairs remained essentially intact. Government of Jiří Rusnok decided to abolished the post at the MFA and leave only the one under the Government of the CR. The redundant positions had been instigated by a political dispute between the then-Prime Minister and the Minister of Foreign Affairs (Euractiv, 2014). From a long-term perspective, however, it was the centralized model of the Presidency period that took root in the coordination system (Marek and Baun, 2010, p.152). Since the criterion has been met, I judge the Presidency to have been a critical juncture in the development of the centralized coordination system.

In terms of selectivity, the coordination system has always comprised a large number of actors with a comprehensive approach to European themes (Karlas, 2009, p.4). The Ministry Coordination Groups had the opportunity to invite representatives of social partners, regions, and NGOs to take part in the discussion (Knutelská, 2013, p.11). Despite this, a comprehensive approach was reinforced during the preparatory phase for the Presidency. The Ministry Coordination Groups had greater latitude to formulate presidential priorities for individual sectors (Knutelská, 2013, p.12, Kaniok, 2010, p. 84). Kaniok and Šteigrová (2014, p.346) also note intensive involvement by civil servants in the coordination of the European agenda during negotiations.

During the Presidency, the CR developed contacts at both the European and national levels and became an open system for interest groups and state and nongovernmental actors (Kaniok and Šteigrová 2014, p.346; Knutelská 2013, p.14). Beneš and Braun (2011, p.71) speak of “reinforcing the role of the Permanent Representation in the formulation of the CR’s position within the EU legislative process.” According to Gärtner, Hörner and Obholzer (2011, p.90), the involvement of large numbers of actors in the coordination

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process is the characteristic of a comprehensive approach today. The Presidency may be seen to have been a critical juncture that oriented the coordination effort in the direction of a thoroughly comprehensive system. In this context, Drulák and Šabič (2010, p.282) are speaking about deep socialization of the Czech politicians within the EU sphere during the Presidency.

4731 new and existing civil servants underwent training as part of the training programs. 338 new short-term positions were created during the Presidency, and although not called for in government plans, 175 newly hired employees remained in the coordination system even after the end of the Presidency (Kaniok and Šteigrová, 2014, p.345). This demonstrates both that personnel capacity increased and that administrative structures were improved in terms of staff knowledge of European law and negotiating skills.

During the Presidency, an inter–ministry Presidency Agenda Database was set up with the aim of gathering documents discussed at various levels by the Council of the EU (Kaniok, 2010, p.160). When the Presidency ended, the database was maintained, as a Database of European Policies (DAP), and today it serves as a communication channel for the EU Committee (Král, 2010, p.26). The Presidency brought about an intensification of the working level contract between the EU Committee and the Permanent Representation, making use of video conferences that have also continued to function (Beneš and Braun, 2011, p. 71).

Since it formed a critical juncture, the CR’s Presidency was reflected in the way the coordination dimension functioned within all three dimensions. The system became more centralized when coordination came under the purview of the Office of the Government. The comprehensive nature of the system was reinforced. And the personnel capacity was also strengthened, with technical tools created for the Presidency continuing to be maintained.

Hungary

Hungary led the Council of the EU in the first half of 2011, and under Kassim’s typology would be classified as a decentralized10, comprehensive system (Gärtner, Hörner and Obholzer, 2011, pp.89-90). Hungary demonstrated indecision as to whether to treat the coordination of European affairs like it did foreign affairs, or like national affairs. In the first two years after accession, the bodies in charge of coordination shifted from the MFA to the Office of European Affairs under the Office of the Government, and then back to the MFA again, which is where the coordination centre was situated in 2006.11 After a change of government in 201012, the coordination effort continued to be conducted by the MFA; the new government renamed the department the “State Secretariat for EU Affairs (State Secretariat)”13 (Gärtner, Hörner and Obholzer, 2011, p.89; Batory, 2012, p.934).

10 Cf., Batory (2012, p.933) calls all coordination systems centralized. This claim is primarily based upon the fact that Batory studies the aggregation of coordination competencies in the hands of the executive. 11 The Office of European Affairs together with a position for the coordination of EU agenda held by a minister without a portfolio was abolished by the new government in 2006 (Batory, 2012, p.929). 12 The right-wing coalition of Fidesz and the Christian-Democratic Peoples Party took power. 13 No competencies of any body or any body’s structure were affected (Batory, 2012, p.933). In this regard, the RI explanation may be excluded.

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The MFA and the State Secretariat became the key entities during the Presidency (Hungarian Government, 2015a). The coordination model comprises a number of coordination levels: the inter-ministerial level sponsored by the Inter-Ministerial Committee for European Coordination (ICEC); the level of the MFA and the State Secretariat, subsidiary to it, which is responsible for the operation of the ICEC; and the highest political level, where coordination is implemented by the Cabinet (Batory, 2012, p.933; Hungarian Government, 2015a). The Hungarian case demonstrated highly stable development resistant to external influences. Along the centralization dimension, therefore, the Presidency cannot be considered to have formed a critical juncture.

Along the selectivity axis, since the 1920s the Hungarian system has been comprehensive, with the ambition of coordinating a broad range of policies (Batory, 2012, p.924). This comprehensiveness, however, has been weakened by the informal nature of channels that do not admit all input into the system. But the parliament takes an active role in coordination, despite the fact that the government is not bound to reflect its opinions under all circumstances (Gärtner, Hörner and Obholzer, 2011, p.90).

During preparations for the Presidency, the competencies of the ministries that formulated positions for the special Committee for the Presidency and the government were reinforced (Gábor, 2008). The Presidency became a permanent topic of discussion within the ICEC, whose task was to ensure that government positions were formulated in all areas (Hungarian Government, 2015b). NGOs were involved more intensively, in particular because of the requirement for transparency and equal opportunity for all actors (European Environmental Bureau, 2011, p.20). But there was no shift towards greater comprehensiveness. The Presidency did not represent a critical juncture for the coordination system, and the system may continue to be defined as a comprehensive one, particularly due to its tradition and the hierarchical nature of public administration in the country (Batory, 2012, p.933).

The 2010 change in government influenced the personnel component in the tool dimension. Six months before the beginning of the Presidency, national administrative structures and the Permanent Representation stuff have been modified and Presidency has been ensured by 800 employees of the MFA (Vida, 2011). These changes did result in a lower average age for members of the administration apparatus; but the politicization of the state administration was such that it was not mitigated even by an event of the Presidency’s magnitude (Romsics, 2011, p.28). The coordination effort was entrusted to young, proactive public servants who had language skills but no practical experience. Training programs started two years prior to the Presidency and were provided for both the older and newer generations of public servants (Romsics, 2011, p.26). A short-term goal of the program was to ensure the operation of the Presidency, but discussions took place on the midterm and long-term impact as well. Although no career plans were created, the Presidency gave rise to new employment opportunities for many employees of the MFA, for example at the Permanent Representation in Brussels. The great majority of these employees remained in their positions even after the Presidency had ended, reinforcing the level of professionalism, qualification, and the amount of information available to public administration (per an interview with a diplomat from Hungary’s Permanent Representation to the EU in Brussels, 2015).

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In terms of tools, inter-ministerial meetings were utilized. They had already functioned prior to the accession to the EU, but now videoconferencing facilities were upgraded and installed at the MFA, the Office of the Government, and the Permanent Representation (per an interview with a diplomat from Hungary’s Permanent Representation to the EU in Brussels, 2015). Both tools have continued in operation as part of the coordination process to this day. By contrast a task force newly created to address unanticipated events (comprising representatives from the MFA, the Office of the Government, and the Permanent Representation) was dissolved once the Presidency had ended. The system of “files” containing framework mandates, priorities, and procedures for achieving consensus in thematic areas also turned out to have a limited lifespan. Once the Presidency had ended, the coordination effort returned to original procedures (per an interview with a diplomat from Hungary’s Permanent Representation to the EU in Brussels, 2015).

The experience of the Presidency had no impact on the degree of centralization or selectivity present. Nor was confirmed any RI potential, since key positions in the coordination system as a whole were maintained after the 2010 change of government. Hungary is, however, an example of qualitative personnel change. From the standpoint of technical tools, no critical juncture occurred, since the country made use of established and/or temporary mechanisms.

Poland

Poland took over the Presidency in late 2011. Kassim classifies the country as having a centralized comprehensive system. Its coordination centre lies with the Committee for European Integration, consisting of sector ministers. The Committee is led by the Prime Minister or the Minister for Foreign Affairs. It received assistance from the Office of the Committee for European Integration, resulting in the creation of a “Minister for Europe” with close ties to the Prime Minister (Kaczynski, 2011, pp.30-31). Gärtner, Hörner and Obholzer (2011, p.87) note that the coordination effort lays entirely in the hands of the executive.

Preparations were launched in June 2008, utilizing the coordination system then in place. The Minister for Europe was designated to act as agent for the Presidency, and was to work closely with the chairperson of the Committee for European Affairs, with support from the Office of the Committee for European Affairs (Kaczynski, 2011, p.35). Changes began in January 2010, when the Committee for European Integration was renamed the Committee for European Affairs, and the Office of the Committee for European Integration was transferred to the MFA (Kaczynski, 2011, p.31). The result was that responsibility for European affairs was now totally in the hands of the MFA. According to Radosław Sikorski, then-Minister of Foreign Affairs, the change helped ensure a successful Presidency (Ministry of Foreign Affairs, 2010) and Europeanized the MFA (Kaczynski, 2011, p.31).

Competencies were distributed between the Office of the Government and the MFA. Although ties between the Minister for Europe and the Prime Minister were maintained, the coordination effort became decentralized. Preparations for negotiations in the Council of the EU were transferred to the MFA (Kaczynski, 2011, p.31). The reformed

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system remained in place even after the Presidency had ended; these changes may thus be designated to have constituted a critical juncture.

A comprehensive system includes social partners in the decision-making process only on a consultative basis. Parliament must also be informed, but in practice is quite weak when it comes to monitoring the EU agenda (Gärtner, Hörner and Obholzer, 2011, p.88). An increased interest in communicating with NGOs was apparent from July 2009. At the December conference on the Presidency, 150 representatives of various NGOs were present. A public tender for the NGOs saw a total of 16 grants awarded for projects connected to the Presidency and its promotion (Ministry of Foreign Affairs, 2012, p.91).

Eighty-three institutions were involved in the Presidency in all; each constituted a so-called Presidency contact point. These contact points were subsequently connected to form a network allowing information to be transferred between the coordination centre and the public administrative apparatus (Kaczynski, 2011, p.35). The initiative continued in use among the Visegrad Group even after the end of the Presidency (Ministry of Foreign Affairs, 2014, p.29).

The Presidency caused no demonstrable shift in the system’s selectivity, and it does not constitute a critical juncture. NGOs were involved with sharp intensity only when the country was actively involved in the role of the Presidency. Nor was the relationship between the legislative and executive branches intensified in any way.

Within the personnel dimension, 1200 people from various ministries were involved in the “Presidency corpus”. Training programs targeted the Presidency as well as long-term preparation tied to the implementation of the Lisbon Treaty. One-year contracts were concluded with employees, and a system of financial benefits was launched to ensure the personnel involved would remain in their positions at least until the Presidency ended. To take care of logistics, approximately twenty new employees were hired (per an interview with the Director of Presidency Coordination of the MFA, Poland, 2015). Traineeships took place from 2009 until July 2010, involving fourteen visits to the European Commission and five visits to the General Secretariat of the Council (Kaczynski, 2011, pp.36-37). In late 2010, Brussels delegated responsibility to eleven officials for helping with preparations for the Presidency (Ministry of Foreign Affairs, 2012).

At the end of the Presidency, civil servants were not dismissed, but rather redistributed and transferred. 70% of the new hires requested long-term employment. Employees who had helped with organizing the Presidency were transferred to less attractive positions centred around European themes, while experts in European affairs remained in their posts or were promoted. Up to 95 percent of the employees who had been trained remained active within public administration (per an interview with the Director of Presidency Coordination for the MFA, Poland, 2015).

The country created an inter-ministerial policy catalogue to set priorities, and this created a more fluent flow of information within the public administration apparatus (Ministry of Foreign Affairs, 2012, p.119). Meanwhile, ministries made more intensive contact with the Permanent Representation via videoconferencing (per an interview with the Director of Presidency Coordination for the MFA, 2015). The above-noted Presidency

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contact points were created and subsequently interconnected to create a communications network (Ministry of Foreign Affairs, 2012, p.90). The catalogue that was created is still used to coordinate national positions within thematic areas, and videoconferencing has been maintained as well (per an interview with the Director of the EU Economic Department of the MFA, Poland, 2015). The network of contact points was dissolved after the termination of the Presidency (Ministry of Foreign Affairs, 2012, p.90).

The Presidency in this case represented a critical juncture in several areas for the coordination system. It influenced the system’s degree of decentralization by reinforcing the MFA. As regards the personnel, the number of qualified experts was increased, and they continued to work for the public administration apparatus. Technical tools were also mostly kept in place. The only dimension left untouched by the Presidency was that of selectivity.

Lithuania

Lithuania held the Presidency in the second half of 2013. The country possessed a centralized14 system (Gärtner, Hörner and Obholzer, 2011, p.88) which slowly moved from coordination under the European Committee of the Government during the accession period to 2009, when coordination responsibility has been assigned to the MFA (Vilpišauskas, 2014, p.100). Since that, the coordination system can be described as decentralised (Vilpišauskas, 2013, p.129). The MFA, with connections to the Permanent Representation in Brussels, bears responsibility for the preparation of COREPER meetings and plays a key role in the system (Gärtner, Hörner and Obholzer, 2011, p.88).

Lithuania commenced intensive preparations for the Presidency soon after joining the EU15. The country opted for the so-called “Brussels-based” system, which takes advantage of facilities in Brussels (the Permanent Representation) and maintains the autonomy of individual bodies16 (Šešelgytė, 2013, p.6). After the reform in 2009, the coordination of the Presidency has been entrusted to the MFA and the Minister of Foreign Affairs became a head of the coordination network. The Government Committee for European Affairs, composed of deputy ministers and headed by the Minister of Foreign Affairs, formulated the main position within EU topics (Vilpišauskas, Vandecasteele and Vaznonytė, 2013, p.22), while logistic and technical issues has been managed by the European Union Council Presidency Department of the MFA (Šešelgytė, 2013, p.6).

The Parliamentary elections held during the preparatory phase brought a new coalition to power17, and this resulted in personnel changes in ministries. Key positions, however,

14 Department for the Analysis of European Policies and the Inter-Institutional Coordination Body (Gärtner, Hörner and Obholzer, 2011, p.88). 15 First meeting took place in 2005 and first Action plan of the Presidency preparations accepted in 2006 (Šešelgytė, 2013, p.6). 16 For smoother operation of the Presidency, ministers received a mandate from the Parliament to make flexible decisions. After the Presidency Parliament continues to grant mandates before every meeting of the Council (per an interview with a Lithuanian Permanent Representation for the EU in Brussels, COREPER II, 2015). 17 In 2012, a centrist-left-wing coalition took power (Vilpišauskas, Vandecasteele and Vaznonytė, 2013, pp.23-24).

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were left untouched18 (Vilpišauskas, Vandecasteele and Vaznonytė, 2013, pp.23-24) and the MFA is keeping a key role in the system (per an interview with a diplomat at the Lithuanian Permanent Representation for the EU in Brussels, COREPER II, 2015). Due to changes in preparatory phase of the Presidency, the system has become decentralised with the MFA coordination responsibility. Therefore, the Presidency can be considered as a critical juncture in the Lithuanian centralization dimension. Vilpišauskas (2013, p.129) adds that most of reforms of the coordination system are related to the changes in ruling coalitions.

Seventy-seven institutions took part in the Presidency (The Baltic Course, 2014), which testifies to the comprehensive nature of the coordination effort. The LINESIS information system accepts documents from European institutions and allows for their exchange among national entities (Seimas of the Republic of Lithuania, undated). During the preparatory phase for the Presidency, visits to Brussels were initiated, aimed at presenting European themes to both governmental and parliamentary actors (Vilpišauskas, Vandecasteele and Vaznonytė, 2013, p.24). As part of the LESSED project (Increased Efficiency in the Lithuanian System of European Affairs), thirty-three thematic studies were prepared to support Lithuania’s position on these themes (Government of the Republic of Lithuania, 2015). These projects supported a comprehensive approach, but did not represent a critical juncture within the second dimension.

In the personnel area, the Presidency brought about a redistribution of existing capacity within the administrative system, but no quantitative changes occurred. By contrast, only a minimum of new employees were hired on temporary contracts (per an interview with a diplomat at the Lithuanian Permanent Representation for the EU in Brussels, COREPER II, 2015). The Permanent Representation increased the existing staff from 85 employees to 188 using only civil servants who had been working in the public administration for a three-year period (Šešelgytė, 2013, p.6).

In 2010, a special unit was established at the MFA as the Department for the Presidency of the Council of the EU. It continued to function until 2014 and provided for staff training, communication and logistics (Vilpišauskas, Vandecasteele and Vaznonytė, 2013, p.22). Financing acquired from the structural funds was used to provide general training for employees of the MFA on European themes, network projects, the LESSES project, etc. (Šešelgyte, 2013, p.7). The government organized a training program maintained even after the Presidency, which has so far seen the participation of two thousand civil servants and diplomats. The country introduced a motivation system for civil servants who took part in the preparation and implementation of the Presidency (per an interview with a diplomat at the Lithuanian Permanent Representation for the EU in Brussels, COREPER II, 2015).

The System LINESIS which was already in place, served as a technical tool during the Presidency (Maniokas, 2009, p.6). The country intensified its communication with the Permanent Representation via videoconferencing (per an interview with a diplomat at the Lithuanian Permanent Representation for the EU in Brussels, COREPER II, 2015). While

18 Political parties represented in Seimas signed an agreement on not using the Presidency for political competition in October 2011 (Vilpišauskas, Vandecasteele and Vaznonytė 2013, p.23).

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selectivity and technical dimension stayed untouched by the Presidency, centralization and the qualitative side of personal dimension represented a critical juncture.

Conclusion

This paper has traced the development of a set of coordination systems to determine whether the Presidency may be designated a critical juncture in the development of coordination systems in general. The influences observed are summarized in Table 2.

Table 2: Evaluation of the impact of the Presidency along the dimensions examined

Degree of centralization

Degree of selectivity

Tools

Personnel Technical

Slovenia no influence no influence critical juncture critical juncture

Czech Republic critical juncture

critical juncture

critical juncture critical juncture

Hungary no influence no influence critical juncture no influence

Poland critical juncture no influence critical

juncture critical juncture

Lithuania critical juncture no influence critical

juncture no influence

Source: Author.

From the five cases selected, the greatest impact of the Presidency was felt in the Czech Republic, Poland and Lithuania. As regards to the dimensions explored, the personnel component of the tools dimension was influenced by the Presidency in every case. In terms of technical tools, influence was noted in more than half of the cases. Dimension of centralization was also affected in three cases. By contrast, the selectivity of the coordination system was immune to the influence of the Presidency everywhere except in the CR. Why should this be true? Why are some countries and dimensions susceptible to greater influence than others?

The case of the CR is specific, and the pre-Presidency situation in the country’s coordination system offers a clue as to why its influence was so strong. The CR typically evidences “decisiveness” in coordinating the EU agenda. This has been demonstrated since 2007 by the shifts that have taken place in the locus of coordination involving the MFA and the Office of the Government. Stabilization of the coordination mechanism with the creation of the position of Deputy Prime Minister for European Affairs came

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only with preparations for the Presidency. The coordination mechanism continued to be cantered in the Office of the Government even after the Presidency, in the person of the State Secretary. The Presidency was a significant event for the CR which initiated changes in the country’s rather unstable and changeable coordination environment.

Contrary to CR, Poland and Lithuania used a different logic: the coordination efforts shifted from centralized to decentralised. Both countries reformed their systems during the preparatory phase and rely on the MFA. The cases of the CR, Poland and Lithuania show that changes along the centralization-decentralization axis do not always occur in the same direction. In addition, decentralized systems seem to be more appropriate for the Presidency period. Poland and Lithuania indicate that distraction of actors involved in coordination and their flexibility might be an effective way how to hold the Presidency. By contrast, the case of the CR confirms the connection between the Euroscepticism of the state and the tendency to centralise the coordination system during the Presidency.

Regarding the systems examined, all of them had been of a comprehensive character prior to the Presidency and this continued to be so after it. In the CR, the Presidency was a number one priority, and this was reflected in the preparatory phase. The politicization of European themes impacted the CR to a greater extent than it did to other countries - the significance of European themes grew with the number of actors involved in the coordination process. The system’s comprehensiveness was predetermined by selecting a combined model for the Presidency. Ministries acquired competencies within the coordination process, and nongovernmental actors were invited to take part in preparations. The above set presumption about comprehensiveness of coordination systems seems to be true. Attention, paid to the country holding the Presidency, causes pressure on inclusiveness of systems.

The Presidency had 100 percent influence over the personnel component of the tool dimension. It is not unexpected that countries would resort to personnel changes during the preparatory phase, since their concerns about the task ahead bring on precisely such changes. For inexperienced countries, the Presidency represents a test of capacities and professional readiness. It is the most significant event to occur since their accession to the EU and integration into its structures, and it provides an opportunity to test the functionality of their coordination system in actual practice. The impact is both quantitative (increase in the number of civil servants) and qualitative (increase in the level of professionalism and training). Civil servants received training in all countries, whether that involved strengthening of administrative capacity as in the CR and Slovenia, or prompted the utilization of existing capacity as a Lithuania. It follows that not all small countries need to extent administrative capacities during the Presidency, as it has been shown in the Lithuanian case.

Technical tools were also important. In the CR, Poland, and Slovenia, such tools were created and maintained even after the Presidency; in other countries, the lifespan of the technical tools did not exceed the period of the Presidency (Hungary) or the country made use of existing mechanisms (Lithuania). The creation and utilization of technical tools is associated with a country’s readiness for the Presidency as well as the time period during which the country was at the helm. For the CEE countries, the first to hold the Presidency,

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technical tools and overall coordination represented a greater challenge. Other countries had more time for modernization and the preparation of technical facilities.

What is revealed, then, is that the Presidency has had an impact that extends beyond the European level (Tallberg, 2004; Schalk et al., 2007). National environment of Member States is impacted as well, both over the short term and the medium term (Kaniok and Šteigrová, 2014). The analysis presented here has demonstrated the influence of the Presidency on the national level (Klemenčič, 2008) and pointed out example cases in which coordination mechanisms were significantly impacted. The Presidency has been shown to have acted as a tool for Europeanization in the CR (Klemenčič, 2008) and to some extent in Poland and Lithuania as well. For CEE countries, the Presidency was a premiere. It remains to be seen what potential it might have to influence coordination systems once the Presidency has been held repeatedly. Future research will indicate whether coordination systems become immune to the influence of repeated Presidencies, or whether each new Presidency provides a novel impulse for change within the coordination system.

Last but not least, the paper uses the concept of critical junctures which proves to have an explanatory ability in this case. This does not only mean that Presidency has a potential to be a critical juncture for national coordination systems, but also that the concept itself is functioning and forming policy at national level. The same theory applies to HI and its notion of institutions’ ability to push historical development ahead.

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• Ministry of Foreign Affairs (2010). The merger of the Ministry of Foreign Affairs and the Office of the Committee for European Integration. Accessed on 30 April 2015. http://www.mfa.gov.pl/en/ninterews/aktualnosc_32480?printMode=true

• Ministry of Foreign Affairs (2012). Polish Presidency of the Council of the European Union 1 July - 31 December 2011. Accessed on 18 April 2015. http://www.mf.gov.pl/en/documents/764034/1137013/Report_Polish_presidency.pdf

• Ministry of Foreign Affairs (2013). Process of coordination and monitoring the European affairs. Accessed 10 November 2014. http://www.mzz.gov.si/en/eu_policies/coordination_of_european_affairs/

• Ministry of Foreign Affairs (2014). Poland’s 10 years in the European Union REPORT. Accessed on 20 May 2015. https://www.msz.gov.pl/resource/fa393546-1309-4ea8-ad30-2c93d01e7f36:JCR

• Niemann, A and Mak, J. (2009) ‘(How) do norms guide Presidency behaviour in EU negotiations?’, UCD Dublin European Institute Working Paper 09-10. http://www.ucd.ie/t4cms/wp_09-10_niemann_and_mak.pdf

• Panke, D. (2010). Small States in the European Union: Coping with Structural Disadvantages, Farnham: Ashgate.

• Pomorska, K. and Vanhoonacker, S. (2012). Poland in the Driving Seat: A Mature Presidency in Turbulent Times, Journal of Common Market Studies, Volume 50 Annual Review pp. 76–84. http://onlinelibrary.wiley.com/doi/10.1111/j.1468-5965.2012.02276.x/abstract

• Romsics, G. (2011). ‘An Interim Review of the 2011 Hungarian Presidency: Finding a New Niche for the Rotating Presidency in Times of Storm and Stress’, Swedish Institute for European Policy Studies, Stockholm. http://www.sieps.se/sites/default/files/2011_1op.pdf

• Schmidt, Vivien A. (2010). ‘Taking ideas and discourse seriously: explaining change through discursive institutionalism as the fourth ‘new institutionalism’, European Political Science Review, 2 (1), pp.1-25. http://cc.sjtu.edu.cn/G2S/eWebEditor/uploadfile/20120415134250019.pdf

• Souček, M. (2011). ‘Koordinace evropských záležitostí v České republice’, In Tajemství českého úspěchu v EU?! Ed. Radko Hokovský, Václav Lebeda eds. Praha: Konrad-Adenauer-Stiftung a Evropské hodnoty o.s. http://www.evropskehodnoty.cz/docs/Tajemstvi_ceskeho_uspechu_publikace_web.pdf

• Sepos, A. (2005). ‘The National Coordination of EU Policy: Organisational Efficiency and European Outcomes’, Journal of European Integration, 27 (2), pp.169-190.

• Seimas of the Republic of Lithuania (nedat.). Information system of the Lithuanian membership of the EU (LINESIS). Accessed on 20 May 2015. http://www.lrs.lt/intl/presidency.show?theme=201&lang=2&doc=694

• Schout, A. (1998). ‘The Presidency as Juggler Managing Conflicting Expectations’, Senior Lecturer, EIPA. Accessed on 20 May 2015. http://aei.pitt.edu/785/1/scop98_2_1.pdf

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• Schalk, J., Torenvlied, R., Weesie, J. and Stokman, F. (2007). ‘The Power of the Presidency in EU Council Decision-making’, European Union Politics, 8(2), pp.229-250.

• Týden (2010). Experti se dohodli na zrušení postu ministra pro Evropu. Accessed on 15 May 2015. http://www.tyden.cz/rubriky/domaci/politika/experti-se-dohodli-na-zruseni-postu-ministra-pro-evropu_171348.html

• Šešelgytė, M. (2013). ‘The First Leadership Test: What to Expect from the Lithuanian Presidency of the EU’, Swedish Institute for European Policy Studies, European Policy Analysis. http://www.sieps.se/sites/default/files/2013_13epa.pdf

• Tallberg, J. (2006). Leadership and Negotiation in the European Union. Cambridge: Cambridge University Press.

• The Baltic Course (2014). Seimas: successful Lithuania’s Presidency of EU Council was not beginner’s luck. Accessed on 23 May 2015. http://www.baltic-course.com/eng/legislation/?doc=93667

• Thomson, R. (2008). ‘The Council Presidency in the European Union: Responsibility with Power’, JCMS, 46 (3), pp.593–617. http://www.cesruc.org/uploads/soft/130311/1-130311111923.pdf

• Thorhallsson, B. (2015). How Do Little Frogs Fly? Small States in the European Union, Norwegian Institute of International Affairs, 12/ 2015. https://brage.bibsys.no/xmlui//bitstream/handle/11250/284448/3/NUPI+Policy+Bief+12-15-Thorhallsson.pdf

• Usnesení vlády č. 2299/ 2004 ze 16. listopadu 2004. http://kormoran.vlada.cz/usneseni/usneseni_webtest.nsf/0/217F5AE75B438A12C12571B6007065BF

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• Vilpišauskas, R., Vandecasteele, B. and Vaznonytė, A. (2013). ‘The Lithuanian presidency of the council of the European Union: advancing energy policy and Eastern partnership goals: conditions for exerting influence’, Lithuanian Foreign Policy Reviews 29, pp.11–37. https://biblio.ugent.be/publication/4109736

• Vilpišauskas, R. (2013). ‘Lithuanian foreign policy since EU accession. Torn between history and interdependence’, in Baun, J. M. and Marek, D. (ed) The New Member States and the European Union: Foreign Policy and Europeanization, Routledge, pp.127-141.

• Vilpišauskas, R. (2014). Lithuania’s EU Council Presidency: Negotiating Finances, Dealing with Geopolitics, Journal of Common Market Studies, Volume 52 Annual Review pp. 99–108. http://onlinelibrary.wiley.com/doi/10.1111/jcms.12164/abstract

• Vizi, B. (2011). The Hungarian Presidency of the Council of the European Union: Focus on the Neighbourhood and on a European Roma Strategy, Journal on Ethnopolitics and Minority Issues in Europe, 10 (1), pp. 123-134. http://www.ecmi.de/fileadmin/downloads/publications/JEMIE/2011/Vizi.pdf

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ROMANIAN JOURNAL OF EUROPEAN AFFAIRS Vol. 17, No. 1, June 2017

Associate Statehood for Scotland as the Way to Stay in both the United Kingdom and the European Union: the Liechtenstein Example

Hakan Kolçak1

Abstract: The Brexit Referendum in which the United Kingdom (UK) voted to leave the European Union (EU) without a nation-wide consensus upon this vote has resulted in a new constitutional crisis in Britain. As an outcome, Scotland, which strongly backed the Remain vote, is now searching for a constitutional option that enables it to stay in both the UK and the EU. As an interdisciplinary study which pays a particular attention to the confederal relationship between Liechtenstein and Switzerland, this article emphasises that associate statehood might be a constitutional option that would allow Scotland to stay in both of the unions.

Keywords: Brexit referendum, constitutional crisis, Scottish independence, associate statehood, European Union membership

Introduction

Scottish politics, which used to be driven mainly by the administrative devolution system, began being shaped through the mechanism of legislative devolution following the establishment of the Scottish Devolved Administration in 1998. Having been ruled by unionist political parties seeking to safeguard Scotland’s constitutional ties with the United Kingdom (UK), the Devolved Administration – a constitutional system bestowing Scotland with the right to exercise territorial autonomy – began acquiring a separatist character in 2007 that would ultimately result in a Scottish independence referendum in 2014.

The 2014 referendum in which Scots rejected the option of secession could have settled the issue of Scottish independence for a generation; however, the 2016 Brexit Referendum in which the UK voted to leave the European Union (EU) without a nation-wide consensus upon the leave vote has led to another constitutional crisis in Britain. As an outcome, Scotland, which overwhelmingly voted to remain in the EU, now faces the prospect of being taken out of the EU, stimulating Scottish First Minister Nicola Sturgeon to take all constitutional options, including the Scottish independence, into account for safeguarding Scotland’s relations with the EU (Sturgeon 2016b).

1 Hakan Kolçak has a BA (honour) in Public Administration from Selcuk University, Turkey and an MA (merit) in Global Politics and Law from the University of Sheffield, UK. He is currently a PhD candidate at the Human Rights Centre, University of Essex. Email: hkolca@essex.ac.uk

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The First Minister has recently announced that there might be some potential options enabling Scotland to stay in both the UK and the EU even after the former has left the latter (Kirkaldy 2016). In supporting this announcement, Hepburn (2016) and Ramsay (2016) argue that Scotland could stay in both unions if it became a federacy akin to Greenland. This constitutional option has, however, been rejected by some representatives of the UK Government, including Scottish Secretary David Mundell and Brexit Secretary David Davis (see Andrews 2016; Dathan 2016), encouraging Nicola Sturgeon and her cabinet to present Scottish independence as the best way to preserve Scotland’s position in the EU (Sturgeon 2016c).

Is an independent Scotland obliged to completely leave the UK? Can a confederal arrangement between an independent Scotland and the UK that renders the former an associate state of the latter permit Scotland to stay in both the UK and the EU? How can associate statehood enable Scotland to stay in the UK? How can a potential Scottish associate state become an EU member state? Can associate statehood prevent Scotland from becoming an EU member state? This research addresses all these questions by paying a particular attention to the confederal relationship between the Principality of Liechtenstein and Switzerland that renders the former an associate state of the latter.

As an interdisciplinary study, which asserts that associate statehood might be a constitutional option allowing Scotland to stay in both the UK and the EU, this article proceeds in the following order. It initially examines the recent episodes of Scottish politics and the Brexit Referendum. The article then turns its attention to the question of how Scotland can stay in both the UK and the EU. Having looked at the option of federacy that has been rejected by some members of the UK Government, the article begins analysing the Liechtenstein case with the main purpose of demonstrating that Scottish independence which takes its shape in the form of associate statehood may provide Scotland with the opportunity to stay in both the UK and the EU.

Brexit referendum: a new constitutional crisis

Scotland, which has been part of the UK since the adoption of the 1707 Act of Union, has not been subject to any (coercive) assimilation policies aimed at eradicating or destroying its distinct national identity; rather, the UK Government has not only respected Scottish national characteristics, but also allowed for their maintenance and development through enabling Scotland to pursue its own national policies, e.g. a separate judicial system based on Roman law instead of English common law; a distinct educational system teaching Scottish features; a Protestant Church constructed upon Calvinism rather than Anglicanism; and separate financial institutions able to issue Scottish banknotes.2

A distinct Scottish political way of life was driven mainly by the Scotland Office, a UK governmental department headed by the Secretary of State for Scotland, until the late 1990s. The Office was the main actor of Scottish politics through exercising administrative devolution in such areas as local government, public health, roads and water supplies, but the

2 For more details on these policies, see Connolly (2013); Dardanelli and Mitchell (2014); Loughlin (2011); Meer (2015); Pittock (2012).

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leading role to shape Scottish politics was then given to the Scottish Parliament (Holyrood) and Executive in 1997, when Scots endorsed the foundation of the Scottish Devolved Administration capable of exercising territorial autonomy as a corollary of the affirmative referendum on legislative devolution for Scotland (Loughlin 2011; McGarry 2010).

Scotland began exercising legislative devolution after the Scotland Act 1998, the backbone of the autonomous arrangement for Scotland, came into effect in November 1998 (Brown 1999; Laycock 2001). The Scottish Parliament, the 129-member legislative branch of the Scottish Devolved Administration, was initially dominated by unionist political parties (mainly the Scottish Conservative Party, the Scottish Labour Party (SLP) and the Scottish Liberal Democrats (SLD)) who seek to preserve the existing constitutional ties of Scotland with the UK, but Holyrood began changing its unionist character upon the 2007 parliamentary election in which the pro-independence Scottish National Party (SNP) came into power through a minority government. The Parliament ultimately gained a secessionist character following the 2011 parliamentary elections in which the pro-independence parties (the SNP and the Scottish Green Party) obtained 71 out of 129 seats. This separatist personality of Holyrood consolidated its existence in the 2016 parliamentary elections in which the secessionist bloc obtained 69 seats in total.

Table 1: Members of Scottish Parliament (MSPs) (1999-present)

Elections SNP Scottish Labour

Scottish Conservatives

Scottish Liberal Democrats

Scottish Greens Others Total

1999 35 56 18 17 1 2a 129

2003 27 50 18 17 7 10b 129

2007 47 46 17 16 2 1c 129

2011 69 37 15 5 2 1d 129

2016 63 24 31 5 6 0 129

Notes:

a. While one of the last two seats was gained by the pro-independence Scottish Socialist Party (SSP), independent candidate Dennis Canavan obtained the other one.

b. The last ten seats were won by the followings: the SSP (6), the Scottish Senior Citizens Unity Party (1) and three independent candidates, Dennis Caravan, Jean Turner and Margo MacDonald.

c. The last seat was secured by independent candidate Margo MacDonald.

d. Independent candidate Margo MacDonald gained the last seat.

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In parallel to the composition of the Parliament, the Scottish Executive, the executive organ of the Scottish Devolved Administration headed by the First Minister, also embraced a unionist character in its first years. The Devolved Administration was ruled by a SLP-led coalition government with the SLD during the first legislature (1999-2003), and this alliance was pursued during the second legislature (2003-2007) as well. The third legislature (2007-2011) was the one during which the Scottish Executive changed its unionist character to a secessionist one represented by a SNP minority government. This separatist personality of the Scottish Executive strengthened its position with a SNP majority government during the fourth legislature (2011-2016). The current Scottish Executive still maintains its secessionist feature through a SNP minority government.

As a natural result of its composition, the Scottish Executive was headed by unionist First Ministers during the first two legislatures, namely Donald Dewar (1999-2000), Henry McLeish (2000-2001) and Jack McConnell (2001-2007); however, the chief position started to be occupied by the SNP leaders, who stand up for Scottish independence following the 2007 parliamentary election: Alex Salmond (2007-2014) and Nicola Sturgeon (2014-present).

After taking up the reins of government in May 2007, the SNP not only formed a secessionist cabinet, but it also initiated a concrete political movement, known as the ‘National Conversation’, asking for a referendum on Scottish independence (Scottish Executive 2007). Accordingly, the Scottish Nationalists joined the 2011 parliamentary election with a manifesto pledge for a Scottish independence referendum (Adam 2014). Having witnessed the SNP’s landslide victory in this parliamentary election, the UK Parliament (Westminster) officially authorised Holyrood to organise a single-question referendum on the constitutional future of Scotland in accordance with the so-called ‘Edinburgh Agreement’, signed between the UK and Scottish Governments on 15 October 2012 (Tierney 2013).

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Figure 1: Scottish Executives (1999-present)

Following various parliamentary debates, on 14 November 2013, the Scottish Parliament passed the Independence Referendum Bill that then received Royal Assent on 17 December 2013, officially starting the referendum campaign. During this process, the Scottish Nationalists and the Scottish Greens represented the secessionist camp standing up for an independent Scotland, while the Scottish Tories, Scottish Labour and the Scottish Lib Dems formed the unionist camp seeking to preserve Scotland’s constitutional ties with the UK (Cairney 2015; Dardanelli and Mitchell 2014; Jeffery 2015).

On 18 September 2014, Scottish voters eventually determined whether Scotland should be an independent country: 44.7 per cent of the voters backed Scottish independence whilst 55.3 per cent rejected this constitutional option.3 The referendum's result could have settled the independence issue for a generation; however, it was the UK referendum on its EU membership, regarded as the ‘Brexit Referendum’, that began recording a different constitutional scenario.

The Conservative Party had won the UK parliamentary elections of 2015 with a manifesto pledge for holding a Brexit referendum before the end of 2017 (see Conservative Party 2015: 72). To enable such a referendum to take place across the UK and Gibraltar, a British overseas territory located on the south coast of the Iberian Peninsula, the Conservative Government enacted two pieces of legislation: i) the European Union Referendum Act 2015, which entered into force in December 2015; and the European Union Referendum (Conduct) Regulations 2016, which came into effect in January 2016, formally starting the referendum campaign. Two cross-party blocs were formed during the campaign: (i) Britain Stronger in Europe, which argued that “Britain is stronger, safer and better off in the European Union than we would be out on our own” (Calamur 2016); and (ii) Vote Leave, which asserted that leaving the EU would permit Britons to “take back control and … spend our money on our [British] priorities” (ibid).

On 23 June 2016, British voters ultimately endorsed the UK to withdraw from the EU: from a voter turnout of 72.2 per cent, 51.9 per cent voted to leave whilst 48.1 per cent voted

3 For all details about the referendum, see Keating (2015); Tierney (2015); The Guardian (2014).

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to remain in the EU. There was, however, no UK-wide consensus upon the leave vote: while England (53 %) and Wales (52 %) backed the Leave vote, Scotland (62 %), Northern Ireland (56 %) and Gibraltar (96 %) opted to Remain. In Scotland, there was a nation-wide consensus upon the Remain vote since all local authority areas saw Remain majorities.4

The Brexit Referendum not only resulted in the resignation of Prime Minister David Cameron, who had backed Remain,5 it also engendered a new constitutional crisis for Scotland’s future. The SNP had already won the 2016 Scottish parliamentary election with a manifesto reading that Holyrood should have the right to hold a second independence referendum if there has been “a significant and material change in the circumstances that prevailed in 2014, such as Scotland being taken out of the EU against our will” (SNP 2016: 24). Just one day after the referendum, First Minister Nicola Sturgeon announced by referring to the manifesto that:

Scotland faces the prospect of being taken out of the EU against our will. I regard that as democratically unacceptable […]. [T]here is no doubt that yesterday’s result represents a significant and a material change of the circumstances in which Scotland voted against independence in 2014 […]. [I]t is therefore a statement of the obvious that the option of a second referendum must be on the table. And it is on the table (Sturgeon 2016a).

Following the First Minister’s announcement, the Scottish Government, which has the diplomatic mission, backed by Holyrood (92 out of 129 MSPs), to conduct its own foreign policy in protecting Scotland’s relationships with the EU,6 also declared its intention to take any constitutional option other than independence into consideration in securing Scotland’s place in the EU (Nutt 2016a, 2016b). Alongside to this declaration, Nicola Sturgeon argued that there might be some potential formulas by which Scotland could stay in both the UK and the EU even after the former has left the latter (Kirkaldy 2016; O’Neill 2016).

Hepburn (2016) and Ramsay (2016) offer such a formula by arguing that Scotland could retain its EU membership without separating from the UK through becoming a federacy7 akin to Greenland, which seceded from the EU in 1985 whilst still being a part of the Kingdom

4 For further details about the results, see BBC (2016); Davidson (2016); Settle (2016). 5 For details about Cameron’s resignation, see Owen (2016). 6 The Scottish Conservative Party was the sole party who abstained rather than supporting the diplomatic mission (Freeman 2016; Learmonth 2016). 7 As a federal-origin political system allowing a certain territory of a state to exercise territorial autonomy, federacy is defined by political scientists and constitutional lawyers in various ways. Rezvani, for instance, defines it as ‘a territory within the international legal boundaries of a state that has been allocated some entrenched (very difficult to take away) final decision-making powers without being a member unit of a federation [or unitary state]’ (2007a: 117). Wolff also underlines the uncharted territorial character of federacies through defining them as political arrangements whereby part of a state enjoys constitutionally-entrenched extensive self-rule while not being a territorial sub-division of that state (2011: 1785, 2013: 33). In parallel to Wolff, Swenden (2012: 619) also emphasises the constitutionality of federacies by saying that federacies are federal political systems authorising minority nations to exercise constitutional embedded powers that cannot be altered or abolished unilaterally. There is no exact form of federacies that exercises a certain list of constitutional powers; instead, each federacy has its unique features and takes its shape through distinct autonomy arrangements (Jakobson 2005). There are now a significant number of federacies in Europe, e.g. the Faroe Islands (Denmark), Greenland (Denmark), the Aland Islands (Finland), South Tyrol (Italy), Gagauzia (Moldova), the Azores Islands (Portugal) and Madeira (Portugal). For more details on federacies, see Jakobson (2005); Rezvani (2007a, 2007b, 2012); Swenden (2012); Wolff (2011, 2013).

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of Denmark. The Kingdom is a EU member state which consists of Denmark, the Faroe Islands and Greenland. All these three territories are part of the Danish Realm; however, solely Denmark represents the Kingdom in the EU while the other two territories, which have not only their autonomous entities but also seats in the Danish Parliament (Folketing), are not represented in the EU. According to Hepburn (2016) and Ramsay (2016), a similar constitutional scenario may be written for the UK as well: having established their own federacies, Scotland and Northern Ireland, both of which voted to remain in the EU, could safeguard their EU membership as part of the UK, whilst England and Wales, both of which voted to leave the EU, could withdraw from the EU as the other part of the UK.

Although the idea of constructing a Scottish federacy was regarded by Nicola Sturgeon as a potential way enabling Scotland to secure its EU membership as part of the UK (see Sturgeon 2016c), this constitutional option was not only considered as fanciful by the Scottish Secretary David Mundell (Dathan 2016),8 but it was also rejected by Brexit Secretary David Davis,9 who is the UK cabinet minister in charge of leaving the EU:

I do not think that [Scotland staying in the EU whilst the rest of the UK leaves] works. One of our really challenging issues to deal with will be the internal border we have with Southern Ireland, and we are not going to go about creating other internal borders inside the United Kingdom (cited in Andrews 2016).

This rejection was one of the main reasons encouraging Nicola Sturgeon to present Scottish independence as the best way to safeguard Scotland’s relationships with the EU:

If we find that our interests cannot be protected in a UK context, independence must be one of those options and Scotland must have the right to consider it […]. I do not pretend that the option of independence would be straightforward. It would bring its own challenges as well as opportunities. But consider this. The UK that we voted to stay part of in 2014 – a UK within the EU – is fundamentally changing. The outlook for the UK is uncertainty, upheaval and unpredictability. In these circumstances, it may well be that the option that offers us the greatest certainty, stability and the maximum control over our destiny, is that of independence (Sturgeon 2016c).

Sturgeon’s call for the Scottish independence was then backed by Holyrood (69 out of 129 MSPs), which, on 28 March 2017, provided the First Minister with the mandate to seek a second Scottish independence referendum between autumn 2018 and spring 2019 (Hughes and Johnson 2017). Just one day after this Scottish decision, the UK Government, led by Prime Minister Theresa May, the new leader of the Conservative Party, officially notified the European Council, the main EU institution in charge with defining the Union’s overall political directions, of its intention to withdraw the UK from the Union in pursuit of Article 50 of the Treaty on European Union (TEU) (Asthana, Stewart and Walker 2017).

The notification is, however, not the only condition to finalise the exit procedure. After the invocation of the so-called ‘Article 50 process’, the UK and the EU are now expected to

8 The formal name of the Scottish Secretary, which is a UK cabinet position, is the Secretary of State for Scotland. 9 The formal name of the Brexit Ministry is the Secretary of State for Exiting the EU.

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negotiate and conclude a withdrawal agreement consonant with Article 218(3) of the Treaty on the Functioning of the European Union (TFEU) within two years. If such an agreement is concluded within two years, the UK would leave the EU in accordance with the exit terms identified in the agreement; if such an agreement cannot be concluded within two years, there are two potential paths: (i) the negotiation period can be extended through a unanimous agreement of all EU member states; or (ii) the UK can leave the EU without any exit agreement should there be no unanimous agreement to extend the period.10

Upon which cornerstones, the forthcoming negotiation period should be built on is one of the main questions which has recently urged Prime Minister Theresa May to call a snap general election, to be held on 8 June 2017. Having announced her Brexit plan, which would most likely result in a hard Brexit creating a UK that leaves the EU single market, refuses to compromise on such issues as the free movement of people, and trades with the EU as if it were any other non-European country, but not a soft Brexit, enabling the UK to keep some degree of its EU membership (McTague 2017; Wood 2017), the Prime Minister was criticised by all main opposition parties in Westminster: Labour threatened to vote against the eventual Brexit agreement the UK Government would reach with the EU; the Liberal Democrats, who argued that there should be a new referendum on the terms of the Brexit deal struct between the UK Government and the EU, underscored their anti-Brexit attitude while also declaring that they would stand against any hard Brexit deal; and the SNP called on the UK Government to negotiate with its Scottish counterpart on the issue of a second independence referendum, whilst also announcing that they would vote against the future legislation formally repealing the UK’s EU membership (BBC 2017a, 2017b). In the existence of this huge division in Westminster, on 18 April 2017, Theresa May, who maintained that the UK should have a stable and strong leadership while preparing to enter Brexit talks, called the snap general election with the goal of securing a certain mandate for her Brexit plan. The following day the House of Commons backed the government motion to hold a general election on 8 June (522 MPs voting in favour and 13 MPs against), formally starting the election campaign (Crouch 2017; Maidment 2017; Stewart and Asthana 2017).

The snap election is, of course, a significant consequence of the Brexit referendum, but another one is that the option of independence is now demonstrated by the Scottish Government as the best way for securing Scotland’s position in the EU. Is an independent Scotland obliged to completely leave the UK? Can such a Scotland stay in both the UK and the EU? It is, this article argues, possible for Scotland to stay in both unions through a new confederal arrangement between Scotland and the UK which renders the former an associate state of the latter. This argument will be expounded in more detail, in the next section.

Associate statehood: the way to stay in both unions

Associate statehood is a confederal-origin arrangement that allows a sovereign state to devolve some of its powers (e.g. diplomatic, financial and/or military) to another sovereign state without endangering its sovereignty status in international law, meaning that associate

10 For more details about the exit process, see Gripper and Campbell (2016); Rankin, Borger and Rice-Oxley (2016).

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statehood neither prevents the associate state from being recognised by other states and the United Nations (UN) as a sovereign independent state, nor hinders the associate state from becoming party to international agreements and/or organisations (Benedikter 2009; Stevens 1997).

The devolution process is generally completed through bilateral treaties which can be terminated by any of the two states without receiving permission from the other one, indicating that their sovereignty is fully recognised in the treaties. In the existence of such treaties, the associate state still has its own constitution, under which it can construct, maintain and develop its own public and private law spheres through various constitutionally-entrenched legislative, executive and judicial powers (Lapidoth 2001; Mautner 1981).

There are currently a significant number of sovereign states which are in free association with other sovereign states: the Principality of Andorra (Spain-France), the Principality of Liechtenstein (Switzerland), the Principality of Monaco (France), the Republic of San Marino (Italy), the Republic of the Marshall Islands (United States of America (USA), the Federated States of Micronesia (USA) and the Republic of Palau (USA) (Dumienski 2014). Among these states, we are going to examine the confederal relationship between Liechtenstein and Switzerland, enabling us to better understand how a prospective Scottish associate state would stay in both the UK and the EU.

The Principality of Liechtenstein was established by its Princely Family, who purchased the Dominion of Schellenber and the Country of Vaduz in 1699 and 1712 respectively (Kohn 1967). The two lordships were united by means of an imperial diploma issued by Emperor Karl VI on 23 January 1719, thereby rendering the lordships an imperial principality of the Holy Roman Empire (Veenendaal 2015). The imperial principality was left intact after the Roman Empire had been terminated by Napoleon in 1806, and it was acknowledged as a sovereign member state of the Napoleonic Rhenish Confederation (Bartmann 2012). Liechtenstein retained its sovereignty during the French Revolution, and it was recognised as a sovereign member state of the German Confederation, which was created in the aftermath of the 1815 Congress of Vienna (Stringer 2011).

The German Confederation was dissolved as a result of the 1866 Austro-Prussian War; however, not long before the dissolution, Liechtenstein had already concluded a customs union treaty with Austria in 1852, rendering the Principality an associate state of Austria. While dramatically benefiting from associate statehood through common currency, trade and postal systems, Liechtenstein had to terminate the customs union treaty just after the First World War, during which various sanctions were imposed upon the Principality owing to its relations with Austria (Duursma 2006).

Having split from Austria, Liechtenstein embarked on a new political process which ultimately rendered the Principality an associate state of Switzerland. The Swiss Federation, officially the Swiss Confederation, began undertaking Liechtenstein’s consular and diplomatic representation in 1919. By adopting its new constitution in October 1921, Liechtenstein intensified its relations with Switzerland. The two countries established a customs union in 1923 which was then followed by the foundation of a currency union in 1924. The confederal relationship between the two countries was developed and strengthened in the following

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years when many bilateral treaties authorising Switzerland to exercise Liechtenstein’s sovereign powers in numerous areas – e.g. education, health, social security, environment, agriculture, to name but a few only – were concluded.

As an associate state of the Swiss Federation, the Principality of Liechtenstein is now, what Article 2 of its constitution states, “a constitutional, hereditary monarchy on a democratic and parliamentary basis”. The Principality, which is recognised by the UN as a sovereign independent state, consists of two main regions: Oberland (Upper Country), which is composed of six communes;11 and Unterland (Lower Country), which is made up of five communes.12 Vaduz, a commune of the Upper Country, is the capital of Liechtenstein, and the Principality has its national flag, coat of arms and language (German) in accordance with its own constitution.13 Liechtenstein has its domestic parliament,14 government15 and courts,16 which enjoy constitutionally-entrenched legislative, executive and judicial powers in all areas of the Principality’s public and private laws, except for those fields in which the authority has been voluntarily devolved to Swiss authorities through bilateral treaties. Let us now look at such fields in more detail.

Customs Union. Liechtenstein and Switzerland concluded a customs union treaty in 1923 which became effective on 1 January 1924. This treaty is indeed the backbone of the current confederal relationship between the two countries. It creates the legal basis for Liechtenstein’s integration into the Swiss customs and economic zone whilst also contributing to the harmonisation of laws in many different areas. The Customs Union Treaty of 1923, under which Liechtenstein is attached to the entire Swiss customs area with no limitation on exports or imports, authorises Switzerland to appoint, pay and dismiss the Principality’s customs officers and border guards. In addition, all Swiss laws pertaining to customs and trade, except for those provisions requiring Swiss cantons to make federal contributions, are fully applicable in Liechtenstein. Moreover, all trade and customs treaties which have been concluded by Switzerland are equally valid in the Principality. Accordingly, Switzerland is the legal actor who represents Liechtenstein in negotiating and concluding treaties in the

11 The communes of the Upper Country are listed in Article 1 of the Constitution of Liechtenstein as follows: Vaduz, Triesen, Triesenberg, Planken, Schaan and Balzers. 12 The communes of the Lower Country are listed in Article 1 of the Constitution of the Principality as follows: Schellenberg, Mauren, Ruggell, Gamprin and Eschen. 13 For more details on the basic national characteristics of the Principality, see Articles 1-6 of the Constitution of the Principality. 14 The Diet is the 25-member legislative organ of Liechtenstein. For more details about the Diet, see Chapter 5 of the Constitution of Liechtenstein. 15 The executive organ of the Principality is made up of two entities: (i) the Prince Regnant, who is the Head of State; and (ii) the Collegial Government, which consists of the Head of Government (Prime Minister) and Government Councillors (Ministers). For more details about the Prince Regnant and the Collegial Government, see Chapters 2 and 7 of the Constitution of Liechtenstein. 16 The judicial system of the Principality is composed of three sorts of courts: a) the Ordinary Courts, which deal with civil and criminal matters by way of its three-fold court system – the Princely Court (first instance), the High Court of Appeal (second instance), and the Supreme Court (third instance); b) the Administrative Court, which deals with governmental decisions; and c) the State Court, which settles jurisdictional conflicts between the courts of law and administrative authorities while also acting as a disciplinary court for government officials and as an electoral tribunal for election issues. For more details on the courts of the Principality, see Chapter 8 of the Constitution of Liechtenstein.

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domains of trade and customs. Finally, the Principality is permitted by the treaty to become party to international agreements or organisations, but if it wants to become party to an international agreement or organisation to which the Swiss Federation has not adhered yet, Liechtenstein is obliged to conclude a special accession agreement with Switzerland by which the latter permits the former to complete its accession to that agreement or organisation.17 The Customs Union Treaty, which is still in force, can be terminated by any of the two countries, but the country who intends to terminate the treaty should notice the other one at least one year earlier than the planned termination date.18

Monetary Union. Liechtenstein had already introduced the Swiss Franc as its official currency in 1924, but a concrete legal basis for the monetary union between the Principality and Switzerland was formed with the Currency Treaty of 1980. According to this treaty, all Swiss laws relating to monetary, credit and foreign-exchange policy, in addition to the protection of Swiss coins and banknotes, are fully applicable in Liechtenstein. Furthermore, the Swiss National Bank is acknowledged by the treaty as the national bank of the Principality which can exercise all its powers over companies, banks and other financial entities operating in Liechtenstein. The existence of this acknowledgement is already the treaty provision preventing the Principality from developing its own independent currency and monetary policy. As concerns treaty infringements, should a financial institution operating in the Principality violate a relevant Swiss law, the violation is tried by the Princely Court of Liechtenstein in first instance and by the High Court of Liechtenstein in second instance; however, the rulings of the High Court can be annulled by the Swiss Court of Cassation, which is recognised as the court of last instance on matters concerning the Currency Treaty of 1980. Finally, as regards the termination of the treaty, there are two distinct paths: 1) any of the countries can terminate the currency treaty with noticing the other one at least six months earlier than its planned termination date; or 2) once Switzerland adopts a new currency law, Liechtenstein can renounce to all its treaty obligations within one month.19

Patent Protection Union. The Patent Protection Treaty of 1979, which entered into force on 1 April 1980, founded the patent protection union between Liechtenstein and Switzerland. In accordance with this treaty, the Swiss Federal Institute of Intellectual Property is the authority dealing with all patent matters in the two countries. The treaty also grants Swiss authorities the right to negotiate and conclude patent treaties with third states that are fully enforceable in the Principality. Moreover, Switzerland and Liechtenstein are named jointly on regional and international patent applications in pursuit of the treaty. Finally, all Swiss laws regarding patent issues are valid in the Principality, and Liechtenstein’s courts are the competent authority to rule any breach of these laws in first and second instances, but the court of last instance is the Swiss Federal Supreme Court, which can abolish any sentence of the High Court of Liechtenstein – the court of second instance – on patent matters. The termination procedure of the Patent Union Treaty is similar to that of the Customs Union Treaty, meaning that any of the countries can withdraw from the patent protection union

17 Liechtenstein followed this procedure in becoming party to the Agreement on the European Economic Area, which Switzerland has not joined. 18 For more details on the customs union, see Duursma (2006); Liechtenstein Ministry of Foreign Affairs (LMFA) (2012, 2015); Manz-Christ (2009). 19 For more details on the monetary union, Duursma (2006); LMFA (2012, 2015); Manz-Christ (2009).

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with noticing the other one at least one year earlier than its planned withdrawal date.20

Aliens Office Union. The cornerstone of the Aliens Office Union between Liechtenstein and Switzerland is Article 33 of the Customs Union Treaty which enables the two countries to establish some cooperation mechanisms for the protection of aliens police and border controls. In implementing this treaty provision, Switzerland and Liechtenstein concluded two separate treaties on 6 November 1963, eliminating all border controls between the two countries. The treaty also renders all Swiss laws concerning the residence and sojourn of aliens fully operative in the Principality. Furthermore, the treaty stipulates that all expulsions from Swiss borders apply to Liechtenstein unless the Swiss aliens police explicitly acknowledge its expulsions as applicable solely to Switzerland. The dissolution procedure of this union is the same as that of the Customs Union Treaty, i.e. any of the countries can withdraw from the Aliens Office Union with noticing the other one at least one year earlier than its planned withdrawal date.21

The above unions are just a few keystones of the confederal relationship between Liechtenstein and Switzerland that renders the former an associate state of the latter. There are also many other areas in which similar unions have been formed. For example, there is now a value-added tax (VAT) union between the two countries. Having adopted its own VAT system in January 1995, Liechtenstein concluded a bilateral treaty with Switzerland that not only makes all Swiss laws relating to VAT issues fully applicable in the Principality but also renders the Swiss Federal Court Liechtenstein’s court of last instance with regards to all VAT cases.22

As can be understood by looking at the Liechtenstein case, Scottish independence may not result in the full separation of Scotland from the UK; instead, an independent Scotland may still be part of the UK through bilateral treaties that render Scotland an associate state of the UK. Hence, we may argue that associate statehood provides Scotland with the opportunity to stay in the UK as an independent sovereign state.

Let us now look at the other part of the question: can Scotland stay in the EU as an associate state of the UK? The answer is, I think, yes. Associate states can become part of international organisations. The Principality of Liechtenstein, for instance, has full membership from the Council of Europe and the Organisation for Security and Co-operation in Europe. Similarly, Scotland may preserve its current position in the EU as an associate state of the UK. We should, however, ask the following question in this regard: how can a potential Scottish associate state safeguard its EU membership?

As the main product of a confederal arrangement, a Scottish associate state can be formed after Scotland has become an independent state; in other words, Scottish independence can take its shape in the associate state of Scotland. According to Article 49 TEU, a new independent European state who respects all principles enshrined in Article 2 TEU may apply to become an EU member state. Some may ask in this regard whether Scotland can be a successor state of the UK in lieu of a new member state. The answer is, I think, no. The

20 For more details on the patent protection union, see Duursma (2006); Rigamonti (2011). 21 For more details on the aliens office union, see Duursma (2006). 22 For more details on the VAT union, see Duursma (2006).

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withdrawal of the UK from the EU does not permit Scotland to fill this vacant position as the successor of the UK. This argument is supported by Professor Neil Walker:

Some people may want to argue the continuing state could be Scotland. In international law, the assumption is the continuing state is the part that is dominant in terms of population and political authority. When you are talking about ten per cent of the state, such as Scotland, that is clearly not the case. That is even before you look at the specific rules of the European Union as an international treaty, which clearly understands the UK, as presently constituted, as the continuing state (cited in McCall 2016).

Should we turn our attention to some UN practices, we can affirm Walker’s argument. When India was partitioned following independence from British rule into India and Pakistan, the UN recognised India as the successor state and Pakistan had to follow UN membership procedure. Subsequent cases support this stance, with Singapore applying for new membership while Malaysia treated as the continuing state in 1965; Bangladesh applying for membership and Pakistan retaining its membership status in 1971; Montenegro applying for membership whilst Serbia continued within the UN in 2006; and South Sudan applying for membership in 2011 with the remaining Sudanese Republic treated as the successor state.

In a nutshell, an independent Scotland which takes its shape in an associate state cannot retain its EU membership as the successor of the UK; rather, it should follow the procedure set out in Article 49 TEU. According to this treaty provision, “a new state needs to apply for EU membership leading to an accession agreement that would require to be agreed unanimously and ratified by all member states” (Tierney 2013: 382). There are a number of conditions laid down in Article 49 TEU, and if these are fulfilled, then accession is effected through EU institutions and member states: “the unanimous decision of the Council; a majority decision of the European Parliament; and subsequent ratification of the Accession Treaty by the member states in accordance with their own respective constitutions” (ibid: 383). Having completed this accession procedure, Scotland may become a EU member state with the endorsement of its citizens. In short, associate statehood may eventually provide Scotland with the chance to safeguard its relations with the EU following a successful accession process.

Some may argue that EU institutions and member states can question any possible confederal relationship between the UK and a Scottish associate state, and therefore may not be inclined to conclude an accession treaty rendering the associate state an EU member state. This cannot be a strong argument, however. The EU allows its member states to form separate confederal unions. This is the case with the Benelux Union, which is indeed a confederal union of the so called ‘Low Countries’ – Belgium, the Netherlands and Luxembourg.23 Article 350 TFEU not only acknowledges the existence of this confederal union but also secures its presence in the EU by reading that:

23 For a deep analysis of the Benelux Union, see Cogen (2015).

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[t]he provisions of the Treaties shall not preclude the existence or completion of regional unions between Belgium and Luxembourg, or between Belgium, Luxembourg and the Netherlands, to the extent that the objectives of these regional unions are not attained by application of the Treaties.

A potential confederal arrangement between the UK and Scotland which renders the latter an associate state of the former is thus not an element preventing the associate state of Scotland from becoming an EU member state.

Conclusion

As an interdisciplinary study, this article has sought to answer whether an independent Scotland can stay in both the UK and the EU. Scottish independence is an issue which could have been dealt with for a generation following the 2014 Scottish Independence Referendum. The 2016 Brexit Referendum in which the UK voted to leave the EU while Scotland clearly rejected this withdrawal, however, has resulted in a new independence crisis. Scottish politicians are now examining all potential constitutional options that may enable Scotland to retain its EU membership after the UK’s exit from the EU.

Scottish First Minister Nicola Sturgeon has recently declared that there might be some constitutional alternatives allowing Scotland to stay in both the UK and the EU even after the former has left the latter. In supporting this declaration, the option of federacy has been recommended by Hepburn (2016) and Ramsay (2016) as a possible constitutional scenario permitting Scotland to safeguard its constitutional relations with the UK and the EU after the former has withdrawn from the latter. This constitutional alternative has, however, been rejected by both Scottish Secretary David Mundell and Brexit Secretary David Davis, stimulating the First Minister and her cabinet to present Scottish independence as the best way to secure Scotland’s position in the EU (Sturgeon 2016c).

Scottish independence is a potential constitutional option that may let Scotland preserve its relations with the EU following the Brexit vote. According to this article, this constitutional option would not certainly mean the complete separation of Scotland from the UK, however. Rather, an independent Scotland which takes its shape in the form of associate statehood may allow Scots to stay in both the UK and the EU.

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ROMANIAN JOURNAL OF EUROPEAN AFFAIRS Vol. 17, No. 1, June 2017

EU and US Export Control Regimes for Dual Use Goods: an Overview of Existing Frameworks

Hamed Alavi, Tatsiana Khamichonak1

Abstract: The systems of EU and US export controls of dual-use items have periods of shared history, where the regulatory efforts were directed at a common adversary and with regard to a common array of critical goods and technologies. Despite certain similarities, the current export control regimes warrant awareness of the mutual policies and procedures for EU and US companies engaged in export and re-export of sensitive items. The differing approaches EU Member States take in implementing export controls and the overall complexity of the US system, now bearing the results of the Export Control Reform, make it difficult to navigate one’s way and not lose one’s sight of the forest for the trees. The article seeks to draw the changing export control frameworks in both jurisdictions and evaluate their interactions from a business perspective.

Keywords: EU export controls, US export controls, dual-use goods, EU Regulation 428/2009, US Export Control Reform (ECR), Commerce Control List, Export Administration Regulations.

Introduction

Export control is a trade instrument of upholding international security objectives in the framework of non-proliferation of weapons of mass destruction (WMD). With the emergence of various forms of terrorism and the efforts of state and non-state actors to acquire WMD and complementary technologies, the threats to security and safety are at their highest, and so it entails the necessity of maintaining an up-to-date and efficient system of export controls. Truly, “export control is political, multilateral, and event-driven”2, which means that each

1 Hamed Alavi is a seasoned academician and researcher in the field of International Business and International Business Law. With a diversified educational background, he is pursuing his PhD in Law at the Autonomous University of Barcelona, Spain. He has immense international research and teaching experience including work with different academic institutions in Georgia, Iran, Latvia, Estonia, Ukraine, Belgium, Czech Republic, France, Poland, Turkey, and Italy. His main areas of interest include international business law, international trade, and export regulations, finance of international trade and European Union political and legal framework. E-mail: hamed.alavi@ttu.ee.Tatsiana Khamichunak is LLM Candidate at Vrije Universiteit Amsterdam, The Netherlands. Pursuing her interest in International Law, she has focused on research and publishing in different areas of public and private international law. Her research has been published in renowned international legal journals. E-mail: tatsiana.khamichonak@hotmail.com. 2 Aoi, T, 2016, “Historical Background of Export Control Development in Selected Countries and Regions”, International Security Trade Control Department, Trade and Logistics Division Mitsui & Co., Ltd. Available at: http://www.cistec.or.jp/english/service/report/1605historical_background_export_control_development.pdf. [01.10.2016].

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country responds to the changes in internal, regional and international security with its own interpretation of and its own needs-based set of export controls provisions.3 Understanding where a given export control system stems from and what rationale underlies its specific regulations helps understand it on a policy level as well as anticipate future challenges and changes. Moreover, living and legislating in the global village precludes governments and law-makers from designing a system of export controls based exclusively on a state’s individual security interests: the global export controls regimes - Wassenaar Arrangement, the Nuclear Suppliers Group, the Missile Technology Control Regime, the Australia Group, among others, - to which a lot of states are party, impose common concerns pursuant to technological developments and availability of items on the international market, which are reflected in national regulations worldwide.

The paper makes a concise inquiry into the history of development of the export control systems in the EU and US, focusing primarily on the current regulation of and recent changes to the control of dual-use goods and technologies. Additionally, the interrelation between the two systems is addressed, emphasizing the major points where the assumptions of similarity may backfire, that is - where re-exports from a European Member State may be subject not only to EU export control provisions but also to the US laws, which applies to virtually all goods originating in the US. We do not intend to produce a comprehensive manual on the use and application of the export control provisions but to illustrate where the two regimes agree and how the current global scene is reflected in the reforms undertaken on each side.

To this end, the paper proceeds in the following manner: Part I is dedicated to an outline of the European export controls system, its evolution and status quo; Part II looks at the US export control regime in a similar fashion, including the existing regulation and the incentives and outcomes of the Export Control Reform Initiative; Part III gives a brief outline of the relation between the two and the questions where special attention is required on the part of businesses engaged in export activities.

Part I. Export controls of dual-use goods in the European Union

Dual-use goods are interpreted rather broadly to cover such industries as nuclear, biological, and chemical as well as computers, telecommunications, encryption and navigation and avionics, among others.4 As warranted by their very nature, dual-use goods are advance technological items that are not freely available on the global market and may be obtained from a limited number of exporters. In the EU, an estimated number of 5 000 businesses are engaged in the export of dual-use goods and technologies, allocating a share of 10% of all exports from the EU to dual-use exports.5

3 Aoi, T, 2016, “Historical Background of Export Control Development in Selected Countries and Regions”, International Security Trade Control Department, Trade and Logistics Division Mitsui & Co., Ltd. p. 1. Available at: http://www.cistec.or.jp/english/service/report/1605historical_background_export_control_development.pdf. [01.10.2016]. 4 Council Regulation (EC) No 428/2009 of 5 May 2009 setting up a Community regime for the control of exports, transfer, brokering and transit of dual-use items (Recast), OJ L 134/1 29.5.2009. 5 European Commission Green Paper ‘The dual-use export control system of the European Union: ensuring security and competitiveness in a changing world’, COM (2011) 393 final.

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The European Member States have historically maintained national export systems and held membership in international non-proliferation agreements in order to harmonise their domestic export control regimes. During the Cold war era, export controls were motivated by preventing the Warsaw Pact6 countries from acquiring crucial Western technologies; the efforts were coordinated by the Coordinating Committee for Multilateral Strategic Export Controls (CoCom)7, which was created in 1949 at the initiative of the U.S. between the U.S., Japan and the NATO states except Iceland. To further its ends, CoCom with its headquarters in Paris, maintained three lists of items that were not to be exported to the USSR and its allies.8

The maintained by the EU Member States national export control regimes effectively precluded the European institutions from participation, which meant that no harmonised Community regime of export controls was ever established. The individual export control systems constituted barriers to internal trade and the four freedoms within the common market were jeopardised. In the long run, the situation adversely effected not only intra-European but external trade.9

The case Aimé Richardt et Les Accessoires Scientifiques SNC showcased that regarding dual-use goods and technology the internal market lacked effective integration and a harmonised system of export controls was required. The judgment triggered Commission review of the status quo of border controls between the Member States and a proposal for their elimination with regard to dual-use goods and technologies. The Aimé Richardt case dealt with the unlawful transit of certain goods without a license through the Grand Duchy of Luxembourg. Mr. Richardt, the director of Les Accessoires Scientifiques, established in France, prepared to deliver a ten-inch Veeco Microetch (used in production of bubble memory circuits) to Technopromimport, established in Moscow. After the necessary formalities were completed in France, the direct flight Paris-Moscow was cancelled and the item was transported by lorry to the Luxembourg airport, where it was seized. The item was claimed to be accompanied by ‘inaccurate declarations in order to conceal its strategic nature and to permit its transit to the USSR’, which was contrary to Luxembourg laws that required a special transit licence.10 Ruling on the matter, the Court of Justice of the European Union (CJEU) cited Article 36 of the EEC Treaty, whose purpose is to allow Member States to derogate from the principle of free movement of goods to secure the interests that Article 36 protects.11 It provides that the measures that a Member State may employ shall serve the justified objective and shall not restrict the intra-Community trade more that absolutely necessary.12 The security objective that was invoked to justify the authorisation requirement

6 The Warsaw Treaty Organisation, a.k.a. the Warsaw Pact, was a political and military alliance between the USSR, Albania, Poland, Czechoslovakia, Hungary, Bulgaria, Romania, and the German Democratic Republic, established in 1955 to counterbalance the NATO. The Pact was terminated in July 1991 with the collapse of the Soviet Union. 7 Micara, AG 2012, ‘Current Features of the European union regime for Export Control of Dual-Use Goods’, Journal of Common Market Studies, vol. 50, no. 4, pp 578-593. 8 Gregory, JE 1987, ‘Controlling the Transfer of Military Significant Technology: COCOM After Toshiba’, Fordham International Law Journal, vol. 11, no. 4, pp. 863-882. 9 Micara, AG 2012, p. 581. 10 Ibid., §§ 3-5. 11 Ibid., §§ 19-20. 12 Micara, AG 2012, § 20.

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concerns, for the purposes of Article 36 EEC Treaty, a state’s external and internal security. Having regard to the following and to the fact that transit and export of dual-use goods may affect a state’s public security, the court decided that Luxembourg was in its right to require a special authorisation for the transit of the item in question and its subsequent confiscation.13

Reacting to the need of eliminating border controls between the Member States in order to bring dual-use items into the common market and strengthen the controls over exports to third countries, the Commission made a proposal in 1992 for a Regulation on the control of exports of certain dual-use as well as nuclear goods and technologies.14 The proposal indicated five criteria for eliminating border controls: the common list of dual-use goods subject to control; the common list of destination countries; common criteria for issuing export licenses for third-country exports; mechanism for coordination and enforcement of licenses; procedures for administrative cooperation between the licensing authorities and customs offices.15 The proposal led Council to adopt Regulation No. 3381/94, which was based on Article 113 of the EC Treaty and so became part of the EU Common Commercial Policy (CCP). Simultaneously, within the framework of the EU Common Foreign and Security Policy the Council adopted Decision 94/942/CFSP on the Joint Action. The two instruments regulated identical issues but coexisted in parallel because of their different legal basis and the separation of power. Whereas the Regulation set up a system of licenses applicable to dual-use goods and technologies, the Joint Action laid down the list of controlled items that was to be coordinated according to international commitments of the Member States. Regardless, the new system effectively addressed the problems highlighted in the Richardt case by establishing a framework of mutual recognition of licences between Member States.16 The novel issue that the system created was the peculiar interaction between the two underlying instruments, which were meant to operate as an ‘integrated system’17 but suffered from conflicting interests, especially in the area of decision-making. Article 113 prescribed decision-making on certain sensitive issues to be carried out by Qualified Majority Voting (QMV), which Member States were reluctant to rely on.18 Whereas the Commission favoured a single European strategy in the area of export controls of dual-use goods, the Member States did not wish to sacrifice their competence in deciding on the controlled goods and export guidelines.

The two-tier export controls approach was reconsidered after the CJEU passed judgment in its two hallmark decisions of Leifer19 and Werner20. The Court decided that exports of dual-use goods and technologies must be included exclusively under the scope of CCP and so treated as trade measures because of their nature instead of measures having security and

13 Ibid., §§ 22-23. 14 Proposal for a Council Regulation (EEC) on the control of exports of certain dual-use goods and technologies and of certain nuclear products and technologies. COM (92) 317 final, 31 August 1992. 15 Leslie, BJ 1994, ‘Dual Use Goods and the European Community: Problems and Prospects in Eliminating Internal Border Controls on Sensitive Products’, Boston College International and Comparative Law Review, vol. 17, no. 1, pp. 193-211. 16 Micara, AG 2012, p. 582. 17 Ibid. 18 Suzuki, K 2007, ‘Between Trade and Security: EU’s Export Control Regime and Its Global Role’, Paper for EUSA Tenth Biennial International Conference, May 17-May 19, 2007, Montreal, Canada. 19 Case C-83/94 Leifer and Others [1995] ECR I-3231. 20 Case C-70/94 Werner [1995] ECR I-3189.

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foreign policy objectives.21 The CCP being an exclusive competence of the EU, the Member States became effectively excluded from acting in the area save with a special authorisation.22 The Commission borrowed the reasoning of the CJEU and argued for the necessity of an EU-wide export control regime. It cited the following reasons: firstly, a harmonised export controls system will further the completion of the common market and form strong boundaries on its frontiers, and secondly, it will provide greater legal certainty and reduce the burden on exporters as well as establish a level playing field.23 The decision to amend the cross-pillar system was made also accounting for the practical difficulties it raised. For example, the lack of harmonisation and of standardised licence forms undermined the effective application of the principle of mutual recognition. In the case of general licences the lists of products and destination countries differed among the Member States. Global licenses were a novelty in some Member States and therefore were at time not completely understood and correctly applied.24

In 2000, the Council Decision on Joint Action was repealed and the Regulation 1334/2000 was adopted exclusively under Article 113 EC Treaty, which unified the former two-tier system of rules in one instrument. In as much as a common EU export controls regime was established, the important limitations remained. For example, now that the lists of controlled items are included into the Regulation’s text, they are implemented uniformly by the Member States and can be amended as part of Commission proposals to amend the Regulation. However, the proposed amendments to the controlled goods are done on the basis of the respective agreements of the Member States within the international export control regimes. This limits the Commission’s powers as it only participates in the Australia Group in its own right. Along the same line of reasoning, with the EU enlargements in 2004 and 2007, the unequal membership of international regimes by the acceding states posed further concerns with regard to export controls and the free circulation of controlled items within the internal market.25

On 18 December 2006, the Commission submitted a proposal for the amendment and recast of Regulation 1334/2000.26 The proposal followed the 2004 peer review of the Regulation’s implementation by the Member States, which was conducted in conformity with the Thessaloniki WMD Strategy and Action Plan in order to meet the standards of the UNSC Resolution 1540. The proposal meant to strengthen the EU dual-use export control regime, provide more clarity and reduce regulatory burdens in implementing export control requirements by EU exporters. Overall, the proposal sought to balance the objectives of the EU WMD Strategy in the framework of international non-proliferation commitments with promoting competitiveness of EU industry and ‘creating the EU of high technology jobs’.27

21 Micara, AG 2012, p. 583. 22 Craig, P & Búrca, G 2011, EU Law: Text, Cases and Materials, 5th edn., Oxford University Press, Oxford, UK. 23 Suzuki, K 2007, p. 4. 24 Shmitt, B 2001, ‘A Common European Export policy for Defense and Dual Use Items?’, Occasional Papers No. 25, The Institute for Security Studies Western European Union. 25 Micara, AG 2012, p. 584-585. 26 Proposal for a Council Regulation setting up a Community regime for the control of exports of dual-use items and technology, COM(2006) 829 final, Brussels, 18.12.2006. 27 Communication from the Commission on the Review of the EC Regime of Controls of Exports of Dual-Use Items and Technology, Brussels, 18.12.2006, COM(2006) 828 final.

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The major five proposed items that go beyond technical revision of the Regulation were referred to as follows: adoption of ‘comitology’ procedure for the amendment of annexes; replacement of authorisation requirement for Annex V items with a pre-notification procedure; introduction of appropriate civil and criminal penalties to be applied by the Member States for violation of the Regulation’s provisions; legal security for the export of dual use items, particularly in respect to third-country legislations; and lastly, introduction of a negotiation mechanism with third-countries concerning such issues as re-export requirements.28 Even though the mentioned comitology procedure would have resulted in an accelerated process of updating lists of controlled items in conformity with the export control regimes, the proposed provision was blocked by the Council and did not find its way in the recast.29

The recast Regulation 428/2009 entered into force in August 2009. It reinforced the Community General Export Authorisation (CGEA) for non-EU transfers of certain items, the list of which is set out in Annex II.30 Article 9(2) and Annex III provide that for all other exports that are subject to an authorisation requirement exporting companies shall obtain a licence, which is meant to prevent them from cherry-picking and exporting from a Member State with less stringent requirements.31

Therefore, there are four types of licences under the EU export control regime:

1) The CGEA allows to export certain dual-use items to certain destinations under certain conditions. There are currently six CGEAs: exports to Australia, Canada, Japan, New Zealand, Norway, Switzerland, Liechtenstein and the U.S.; exports of some type of dual-use items to identified destinations; export after repair or replacement; temporary export for exhibition or fair; telecommunications; chemicals.32

2) National General Export Authorisations (NGEA) shall be issued by Member States to exporters established or resident in the authorising State if they do not overlap with items listed in part 2 of Annex II, meet the requirements set out in the Regulation and national legislation.33 Currently, NGEAs are applied in France, Germany, Greece, Italy, Sweden, the Netherlands and the UK.34 The Commission shall be notified of any NGEA issued or modified by a Member State.

3) Global Export Authorisations cover several items in several countries of destination or several end-users.

4) Individual licences are granted by national authorities to an exporter to cover exports of one or more dual-use items to one end-user in a non-EU country. All

28 Communication from the Commission on the Review of the EC Regime of Controls of Exports of Dual-Use Items and Technology, Brussels, 18.12.2006, COM(2006) 828 final, p. 8. 29 Micara, AG 2012, p. 588. 30 Regulation 428/2009, Article 9. 31 Fiott, D & Prizeman, K 2013, p. 16. 32 European Commission Factsheet on The EU Dual Use Export Control Regime, 07/02/2014. Available at: http://ec.europa.eu/trade/import-and-export-rules/export-from-eu/dual-use-controls/. [13.12.2015]. 33 Article 9(4). 34 Commission factsheet, supra note 32.

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four types of licenses are granted or denied by the Member State authorities, whereas it is required to notify the Commission of export licence refusals.35

Furthermore, Article 4 read in conjunction with Article 8 of the recast Regulation introduces a so-called ‘catch-all’ clause, which allows Member States impose a restriction on exports of dual-use items that are not covered by Annexes I and IV for national security and public policy reasons. In particular, Article 4(1) reads that an authorisation for unlisted items may be required if the exporter has information that the items may be intended for production and development of chemical, biological or nuclear weapons or other nuclear explosive devices or missiles capable of delivering such weapons. Also, authorisation shall be required if unlisted items are meant to be transferred to a country subject to an arms embargo and when the exporter has information that the items are intended for ‘military end-use’.

At present, the EU regime of export control of dual-use items comprises of the Regulation (EC) No. 428/2009 and the Council Joint Action 2000/401/CFSR36. EU export controls is claimed to be ‘the closest thing there is to a unified export control regime’.37 The Regulation is binding and directly applicable in the Member States whereas the Joint Action is an intergovernmental cooperation instrument, which was adopted under the TEU provisions and which has to be transposed into the Member States national legislations.38 The Regulation has been subsequently substantially amended by Council Regulation (EC) No. 1232/2011 and items listed in Annex I of the Regulation were amended by Council Regulation (EC) No. 388/2012 after the review of the control lists of the Wassenaar Arrangement, Australia Group, Missile Technology Control Regime and the Nuclear Suppliers Group during 2009-2010.

Since the adoption of the WMD Strategy in 2003 the EU has grown from 15 to now 28 Member States. The enlargement changed the inner dynamics in the EU and the effectiveness of the system of export controls in the larger Europe came into question.39 Whereas the Strategy made the enhancement of EU export control policies a priority, many of the newcomers did not have effective export controls and were not members of the four export control regimes.40 The implications were such that their accession would provide access to the EU common market, where the free movement of dual-use goods was established, which will create a proliferation threat.41 Resolution of this issue was a high priority in 2005-2006, when the provided in the WMD Strategy peer review of export controls in current and acceding countries was completed.42

35 Fiott, D & Prizeman, K 2013, p. 16. 36 Council Joint Action of 22 June 2000 concerning the control of technical assistance related to certain military end-uses, 2000/401/CFSP, L 159/216. 37 Chapman, B, Export Controls: A Contemporary History, University Press of America, Inc. 38 Michel, Q 2014, The European Union Dual-Use Items Control Regime, Comment of the Legislation article-by-article, ESU Non-Proliferation, January 2014. 39 Anthony, I & Grip, L 2013, ‘Strengthening the European Union’s Future Approach to WMD non-proliferation’, SIPRI Policy Paper No. 37. 40 Ibid., p. 17. 41 Jones, S 2003, ‘EU Enlargement: Implications for EU and Multilateral Export Controls’, Nonproliferation Review, vol. 6, no. 10, pp. 80-89. 42 Anthony, I & Grip, L 2013, supra note 47, p. 18.

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In 2008 the Council adopted the ‘Conclusions and new lines for action by the European Union in combating the proliferation of weapons of mass destruction and their delivery systems’, in which it reflects on the efforts and outcomes of the implementation of the WMD Strategy and seeks to strengthen it further.43 Inter alia, it reaffirms that WMD that are misappropriated by terrorists or non-state actors constitute ‘one of the greatest security challenges which Europeans may ever faced’.44 Indeed, it is characteristic of the current system of export controls regimes to be state-focused. That is, the provisions of multilateral treaties on the manufacture and possession of dual-use goods and technologies are addressed to state actors, whereas it is up to the state parties to institute a proper system of control as regards their citizens and businesses.45

Part II. Export Controls of dual-use goods in the US

“The main goal of export controls is to keep certain states or non-state actors from developing or acquiring military capabilities that could threaten important [national] U.S. security interests”.46 This stays true in relation to export controls of both dual-use and military items. An effective system of export controls, thus, allows the US manage the access of such state and non-state actors to critical technology and equipment.47

The current US system of export controls takes root in the Cold War era. The expansive acquisition by the Soviet Union of Western technology ignited a concern among the US and its allies that ‘as Lenin had predicted, the Capitalist West would sell the Communist East the rope with which to hang it’,48 following which the CoCom was created with the view to create a multilateral system of control of exports and imports of certain commodities and technologies that could affect national security of the CoCom member countries.49 It is commonly recognised that the current system has failed to adapt to the new realities of the defence technology industry, which has undergone significant change since the Cold War order.50 Firstly, whereas during the Cold War the threat was posed mainly by the proliferation of arms technologies to the Eastern bloc countries, major threats to the US national security currently also involve arms proliferation to non-state actors such as international terrorist organisations.51 Secondly, during the Cold War the development of military and defence-

43 Council Conclusions 17172/08, Brussels, 17 December 2008. 44 Ibid., p. 3. 45 Joyner DH in Non-Proliferation Export Controls: Origins, Challenges and Proposals for Strengthening, edited by Daniel Joyner, Ashgate, UK. 46 Ileana Ros-Lehtinen, Chairman of the House Foreign Affairs Committee in Long, C, 2013, “An Imperfect Balance: ITAR Exemptions, National Security, and U.S. Competitiveness”, National Security Law Journal, vol. 1, no. 2, pp. 43-64, p. 43. 47 Ibid., p. 43. 48 Christopher F. Corr in Pyetranker, I 2015, “An Umbrella in a Hurricane: Cyber Technology and the December 2013 Amendment to the Wassenaar Arrangement”, Northwestern Journal of Technology and Intellectual Property, vol. 13, no. 2, pp. 153-180, p. 159. 49 Ibid., p. 159. See also supra p. 2. 50 Fitzgerald DR, 2014, “Leaving the Back Door Open: How Export Control Reform’s Deregulation May Harm America’s Security”, North Carolina Journal of Law and Technology, vol. 15, pp. 65-99, p. 68. See also, Jones, J 2013, “Export Controls for the 21st Century”, Wall Street Journal. Available online at: http://www.wsj.com/articles/SB10001424052748703959704575454313481209990 [27.09.2016]. 51 Fitzgerald DR, 2014, supra note 43, p. 68.

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related technologies was carried out primarily by the US government. Overtime, the focus has shifted to the private sector, with companies developing said technologies for commercial purposes.52 The so-called ‘off-the-shelf’ procurement of military technology is beneficial in several ways, including cutting research and development costs by delegating it to private investment and keeping the R&D up-to-date with market trends.53 The trade-off for these advantages is that in order to survive in the competitive marketplace, private firms must diversify their risks through trade with and exports to parties other than the US Department of Defence (DoD). Indeed, a lot of the specialised technologies developed by the private sector are dependent on the scale to be profitable. And whereas in mid-1980s up to 50% of the research investments were allocated to the US government, today it is less than a tenth of that and the DoD can no longer catch up with the financial incentives of wide commercial applications.54 In order for the privately developed technologies to not get into the wrong hands, the law imposes limitations on where the technologies can be exported, which undermines the companies’ competitiveness internationally.55 It is crucial to create a system of export controls that furthers the competitiveness of the US industry and not impairs it.56

Regulation and Administration

Motivated by the need to restrict exports of privately developed technologies that could jeopardise US national security, the law-maker has adopted numerous regulations that paid little attention to the distinction between low-tech and widely available items and advanced proprietary technologies, which led to the creation of a system of export controls characterised as ‘fundamentally broken’57 as well as ‘too rigorous, insufficiently rigorous, cumbersome, obsolete, inefficient, or any combination of these’.58

Often cited as a source of confusion among exporters, manufacturers and other interested parties is the fact that the US government maintains two sets of export control regulations and the corresponding two sets of control lists. This disparity creates a situation where it is unclear which is the set of applicable rules, which license is required and from which authority it shall be sought. That said, the two primary sets of legislation are the Export Administration Regulations (“EAR”), which regulates exports of dual-use items, and the International Traffic in Arms Regulations (“ITAR”), which regulates items and services specifically developed for military purposes.59 Respectively, the items and services that are subject to restrictions under the two sets of instruments are laid down in the Commerce Control List (“CCL”), administered by the Department of Commerce, and the Munitions List (“USML”), administered by the State Department.60

52 Jones, J 2013, supra note 43. 53 Fitzgerald DR, 2014, supra note 43, p. 69. 54 Sender, H 2016, “US Defence: Losing its edge in technology?”, Financial Times. Available at: http://www.ft.com/cms/s/0/a7203ec2-6ea4-11e6-9ac1-1055824ca907.html?siteedition=intl#axzz4LRyKYE87. [27.09.2016]. 55 Fitzgerald DR, 2014, supra note 43, p. 71. 56 Jones, J 2013, supra note 43. 57 Ibid., p. 70. 58 Fergusson, IF and Kerr, PK, 2014, “The U.S. Export Control System and the President’s Reform Initiative”, Congressional Research Service 7-5700, p. 1. 59 See more at http://www.state.gov/strategictrade/overview/. 60 Ibid.

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The EAR implement the Export Administration Act (“EAA”) of 1979, which is the basis of the Department of Commerce’s authority to regulate the export and re-export of dual-use goods, software, and technology, which originate from the US. The EAA was adopted in furtherance of the Congress’ attempts of protecting national security and promoting United States international trade in advanced goods and technologies, which at the time was undermined by the foreign availability of the said items to the communist countries.61The EAA authorises the President to control exports for national security, foreign policy and short supply purposes62 and allocates the power to exercise national security controls to the Department of Commerce to the exclusion of the Secretaries of Defence and State, whose role is limited to adversarial, unless otherwise provided in the Act.63 The EAA is now expired but the export licensing authority thereunder established has been extended by a presidential declaration of national emergency ever since.64&65 Thus, upon EEA’s expiration in 1994 President Bill Clinton invoked the International Emergency Economic Powers Act (IEEPA)66 in the Executive Order No. 12923, stating that “the unrestricted access of foreign parties to U.S. goods, technology, and technical data and the existence of certain boycott practices of foreign nations […] constitute an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States and hereby declare a national emergency with respect to that threat”.67

Since 1985, the Department of Commerce’ Bureau of Industry and Security (BIS) is charged with implementing and enforcing the EAR and regulating exports and re-exports of dual-use items.68 As defined by the EAR, dual-use are those items that have both civil as well as terrorism, military or WMD-related applications.69 A closer look at §734.3 demonstrates that EAR applies not only to dual-use items but to any item that warrants control and that is not excluded from the scope of the EAR in §734.3(b). Thus, all items in the United States, including in US Foreign Trade Zones (FTZ) and in transit; all US origin items wherever located; foreign-made commodities, software and technology that incorporate controlled US-origin items; certain foreign-made direct products of US origin technology or software

61 Dvorin, SM, 1980, “The Export Administration Act of 1979: An Examination of Foreign Availability of Controlled Goods and Technologies”, Northwestern Journal of International Law & Business, vol. 2, no. 1, pp. 179-199, p. 179. 62 Fergusson, IF and Kerr, PK, supra note 51, p. 2. 63 Dvorin, SM, supra note 54, p. 194. 64 Fergusson, IF and Kerr, PK, supra note 51, p. 2. 65 The EAA was reauthorized in 2000 and lapsed again on August 20, 2001, after which the EAR continued in effect by virtue of the Executive Order no.13222 of August 17, 2001. 66 IEEPA empowers the President of the United States to “investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States”. 2 US Code Title 50 (War and National Defence), Chapter 35, § 1702 (B). 67 White House Press Release, Continuation of Export Control Regulations, Executive Order no. 12923, June 30, 1994. Available at: http://fas.org/irp/offdocs/eo12923.htm. [27.09.2016]. 68 In 1985, it was separated from the International Trade Administration of the Department of Commerce in order to detach the former from the trade promotion functions of the latter. (Fergusson, IF and Kerr, PK, supra note 51, p. 3). 69 CFR/EAR §730.3 “‘Dual-use’ and other types of items subject to the EAR.”.

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and certain commodities produced by any plant or major component of a plant located outside the United States that is a direct product of US origin technology or software, are subject to the EAR according to §734.3. It is possible that the items that are subject to the EAR also fall within the scope of regulatory programs of other agencies, which means that users may be required to comply with overlapping rules.70, 71 Besides, the fact that a certain item is subject to the EAR does not automatically impose on it a licensing or other requirement, which shall instead be sought in the other parts of the EAR.72 This means that a person may undertake transactions that are subject to the EAR without a license or authorisation, unless there’s an affirmative statement to the contrary in the General Prohibitions or License Exceptions parts of the EAR.73

Regarding the general prohibitions, an exporter’s behaviour is largely conditional on the following considerations: classification of the item, destination, end-user, end-use and conduct.74 Depending on these, §736.2(b) lists the ten general prohibitions75, in which an exporter may not engage unless they have obtained a BIS license or qualify for a license exception from each of the general prohibitions.76

Besides laying down the licensing policy for certain goods and destinations and outlining the application process to be used by exporters, the EAR sets forth a Commerce Control List (CCL), which is a list of items - commodities, technologies and software - that is subject to the export licensing authority of BIS.77 The CCL is divided into 10 categories (nuclear materials, facilities and equipment; materials, chemicals, microorganisms and toxins; materials processing; electronics; computers, telecommunications and information security; lasers and censors; navigation and avionics; marine; aerospace and propulsion), which are further split into 5 groups each (equipment, assemblies and components; test, inspection and production equipment; materials; software; technology).78 Within each group individual items are identified by the Export Control Classification Number (ECCN)79, 80, which is complemented by an item description and the reason for control.81 Determining the ECCN is the first step towards establishing whether a license in required for the export of a certain

70 §734.2(a)(2). 71 In case of an overlap, entries in the CCL contain a reference to the controls administered by other agencies. 72 §734.2(a)(3) 73 §736.1. 74 §736.2 (a). 75 The ten general prohibition are the following: 1) Export and reexport of controlled items to listed countries; 2) Reexport and export from abroad of foreign-made items incorporating more than a de minimis amount of controlled US content; 3) Reexport and export from abroad of the foreign-produced direct product of US technology and software; 4) Engaging in actions prohibited by a denial order; 5) Export or reexport to prohibited end-uses or end-users; 6) Export or reexport to embargoed destinations; 7) Support of Proliferation Activities; 8) In transit shipments and items to be unladen from vessels or aircraft; 9) Violation of any order, terms, and conditions; 10) Proceeding with transactions with knowledge that a violation has occurred or is about to occur. For a detailed guidance see §736.2 (b). 76 §736.2 (b). 77 Fergusson, IF and Kerr, PK, supra note 51, p. 3. 78 § 738.2(a) and (b). 79 §738.2(d). 80See BIS website for a detailed guide as to how to interpret the ECCN. https://www.bis.doc.gov/index.php/regulations/export-administration-regulations-ear. [27.09.2016]. 81 §738.2(d).

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dual-use item, which is achieved by applying the CCL’s ECCN and the Commerce Country Chart.82 As mentioned earlier, virtually all items that originate in the US are subject to the EAR; consequently, those items that are not on the CCL may be still restricted to a destination if it is meant to be used for a military end-use or an entity involved in proliferation.83

The Export Controls Reform

Since 2009 the US system of export controls has been en route towards a clearer, streamlined and overall fundamentally restructured regulation, with over 170 pages of added and amended provisions published to date.84 The reform was launched with the view to face the changed realities of the post-Cold War period. The current export controls rules and processes are not fit to deal with the challenges of the 21st century, such as preventing proliferation of crucial technology and equipment to terrorist groups and states seeking to advance their WMD arsenal.85 Secretary Gates identified the flaws of the existing approach in that, inter alia, the current system is too overreaching to be effective because it offers a far too broad a definition of items subject to export control and classification, which overburdens the system with cases that could be excluded from regulation altogether86 and takes the focus away from those items that pose true security concerns. A corollary to this is the second problem that the export control system has developed overtime, that is - the complicated and often overlapping bureaucratic apparatus. The resources in time, money and manpower that the US government spends on coordinating only the procedural aspects of export controls is a red flag for reform; besides, such intricate arrangement creates proliferation risks in that one item may be subject to jurisdiction of different agencies, whose policy determinations may repeat each other as well as be in conflict. On top of all, the onerous and complex provisions “impedes the effectiveness of our closest military allies, tests their patience and goodwill, and hinders their ability to cooperate with US forces”.87

For the said reasons, in August of 2009 President Obama directed the agencies involved in the US export controls to conduct a broad-based review of the system in order to identify the ways of strengthening the national security and the competitiveness of the core manufacturing and technology industries.88 The review revealed the pitfalls of the current export controls system, which triggered the launch of the Export Control Reform Initiative (ECR Initiative), whose ambitious objective is to fundamentally reform the US system of export controls. The US Department of State described the objectives of the reform in the following way: “Export Control Reform will move less sensitive items that no longer merit

82 § 738.3. 83 Fergusson, IF and Kerr, PK, supra note 51, p. 4. 84 Pasco, B 2014, “The Case for Export Control Reform, and What it Means for America”, Harvard Law School National Security Journal. Available at: http://harvardnsj.org/2014/10/the-case-for-export-control-reform-and-what-it-means-for-america/. [30.09.2016]. 85 Remarks of the Secretary of Defence Robert Gates to the Business Executives for National Security on the U.S. Export Control System, U.S. Department of Defence, April 20, 2010. Available at: http://www.fas.org/sgp/news/2010/04/gates-export.html. [01.10.2016]. 86 In his April 20, 2010 speech Secretary Gates said: “We were wasting our time and resources tracking technologies you could buy at Radio Shack”. 87 Ibid. 88 See more at www.export.gov.

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controls under the USML, such as certain parts and components, to the CCL, to allow for more flexible licensing authorisations to allies and partners while increasing the number of enforcement officials available to safeguard against illicit attempts to procure sensitive defence technologies”.89

The ECR is to be implemented in three phases (reconciling the definitions, regulations and policies pertaining to export controls, and eventually creating a single control list, single licensing agency, unified information technology system and enforcement coordination system), with the first and second phases being complete by 2015.90 The first stages of the reform were concerned with relocating thousands of items from USML to CCL, in order maintain under the USML scope only those items that “provide at least a significant military or intelligence applicability”.91 This migration of items from a State-regulated to a Commerce list has triggered the creation of a new 600 series ECCNs, which became effective on January 6th 2014 and refer to, among others, military vehicles, vessels of war, submersible vessels, and related items.92

Whereas the ultimate result pursued by the reform is to create a refined and simplified structure with harmonised definitions and eliminate overlap and confusion as to the agencies’ jurisdictions, some criticise this ambition as erring on the side of deregulation.93 There is, thus, no certainty that the current approach will be equally effective in not only improving the position of technology manufacturers but also comprehensively answering the security concerns.

In the light of new political developments in the US and taking the office by Donald J. Trump as a 45th president of the United States of America the destiny of reform process is completely blurred. Despite the fact that it is too soon to speculate about the final outcome of ECR, hardliner attitude of new administration leans toward further regulation of exporting dual use items and technologies from the US rather than having hope for any sort of deregulation such activities. Holding strong position against particular nations and imposition of ban on followers of very distinctive faith to enter the United States among first executive orders issued by president Trump might be interpreted as signal for furtherance of imposing tougher conditions for issuing export licenses as well as improvement of enforcement procedure and imposition of sanctions against violations of Export Control regulations for export of dual use items during his tenure. From one hand, such outcome would be in sharp contract with achievements of first and second phase of ECR Initiative during the Obama administration and on the other hand by imposing restriction on access of American dual use technology producers to international market, it will be against promises of president Trump during his campaign for improving trade and creating job for American citizens. This way or the other, it is not unexpected to witness further developments in American Export Control Regulations during Trump administration.

89 See more at www.state.gov. 90 Ibid. 91 Rosanelli, R 2014, US Export Control Regulations Explained to the European Exporter: A Handbook, European Studies Unit. Available at: http://local.droit.ulg.ac.be/jcms/service/file/20140108134656_Handbook-RR-0801.pdf. [05.10.2016]. 92 Ibid., pp. 35-36. 93 Fitzgerald DR, 2014, supra note 43.

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Concluding Remarks

US and EU export control regimes are the products of the historic, political and economic development of the region. The one uniform issue that they have in common is that both engage in a balancing exercise to date in order to coordinate the economic and security interests within a state and the internal market, as well as vis-a-vis other states against whom controlled items may be used. Governments are tasked to reconcile those interests at a national level as well as internationally. Overall, export controls are believed to distort market prices and impose net-welfare losses on a domestic economy that makes use of them.94

The mechanisms that states employ to restrict exports of sensitive items bear serious effect on the sustainability of national economic actors and affected industries. Thus, imposing an export ban, tax quota and restrictive licensing on dual-use goods and technologies shall be introduced as a policy tool when assessed against the background of the global dual-use goods market. For example, an export tax or ban may reduce the competitiveness of a domestic producer, which will not achieve the ultimate objective of limiting the access to a target item internationally if the item could alternatively be acquired from elsewhere. The US engaged in the practice of establishing unilateral restrictions and control practices during the Cold War era, which had a negative impact on the economy because none of its then allies and partners followed.95 It is thus argued that unilateral features shall be excluded from export controls regimes save for the instances when there is a prospect that other states’ positions could be expected to be altered within a short time.96 National industries could also be put under unnecessary strain if the operating control lists are over-inclusive. This has been the case in the US until the 2009 reform initiative, which has undertaken to create a common control list and reduce the number of controlled items.

Regardless of the form that export control regulations take, it is inevitable that exporters are tasked with familiarising themselves with the attaching compliance obligations, the respective export controls regulations in the state of the client, and setting up effective compliance programs.97 The complexity of respective systems of export controls goes both ways: US exporters ought to locate and keep in mind the applicable European Regulations and the laws of the partner-Member States, whereas the European exporter will need to catch up with the ongoing restructuring of the US export control system, which may prove to become rather burdensome and costly in the initial periods.

94 Bonarriva, J, Koscielski, M & Wilson, E 2009, ‘Export Controls: An Overview of Their Use, Economic Effects, and Treatment in the Global Trading System’, Office of Industries Working Paper No. ID-23, U.S. International Trade Commission. 95 Panel on the Future Design and Implementation of U.S. National Security Export Controls et al 1991, Finding Common Ground: U.S. Export Controls in a Changed Global Environment, National Academies Press. 96 Ibid. 97 Rosanelli, R 2014, supra note 88, p. 39-40.

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REFERENCES:

• Anthony, I & Grip, L 2013, ‘Strengthening the European Union’s Future Approach to WMD non-proliferation’, SIPRI Policy Paper No. 37.

• Chapman, B, Export Controls: A Contemporary History, University Press of America, Inc.• Craig, P & Búrca, G 2011, EU Law: Text, Cases and Materials, 5th edn., Oxford University

Press, Oxford, UK.• Dvorin, SM, 1980, “The Export Administration Act of 1979: An Examination of

Foreign Availability of Controlled Goods and Technologies”, Northwestern Journal of International Law & Business, vol. 2, no. 1, pp. 179-199, p. 179.

• Fergusson, IF and Kerr, PK, 2014, “The U.S. Export Control System and the President’s Reform Initiative”, Congressional Research Service 7-5700, p. 1.

• Fiott, D & Prizeman, K 2013.• Fitzgerald DR, 2014, “Leaving the Back Door Open: How Export Control Reform’s

Deregulation May Harm America’s Security”, North Carolina Journal of Law and Technology, vol. 15, pp. 65-99, p. 68.

• Gregory, JE 1987, ‘Controlling the Transfer of Military Significant Technology: COCOM After Toshiba’, Fordham International Law Journal, vol. 11, no. 4, pp. 863-882.

• Jones, J 2013, “Export Controls for the 21st Century”, Wall Street Journal. Available online at: http://www.wsj.com/articles/SB10001424052748703959704575454313481209990 [27.09.2016].

• Jones, S 2003, ‘EU Enlargement: Implications for EU and Multilateral Export Controls’, Nonproliferation Review, vol. 6, no. 10, pp. 80-89.

• Joyner DH in Non-Proliferation Export Controls: Origins, Challenges and Proposals for Strengthening, edited by Daniel Joyner, Ashgate, UK.

• Leslie, BJ 1994, ‘Dual Use Goods and the European Community: Problems and Prospects in Eliminating Internal Border Controls on Sensitive Products’, Boston College International and Comparative Law Review, vol. 17, no. 1, pp. 193-211.

• Long, C, 2013, “An Imperfect Balance: ITAR Exemptions, National Security, and U.S. Competitiveness”, National Security Law Journal, vol. 1, no. 2, pp. 43-64, p. 43.

• Micara, AG 2012, ‘Current Features of the European union regime for Export Control of Dual-Use Goods’, Journal of Common Market Studies, vol. 50, no. 4, pp 578-593.

• Michel, Q 2014, The European Union Dual-Use Items Control Regime, Comment of the Legislation article-by-article, ESU Non-Proliferation, January 2014.

• Panel on the Future Design and Implementation of U.S. National Security Export Controls et al 1991, Finding Common Ground: U.S. Export Controls in a Changed Global Environment, National Academies Press.

• Pasco, B 2014, “The Case for Export Control Reform, and What it Means for America”, Harvard Law School National Security Journal. Available at: http://harvardnsj.org/2014/10/the-case-for-export-control-reform-and-what-it-means-for-america/. [30.09.2016].

EU and US Export Control Regimes for Dual Use Goods: an Overview of Existing Frameworks

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• Pyetranker, I 2015, “An Umbrella in a Hurricane: Cyber Technology and the December 2013 Amendment to the Wassenaar Arrangement”, Northwestern Journal of Technology and Intellectual Property, vol. 13, no.2, pp. 153-180, p. 159.

• Remarks of the Secretary of Defence Robert Gates to the Business Executives for National Security on the U.S. Export Control System, U.S. Department of Defence, April 20, 2010. Available at: http://www.fas.org/sgp/news/2010/04/gates-export.html. [01.10.2016].

• Rosanelli, R 2014, US Export Control Regulations Explained to the European Exporter: A Handbook, European Studies Unit. Available at: http://local.droit.ulg.ac.be/jcms/service/file/20140108134656_Handbook-RR-0801.pdf. [05.10.2016].

• Sender, H 2016, “US Defence: Losing its edge in technology?”, Financial Times. Available at: http://www.ft.com/cms/s/0/a7203ec2-6ea4-11e6-9ac1-1055824ca907.html?siteedition=intl#axzz4LRyKYE87. [27.09.2016].

• Shmitt, B 2001, ‘A Common European Export policy for Defence and Dual Use Items?’, Occasional Papers No. 25, The Institute for Security Studies Western European Union.

• Suzuki, K 2007, ‘Between Trade and Security: EU’s Export Control Regime and Its Global Role’, Paper for EUSA Tenth Biennial International Conference, May 17-May 19, 2007, Montreal, Canada.

Legislation and Regulation:• Communication from the Commission on the Review of the EC Regime of Controls of

Exports of Dual-Use Items and Technology, Brussels, 18.12.2006, COM(2006) 828 final.• Council Conclusions 17172/08, Brussels, 17 December 2008.• Council Joint Action of 22 June 2000 concerning the control of technical assistance

related to certain military end-uses, 2000/401/CFSP, L 159/216.• European Commission Factsheet on The EU Dual Use Export Control Regime, 07/02/2014.

Available at: http://ec.europa.eu/trade/import-and-export-rules/export-from-eu/dual-use-controls/. [13.12.2015].

• European Commission Green Paper ‘The dual-use export control system of the European Union: ensuring security and competitiveness in a changing world’, COM(2011) 393 final.

• Proposal for a Council Regulation setting up a Community regime for the control of exports of dual-use items and technology, COM(2006) 829 final, Brussels, 18.12.2006.

• White House Press Release, Continuation of Export Control Regulations, Executive Order no. 12923, June 30, 1994. Available at: http://fas.org/irp/offdocs/eo12923.htm. [27.09.2016].

Case law:• Case C-367/89 Aimé Richardt et ‘Les Accessoires Scientifiques’ [1991] ECR.

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ROMANIAN JOURNAL OF EUROPEAN AFFAIRS Vol. 17, No. 1, June 2017

The Race towards the Future: Geopolitics versus Technology. Implications for Romania

Florin Bonciu1

Abstract: The paper identifies two broad and unrelated processes that take place in contemporary world economy, the historical process of redefinition of the balance of power and spheres of influence which is characterized by the geopolitical dimension and the process of profound technological change determined by the 4th industrial revolution which is characterized by the technological dimension. The research identifies a race not between the two processes per se, but between the implications of their outcomes. Depending on which of the two processes will succeed in redefining the architecture and predominant type of relations in the world economy the reality of the period from 2020 to 2030 - 2050 might be very different. Based on the conclusions of this research, the final part of the paper analyses the implications of these possible outcomes for Romania, given its current characteristics which resulted after 27 years of transition.

Keywords: globalization, geopolitics, balance of power, 4th industrial revolution, return of the nation states/state entities

JEL classification: F02, F50, F63, O33

Looking into the future

The preoccupation for studying the future in the sense of designing potential scenarios and alternative solutions to different challenges has always been more intense during periods of uncertainty, of perceived discontinuity and when the understanding and representation of the world has substantially changed.

Apart from the study of the future as an academic research, the state entities with significant global or regional power as well as some international institutions, organizations or foundations have attempted, especially after World War II, to systematically explore the medium to long term future from time to time and particularly when out of the ordinary events required it (Bell, D., 1965).

Usually the prospective researches are based on certain hypotheses such as the demographic dynamics at a global or local level, the climate change, the environment

1 Florin Bonciu, PhD, is a University Professor with the Romanian-American University in Bucharest and Senior Researcher with the Institute for World Economy in Bucharest. His activity materialized in 16 books and over 100 papers on issues related to international economics, European integration, international investments and international business. E-mail: fbonciu@gmail.com.

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pollution or the exhaustion of the main resources used by the current technologies. Starting from these hypotheses assumptions are made regarding the economic growth rates, the increase of energy efficiency, the recycling of waste or the impact of new technologies. A common limit of many of these approaches is that they are, to a large extent, uni-factorial, that is they take into account the impact or consequences of a given factor. Another rather common limit or even weakness is that factors like cultural, spiritual, political or anthropological ones are very rarely if ever taken into account. This latter limit is somehow understandable as such factors are rather difficult to grasp and even more difficult to quantify.

On the other hand, although many scenarios take into account cases of exponential growth (such as the Moore’s law that has predicted successfully for the past 50 years the increase in density of components in integrated circuits (Anthony, S., 2016) or models that predict the impact of the increase of environment temperature in the next 50 years), it is very rare that the transformation of quantitative accumulation into a qualitative leap or the vectorial result of the addition of several complex forces are taken into account in making predictions or forecasts.

In an attempt to avoid these limitations this research approaches the exploration of the medium to long term future of the world economy on the basis of a metaphor of a race towards the future. According to this approach, looking from a very broad perspective, the world economy of today can be represented as the place where a race between the outcomes/end results of two unrelated processes is taking place. These two processes are enabled and manifested by the people but they are not designed deliberately by the people in view of obtaining a particular result. Although people, firms and states have permanently their own objectives, the inter-action of their behaviour is much too complex to fit a simplifying pattern and that is why “unexpected” events often happen.

According to the above mentioned metaphor, depending on the outcome/end result that will win the race in the sense of influencing and determining the major characteristics of the world order, the world economy will have in the next decades a different architecture, with different institutions and different new rules of the game. And while the transition from the current situation to a future one is expected to take some time (in our estimation this transition will be clearly launched by 2020 and most probably it will be completed by 2030), what can be expected with a relatively high level of certainty is that the transition will not be linear or smooth but rather non-linear and marked by moments of crisis and discontinuity.

The race towards the future and the two contenders

When analysing the world economy it is useful to bear in mind a number of characteristics specific to long term history. One is that history is not moving in a linear way, but rather on a dialectical spiral that make some things, situations and events repeat, on a different level, with a different meaning and a different content.

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The difficult part in looking to the flow of historical events from this perspective is to separate the external manifestations (which are different from one historical period to another) from the inner principles (which are intrinsically the same). One example regarding the manifestation of the dialectical spiral is to compare the literacy rate and access to knowledge during the Middle Ages and nowadays. During the Middle Ages the number of people able to read and write was extremely low while the access to knowledge and written materials was very difficult. Nowadays the literacy rate is by any means much higher and the access to knowledge is very easy, almost universal. The two manifestations are extremely different in their appearance. But in reality, the number of people in contemporary world that can operate with the huge amount of data and information available (not to mention here the implications of so-called “fake news”) is extremely low. This current situation is made worse by the existence in all countries, developed and developing, of significant percentage of people affected by functional illiteracy which means that while they can read and write to a certain level, they cannot make sense of what they read in order to fulfil daily personal or professional tasks (UNESCO, 2013).

A second characteristic is that the study of history as well as that of economy deals with people and societies and therefore one should take into account all aspects related to human beings such as those studied by anthropology, sociology and psychology and not only numerical values (quantitative aspects). And as historical experience proved time and again in the long run cultural and spiritual values, traditions and identities are much more important than whatever can be measured by numbers. The design of simplifying and simplified models of human societies where all (or most of) the participants are presumed to be rational (whatever that means) and motivated by profit and/or efficiency can lead to results that may be very far from reality.

Taking into account these two characteristics and analysing the current trends that have been manifesting in the world economy in the last decades, we identified two processes (contenders) in this race towards the future that are taking place here and now.

The first contender is represented by the historical process of redefining the balance of power and the spheres of influence at a global level. This is a classical/natural process that involves states, diplomacy, realpolitik, all sorts of negotiations and sometimes wars. These elements can be generically labelled as geopolitics or the geopolitical dimension.

The second contender refers to a profound technological change often named the 4th industrial revolution or the digital revolution (Schwab, K., 2016). This revolution includes and will bring with it the rise of robots and of artificial intelligence, the genetic revolution determined by the possibility to edit genes, nanotechnology, new materials, 3D printing but also a new architecture of the world economy defined by Parag Khana as “connectography”, meaning interconnected geography and/or reality (Khanna, P., 2016). All these elements can be generically labelled as technology or the technological dimension.

In the next part we are looking in depth to each of these contenders in order to define their characteristics and implications for the world economy, as well as for the actors that operate within the world economy and for the institutions and rules of the game.

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Geopolitics

The first contender (geopolitics) in this race towards the future is the less optimistic one but also the most likely to happen. It has as argument in its favour the long term history of humankind, marked by numberless conflicts of all sorts, where peace (at local or regional level) has too often been just the period between two wars. The return of geopolitics in present times is a proof that history is not moving in a linear way from nation states to multilateral and then to universal institutions that could have been specific for a globalized world. We speak nowadays about a return to geopolitics because after 1990 (once with the demise of the Soviet Union and of the socialist system centred on it) there was a perception of the “end of history” (Fukuyama, F.) and of a linear and accelerated movement towards a type of globalization characterized by universal institutions and rules.

According to this perception the importance of states was supposed to diminish and their role be replaced by new institutions – such as the United States of Europe which was expected to transform the European Union into a federal super-state (Reding, V., 2012) - or global rules as those included in the Transatlantic Trade and Investment Partnership (TTIP) or the Trans Pacific Partnership (TPP). In case of the two mentioned partnerships the diminishing role of the state could have resulted indirectly from the so-called Investor State Dispute Settlement, a mechanism which could have limited the ability of states to initiate measures (such as the change of the level of minimum wage or of the level of Value Added tax) that could affect the profitability of multinational corporations. In case such disputes might have arisen their settlement was supposed to be addressed outside the normal legal system (Krist, B., 2014). At the beginning of 2016 these developments, especially the two partnerships, seemed almost completed.

Instead of that, what we have today, just one year later, at the beginning of 2017, is a return on a dialectical spiral to national approaches, to bilateralism and to new alliances and new balances of power. As of early March 2017 the European Union gave up not only the concept of the United States of Europe but much more. Jean-Claude Juncker, the president of the European Commission evoked the possibility that European Union may even give up the political union and be just a single market (Foster, P., 2017).

At the same time, the citizens in many countries (including many developed ones) have re-launched the dialogue to their respective states mainly because the states are entities they can understand and interact with (however imperfect that interaction may be). Regional, continental (such as the European Union) or global institutions (such as the United Nations) are way too abstract and too far for the normal people to be perceived as partners in a dialogue and providers of concrete solutions to the challenges and hardships of daily life.

In times of crisis or uncertainty, in times when the social tensions between “the 1%” or even “the 0.1%” (that is the ones that have considerable wealth) and “the forgotten” (the rest of society) are increasing, the majority of people are seeking protection within and from their communities, be they local, regional or national.

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After the year 2008 (that is after the onset of the economic crisis) and particularly after 2016 geopolitics has been brought to the fore by a number of factors such as:

• The consequences of globalization that improved beyond any doubt the aggregated economic indicators (such as Gross World Product or volume of international trade) but also generated a very unequal distribution of the accumulated wealth, especially in the developed countries (Oxfarm International, 2017);

• The new balance of power and the emergence of a true multi-polar world;

• The new relations between economic and political factors in the developed countries and the return of state entities as key players in many parts of the world;

• The inequality issue and the need of a new discussion about the social contract, especially in the developed countries. The significance of this issue is so high that in many countries (like United States, France or Italy) the political parties are faced with an existential crisis and new parties emerge attempting to reflect the new preoccupations of large segments of the population;

• The coming of age of national approaches in Latin America & Africa;

• The historical need for a sustainable solution in the Middle East.

What has to be taken into account is the fact that all these factors have not appeared overnight; they were not the direct result of the crisis that started in 2008 and, at the same time, they do not represent accidents of consequences of mistakes made by politicians (in making some decisions or in designing certain public policies) or by the general public (in the manifestation of their options during elections). Each of them is the result of a gradual building up of characteristics and tensions that took decades to come to maturity.

The world economy has developed in quantitative terms considerably in the past 30 years, it is nowadays bigger and much more diverse, it has new centres of economic and military power. The world economy of 2017 is definitely, beyond the shadow of a doubt, different than the one from 1945 when World War II ended or that of 1990 when the world became unipolar, once with the demise of the Soviet Union.

Under these circumstances the most logical thing would be to have negotiations involving all states (maybe under the aegis of the United Nations) for adapting the world order to the new realities. Negotiation is always better than confrontation, but this evidence is not enough for making this option come true.

The alternative to global negotiations is that the states may negotiate new alliances among themselves on a bilateral or plurilateral basis, confront with each other in different ways (by means of trade wars, exchange rate wars or real wars) and continue to do so until it would be too costly and too inefficient to continue like that. This scenario is not very pleasing, it is to be avoided at all costs, but unfortunately it is still possible.

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Technology

The second contender (technology) is, at first sight, more optimistic in its projection of the future; but this is because it tends to forget the past and focus mainly on the promises based on the technological and scientific achievements. Science and technology seem nowadays to have solutions for anything, but what is often forgotten is that these solutions may have dual potential (civil and military). In this case the obvious question is: who guarantees which use (civil or military) will prevail?

The efficient and effective use of the positive and civil applications of technology require rationality, cooperation and long term vision from the part of all significant actors within the world economy. These requirements although simple and evident are difficult to be fulfilled; anyway their repeated statement and observance may increase in the long term the chances of success.

Unfortunately, the long as well as the short term history show us that science and technology have always been used for military applications, not to mention that in many cases the military use has been the first one and the civil use the second.

But even if we are extremely optimistic and imagine that for the first time in the history of humankind the knowledge, science and technology that form the essence of the 4th industrial revolution will be used exclusively for civil purposes and therefore we avoid conflicts, two big questions still remain:

1) How will the results of the scientific achievements be distributed?

2) What will happen with the people/the human factor who will become substantially obsolete and redundant?

Regarding the first question many research documents point to the risk that the huge benefits of the scientific achievements will only enlarge the gap between the 1% and the 99% of the population (Marr, B., 2016). Under the current social and economic mechanisms it is just normal that the more affluent part of society will benefit more and sooner from the results of the new scientific discoveries and technologies.

As for the second question, because we are at the very beginning of the manifestation of the 4th industrial revolution there is a lack of comprehensive understanding of its main implications for human beings and for society as a whole. Many studies point anyway to the possibility that artificial intelligence and robots will make redundant much more human labour than the previous industrial revolutions just because this one will cover all sectors of activity and all human activities (World Economic Forum, 2016).

In the early days of the exploration for a solution to the human redundancy problem, there is a lot of debate on the Universal Basic Income, a minimum amount of money to be distributed freely each month to every citizen. Universal Basic Income may be a solution to both inequality issue manifested in the developed countries as result of globalization and to the redundancy of the human factor as result of the rise of the robots and artificial intelligence (AI). But for the moment this concept is just explored and tested. For instance Bill Gates thinks that the countries are not rich enough yet to implement this concept but the time may come sooner than we think (Javelosa, J., 2017).

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The Race towards the Future: Geopolitics versus Technology. Implications for Romania

The two processes at work and the new characteristics of globalization

The crisis that started in 2008 as well as the decline of the multilateralism as shown by the failure of the international trade negotiations during the Doha Round (negotiations that took place under the aegis of the World Trade Organization), the rise of China as a global power and the remarkable growth of India, the increase of the political and military role of the Russian Federation and the multiple and persistent crises confronting the European Union which celebrates in 2017 its 60th anniversary, all these have determined a new balance of power at the regional and global level and a return to an increased role for the state entities.

This new international landscape is marked at the beginning of 2017 by aspects such as:

• The existence of vast areas of instability (such as Middle East) with major economic and social implications (like those related to massive migration);

• The need to rethink the European Union project, especially after Brexit, after the formulation by the Visegrad countries of a position on the need for a new Treaty and, especially, after the 2017 elections in France, Germany and Netherlands;

• The existence of technological changes that can be compared from the point of view of implications with the first industrial revolution. Although many of the technologies of the 4th industrial revolution already exist to a significant extent and some of them are even implemented, their full scale deployment is still to come until 2020. In our opinion one characteristic of the 4th industrial revolution is of utmost importance and unfortunately it is largely unknown and not understood: “the fact that this industrial revolution will change not only what we do, but also who we are” (Schwab, K., 2016);

• The climate and demographical challenges are well documented by numerous studies, but they are not internalized by the general public and/or political decision makers as being imminent and of significant relevance.

In relation to the two processes (driven by geopolitical forces and by the technological ones) the world economy is nowadays like a scale that is only waiting some impulse for tilting one way or the other (that is towards competition and confrontation or towards the use of the benefits of science and technology for solving the vast majority of the humankind’s problems).

The geopolitical process seem at present to have some advantage in influencing the course of events. The inequality phenomenon has affected the developed countries and determined already substantial social movements asking for the return of decision power to the nation states while multiple conflicts and local/regional wars generated a negative attitude towards the Western world in numerous places like Middle East, Africa or Latin America. If the geopolitical process wins the race, the world will be less stable, the economic growth will decline and the search for sustainable solutions may take a long time, while mistakes will be paid with waste or resources, of time and, at worst of all, of human lives.

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The technological process represented by the 4th industrial revolution has started and has the potential to develop and expand exponentially. It can offer solutions for the demands of energy and raw materials, it may find cures for all diseases and it may allow for the full development of human potential. But it can also lead to a global control of the individuals, to redundancy of the majority of human labour and to an enormous challenge represented by the need to redefine the values, roles and mechanisms for the daily functioning of the human society.

There is yet another scenario, we may call it the worst case scenario: that in which the geopolitical process uses/confiscate the results of the technological one. Given the contemporary potential of science and technology such a scenario will involve a lot of tensions, conflicts and instability that may end only when a new clear balance of power would be re-established, irrespective of the costs.

Having in view these considerations one may say that the contemporary period carries the most promising opportunities ever known to humankind, but, at the same time, risks which are higher than ever. And it is our perception that the probability of manifestation is higher for risks than for opportunities.

What will happen first in the coming months? Political decisions that may lead to conflicts or at best to a return to old style bilateral relations? Or the capability based on artificial intelligence to know and simulate potential paths or directions for the world economy so that we can anticipate and avoid dangerous options? Will humankind be able to simulate options in a virtual reality or are we at risk to learn only by doing (and thus exposing ourselves to numerous perils)?

In our view the merit of asking these questions is that this may generate new questions, useful answers or at least it may raise awareness. And the more aware we are, the more chances we have for a better and sustainable world.

Conclusions - Challenges for Romania

The race towards the future between the outcomes of geopolitics and technology has specific challenges for Romania due to a number of characteristics of the Romanian economy and society after 27 years since the change of the system from a centrally planned economy to a market economy. Among these characteristics we can enumerate:

• Romania has the vast majority of its economic relations with European Union member countries although the European Union represents only about 17 % of world gross product measured at PPP and only about 7 % of world population;

• Romania relies on external intervention for defending its borders, option that implied the massive reduction of its own defence capabilities. A shift towards developing more domestic military capabilities is under consideration but this new approach is in its early days;

• Romania has opted for a significant decline of the role of state in economy. The impact of this option on the maintenance and development of infrastructure of all sorts is yet to be understood and evaluated;

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The Race towards the Future: Geopolitics versus Technology. Implications for Romania

• Romania has a rather limited participation of domestic capital companies in the economy not to mention a very limited participation of the Romanian companies abroad;

• Romania has not been consistent in designing strategies, in planning and implementing them, even in sectors like infrastructure, education, health, science.

• Romania has allocated very few resources for research – innovation and development and it is therefore disadvantaged at the start of the 4th industrial revolution.

From the geopolitical point of view, the return to a major role played by the state entities as well as the perceived new foreign policy of the US which seems to be less interventionist and more transactional requires Romania to rethink its domestic and foreign policy, keeping existing partnerships but relying more on its own resources and strategies.

From this perspective a key resource Romania should concentrate on, in our opinion, is the human resource. Providing for a long term strategy that will allow for an education system better and more adapted to the realities of the 21st century, for better health services and for a much better research and development environment are mandatory in order to be competitive and prosperous.

Romania should also take into account the process of rethinking and redesigning of the European Union which is now well underway. This process indicate some trends towards the re-nationalization of some policies and towards the diminishing of the EU funding in the post-2020 period, at the same time with the distribution of community funds in a much more competitive way.

At the same time, given the large scale implications of the 4th industrial revolution Romania should define (using in an efficient and intelligent way its own resources) a sustainable and effective development strategy, based on science and technology, in all fields of activity. This strategy should include in a coherent and consistent manner a number of key factors that belong to long time neglected sectors: education, research-development-innovation as well as industry.

The world economy is changing and Romania, as well as all other countries, needs to make decisions in order to adapt to the new realities. These decisions need to be coherent and consistent and they should provide for defining and implementing of a firm and clear development strategy at least until 2030 and recommended until 2050. The positive part of the situation is that today’s world has all the knowledge and the instruments that make such a strategy possible.

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REFERENCES:

• Anthony, S., (2016), Transistors will stop shrinking in 2021, but Moore’s law will live on, Ars Technica, July 25, 2016, at page https://arstechnica.com/gadgets/2016/07/itrs-roadmap-2021-moores-law/

• Bell, D., (1965), The Study of the Future, National Affairs, No.1 – Fall 1965, at page http://www.nationalaffairs.com/doclib/20080514_issue1thestudyofthe.pdf

• Foster, P., (2017), Jean Claude-Juncker’s blueprint for Europe: EU could give up dream of political union and be ‘nothing but the single market’, The Telegraph, March 1, 2017, at page http://www.telegraph.co.uk/news/2017/03/01/revealed-jean-claude-junckers-five-scenarios-future-europe/

• Fukuyama, F. (1992), The end of history and the last of man, The Free Press, Macmillan Inc., New York.

• Javelosa, J., (2017), Bill Gates: The World Isn’t Ready for Universal Basic Income Now, But We Will be Soon, February 28, 2017, at page https://futurism.com/4-bill-gates-thinks-countries-arent-ready-for-basic-income-yet/

• Hunt, D. (2017), ‘We need a defence union!’ Guy Verhofstadt admits he wants a ‘United States of Europe’, 31 January, 2017, at page http://www.express.co.uk/news/uk/761175/Guy-Verhofstadt-backs-EU-army

• Khanna, P., (2016), Connectography: Mapping the Future of Global Civilization, Random House

• Krist, B., (2014), ISDS: A Sticky Issue in Both the TPP and TTIP , Washington International Trade Association, 31 July, 2014, at page http://americastradepolicy.com/isds-a-sticky-issue-in-both-the-tpp-and-ttip/#.WLsXfm-GPIU

• Marr, B., (2016), Why Everyone Must Get Ready For The 4th Industrial Revolution, The Forbes, April 5, 2016

• Oxfarm International (2017), An Economy for the 99%, Briefing Paper, January 2017• Reding, V., (2012), Why we need a United States of Europe now, European

Commission, Speech 12/796 • Schwab, K. (2016), The Fourth Industrial Revolution: what it means, how to respond,

World Economic Forum, Global Agenda/Fourth Industrial Revolution, at page https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/.

• UNESCO Institute of Statistics, (2013), Adult and Youth Literacy - National, regional and global trends for the period 1985-2015, Montreal, Canada

• World Economic Forum, (2016), The Future of Jobs, January 2016, Davos

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Can EU Act as a Democracy Promoter? Analysing the Democratization Demand and Supply in Turkey-EU Relations

Çiğdem Üstün1

Abstract: The EU’s role to assist Turkey in its democratization efforts has been debated during Turkey’s candidacy. However, in the second decade of the 21st century, this role of the EU lost its visibility while Turkey seemed to lose its interest in reform movements. This paper, inspired by Pevehouse, defines the EU as a supplier of democratization mechanisms and Turkey as an actor in need. Although lack of enthusiasm and disengagement have come to characterize Turkey-EU relations, this study aims to demonstrate that there are differences between the governing and the opposition actors’ views on the EU and its role in the democratization of Turkey. Data collected from the speeches of opposition parties’ parliamentarians between 1 January 2011 and 31 August 2016 demonstrates the similarities observed in these parties’ concerns regarding democratic practices and the perception of the EU as an actor strengthening democracy, while indicating that the EU, as a supplier, overlooked their concerns during the process.

Keywords: Democratization, European Union, parliamentary debates, opposition parties

Introduction

Turkey’s European Union (EU) membership bid has been seen as an important anchor on its way to becoming a more liberal democracy. Even to start the negotiations to become a member required democratization reforms, amendments to existing regulations and legislation. The membership of Republic of Cyprus to the Union, the negative attitude towards Turkey’s membership displayed by some Member States, i.e. France, the destructive impact of the economic crisis on the EU, the lack of will to use conditionality on Turkey, and, last but not least, Turkey’s waning interest to become a member of the EU resulted in slowing down these democratization steps.

This paper is inspired by Pevehouse’s terminology on international organizations’ role in assisting democratization efforts by supplying causal mechanisms. In this case, the EU is the main democracy promoter; through its instruments it is the supplier, while the demanding actor is Turkey. However, it has been observed that on the demand side Turkish government policies and the speeches of the President clearly did not prioritize EU membership. This disengagement reflected on Turkey’s democratic reform movements and some of the literature even started to define the regime in Turkey as competitive authoritarianism. (Esen

1 Çiğdem Üstün is Associate Professor in EU Studies and is affiliated with the Association of Development, Migration and Social Policies (DEMIS), in Izmir, Turkey. Her research interests concentrate on EU-Turkey relations and neighbourhood policies. Email: cigdem.ustun@gmail.com

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and Gümüşçü 2016) (Özbudun 2015). In 2016, one of the main discussion topics in Turkey-EU relations has been the EU-Turkey Statement on 18 March 2016, a.k.a the EU-Turkey Refugee Deal. An optimistic perspective defends this deal, since it initiated talks between Turkey and the EU; the pessimistic perspective argues that the deal would not take Turkey-EU relations further and would not have a positive impact on Turkey’s reforms. The process of negotiations and the deal itself had been criticized internationally (Şenyuva and Üstün 2015), since it disregarded the EU’s own principles and it has been a tool for the EU in implementing its short-term policies, lacking any long-term perspective on strengthening ties with Turkey. Thus, neither the negotiations nor the deal highlighted the conditionality principle in EU-Turkey relations. While the supply side lacked serious interest in democracy promotion, one can still observe the will of the opposition parties at the Turkish Grand National Assembly (TGNA) to work with the EU since it is [still] referred to as the anchor for Turkey’s democratization and an exemplary model to promote democracy internationally. This paper, noting the differences between the government’s position and the opposition’s views, separates the demand side into two. The paper analyses the TGNA minutes between 2011 and 2016. In the 2011 general election, Adalet ve Kalkınma Partisi (AKP) won 49.83% of the total votes and got 341 of the seats (out of a total of 550) while Cumhuriyet Halk Partisi (CHP) won 25.98% of the votes and 112 of the seats and Milliyetçi Hareket Partisi (MHP) got 13.01% of the votes and 71 seats in the parliament (Gümrük Oyları Dahil Türkiye Geneli Seçim Sonuçları 2011). There were more than 30 independent parliamentarians who won seats in this election. This was AKP’s biggest electoral win since 2002. In that year, AKP’s share of votes was 34.28% and in the 2007 elections its share was up to 46.58%. The 2011 election gave almost half of the popular support to AKP and 2010 was the last year that the Turkish parliament accepted extensive reform packages in line with the EU membership goal. Thus, the beginning of 2011 to the end of August of 2016, just after the failed coup attempt, is taken as the time frame in analysing opposition parties’ speeches in relation with the EU and democratic practices.

The first part of the paper summarizes the literature on the international organizations’ role as a democracy promoter. The second part demonstrates the positive impact of the EU on Turkey starting from the Helsinki Summit in 1999, where Turkey’s position was elevated to candidacy. Since the relations between Turkey and the EU are not considered to be exemplary, the golden years of Europeanization and democratization in this perspective seem to be forgotten. This part of the paper aims to remind all of the potential of the EU to supply the mechanisms that had pushed Turkey to reform itself.

The following section dwells upon the demand side of the relationship from 2011 to 2016. In this part, the article divides the demand into two: the government and the opposition, since their attitudes towards the democratization reforms, on EU-Turkey relations, expectations from the EU, and priorities are distinct from each other. Although this part provides the rhetoric from the government side on the relations with the EU, the main aim is to demonstrate the similarities and differences of the opposition parties regarding their expectations and priorities on EU-Turkey relations in relation to democratization by analysing opposition party members’ speeches between 2011 and 2016.

In the conclusion, the paper shows that the demanding actor’s opposition still holds a strong dedication towards reform, although public opinion polls and the daily rhetoric of Turkish domestic politics indicate otherwise.

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International Organizations as democracy promoters

The role of international organizations in assisting democratic transition and consolidation has been debated broadly. Although there is wide literature on democratization analysing the reasons and the ways to establish a democratic system (such as social conflicts, actors not being able to impose their rule, the need to have economically developed societies with a more advanced division of labour), for the purposes of this paper the possible impact of international organizations on domestic actors is the main interest of the study. (Gleditsch and Ward 2006)

The literature also varies in defining democracy and the democratization process, since there is a constant debate on utilizing solely political terms or the need to refer to the social and economic processes together (Burnell 2005). The debate on the influence of external actors on democratization has been explained through structures and actors2, focusing on issues including political and economic interdependence, geographical proximity, domestic political elites, power asymmetries, the impact of international events and processes. Therefore, it would be wrong to argue that there is only one way to explain the democratization process or the impact of the international organizations in this process.

If one aims not only for a representative democracy (where citizens have the opportunity to choose competing agendas and hold decision makers accountable for their actions), but also a participatory or even deliberative democracy (in which exclusion and marginalization are avoided), access to reliable and relevant information is possible (Bexell, Tallberg ve Uhlin 2010), and the significance of opposition groups and their elites becomes a subject of democracy promotion. In order to achieve a liberal democratic system where political and civil pluralism are promoted by the international organizations, one of the approaches present in the dedicated literature argues in favour of supporting groups outside the power structure who have the will and capability to challenge the government’s power (Burnell 2005). The cooperation between external actors, domestic opposition, and international institutions is assumed to create opportunities for democratic mobilization and life-saving protection to domestic activists (Schmitz 2004).

According to Pevehouse, diplomatic and economic pressures, and international organizations’ membership can force countries to liberalize and international organizations

2 For detailed analysis see: E.N. Muller, “Dependent Economic Development, Aid Dependence on the United States and Democratic Breakdown in the Third World”, International Studies Quarterly, 29, 1985, pp. 445-469; L. Whitehead, Transitions from Authoritarian Rule: Comparative Perspectives, John Hopkins University Press, Baltimore Maryland, 1986; J.S. Kopstein and D.A. Reilly, “Geographic Diffusion and the Transformation of the Post-Communist World”, World Politics, 53(1), 2000, pp 1-37; S. Levitsky and L.A. Way, “Linkage, Leverage and the Post-Communist Divide”, East European Politics and Societies, 21(1), 2007, pp. 48-66; D. Brinks and M. Coppedge, “Diffusion is No Illusion: Neighbour Emulation in the Third Wave of Democracy”, Comparative Political Studies, 39(4), 2006, pp. 463-489; D. Berg-Schlosser, “Neighbourhood Effects of Democratization in Europe”, Taiwan Journal of Democracy, 4(2), 2008, pp. 29-45; R.D. Putnam, “Diplomacy and Domestic Politics: the Logic of Two-Level Games”, International Organization, 42(3), 1988, pp. 427-460; H.V. Milner, Interests, Institutions and Information: Domestic Politics and International Relations, Princeton University Press, Princeton, New Jersey, 1997; T. Risse, S.C. Ropp and K. Sikkink (eds.), the Power of Human Rights: International Norms and Domestic Change, Cambridge University Press, Cambridge; H. Yılmaz, “External-Internal Linkages in Democratization: Developing an Open Model of Democratic Change”, Democratization, 9(2), 2002, pp. 67-84; F. Schimmelfennig and U. Sedelmeier (eds.), The Europeanization of Central and Eastern Europe, Cornell University Press, Ithaca, NY, 2005.

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may lower the risks that domestic activists face during the democratization process. Through the principle of conditionality associated to the membership perspective and the enforcement of those respective conditions, democratic international organizations can supply the causal mechanisms to assist the democratization effort (Pevehouse 2002). However, it is crucial that the supply side should be vigilant in its commitments to promote democracy. Levitsky and Way summarize the relationship between international organizations and domestic actors by stating that linkage to the West would create constituencies for adherence to international norms and may even shape voter preferences, since they would support integration (Levitsy and Way 2005) with democracy promoting organizations.

In this literature, one can see reference to the soft power of these international organizations, as they can put pressure on authoritarian governments. The EU has been perceived as the only fully functioning international organization, although it should be admitted that it is a unique type of polity, which holds this kind of ability around its borders through its membership carrot. The EU has been proud that it does not only provide support for civil society, but can also put pressure on governments and opposition parties through its conditionality clause. One should also emphasize that for international support to be successful in fuelling the democratization process, there must be a sympathetic ground among the citizens at the domestic level. This will be called the “demand” of the domestic actors.

Was the EU a democratizing force for Turkey?

Since 1999, when the EU elevated Turkey’s status to candidate state, the necessary steps to start the negotiations were taken and to become a negotiating candidate country has been the main aim. After the Helsinki Summit, political, administrative and judicial reforms were speeded up, and the government was keen on taking necessary steps in order to improve respect for human rights, democracy and rule of law. Titles which were prioritized in this regard were: freedoms of thought, expression and association, the fight against torture, training of public service personnel on human rights issues, improving the judiciary, measures against discrimination, and alleviating regional disparities (Baykal 2002). In 2001, constitutional amendments were made in line with these priorities and the 2001 Progress Report stated that “The constitutional amendments adopted by the Turkish Parliament on 3 October 2001 are a significant step towards strengthening guarantees in the field of human rights and fundamental freedoms and limiting capital punishment. The amendments narrow the grounds for limiting such fundamental freedoms as the freedom of expression and dissemination of thought, freedom of the press and freedom of association” (Commission 2001).

Following this report, in 2002, there were three more reform packages which demonstrated “the determination of the majority of Turkey’s political leaders to move towards further alignment with the values and standards of the European Union” (Commission 2002). The 2003 Progress Report showed appreciation of Turkey’s efforts: ‘Turkish government has shown great determination in accelerating the pace of reforms, which have brought far-reaching changes to the political and legal system” (Commission 2003) and in 2005 Turkey officially opened the accession negotiations with the EU.

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Initiation of negotiations was highly welcomed by the Government, media, civil society organizations and opposition parties in general, with the exception of MHP. The front page of Milliyet, a mainstream daily newspaper, was illustrated with EU stars and its headline read, “New Europe New Turkey” (Milliyet 2005). Daily newspaper Sabah highlighted the statements made by (former President) Abdullah Gül: “we will bring the international standards to Turkey” (Dünya için önemli adım 2005). In the parliament, a day after the start of the negotiations with the EU, Yaşar Yakış, AKP member and former foreign affairs minister, said “it has been the most important step towards the accession process and we see this process as the most important modernization project since the establishment of the Republic. As a parliament, which achieved this, we should be very proud and happy” (Yakış 2005). The public opinion polls showed that public support for EU membership was 59% in 2005 (Commission 2005) and 54% in 2006 (Commission 2006). CHP Vice-Chair at the time, Onur Öymen, said that “Turkey should not expect the accession negotiations to start at the beginning of 2005, although if it happens it would be a good thing” (CHP: AB’de 2005’i beklemeyin 2004). After the start of the accession negotiations, in October 2005, there were criticisms from CHP regarding mainly the Cyprus question. However, these criticisms did not suggest an attitude against the membership since the CHP has been renowned for its support of the EU process. Before the 2007 elections, CHP’s electoral declaration also stated that the party will speed up the integration efforts to the EU (Dizdaroğlu 2007).

After the negotiations started, although the process did not speed up as it should have, still the EU membership and reforms were on the agenda. As the progress reports suggest, the Parliament passed laws regarding the political criteria (Commission 2006), and they had positive consequences on the execution of ECHR judgements (Commission 2007). However, the decision of the Council in 2006 (on not opening eight of the negotiating chapters related to Cyprus and not closing any of the chapters until Turkey implements the Additional Protocol to the Association Agreement), debates on the Mediterranean Union (proposed by former French President Nicolas Sarkozy) and German Chancellor’s Angela Merkel infamous interview with Deutsche Welle, in which she argued that “a privileged partnership is a way to keep close ties between Turkey and the EU” (İnal and Yeğenoğlu 2005) exacerbated the negative attitudes towards Turkey’s full Union membership. It has been observed that since the French and Cypriot vetoes on the opening of chapters, Turkish efforts in reforms to be undertaken to guarantee its membership decreased over the years.

Since 2008, the progress reports demonstrated a slowing down in reform processes and alignment to the EU criteria on the road to full membership. The constitutional referendum bringing changes in the composition of the Constitutional Court and the High Council of Judges and Public Prosecutors (HSYK), introducing an Ombudsman; narrowing down of the area of competence of military courts in favour of civilian courts; the strengthening of positive discrimination (affirmative action) in favour of women, children, the elderly, the disabled, and widows and children of war veterans; and the introduction of new rights, such as personal data protection, the removal of certain restrictions on the right to travel abroad and children’s rights (Özbudun 2012) took place in September 2010. This referendum has been a very divisive one, since the opposition parties argued that the constitutional amendments were increasing the power of the government, establishing a tyranny of the majority, while ignoring the minorities and the opposition. Some of the opposing activists argued that the

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changes have opened the way for a presidential system in Turkey without creating a strong checks and balances system (Neden Hayır Diyorlar 2010).

The Progress Report in 2011 declared “a new composition of the High Council that is more pluralistic and representative of the judiciary as a whole. Sixteen of its judicial full members (out of twenty-two) and all twelve substitutes are now elected directly by judicial bodies’ (Commission 2011). However, the opposition parties and various activists were strongly against this kind of judgment. CHP argued that this amendment would only bring more partisan judges into the judiciary system (Referandumla Değişen Anayasa Maddeleri 2010), MHP protested, since these changes would mean politicization of the judiciary system, and it has also been critical of the Ombudsman, by arguing that this new institution would be utilized as a tool to recruit AKP supporters only (MHP 2007).

Regarding the fundamental rights, Turkey has been criticized in the progress reports, i.e. 2012 Report stated that “There has been very limited progress as regards fundamental rights” (Commission 2012). The 2014 Report reads that “legislation adopted in the area of judiciary raised serious concerns as regards judicial independence and impartiality, separation of powers and rule of law” while the internet bans were perceived as the measures limiting the freedom of expression (Commission 2014). Thus, it can be argued that since 2014, the tone of the EU on the progress of Turkey in meeting the democratic values has been toughened. However, in 2015, the publication of the Progress Report was delayed due to the negotiations on the flow of migrants. The statement on refugees, in March 2016, foresaw a one-for-one principle, meaning all irregular migrants crossing from Turkey into the Greek islands will be returned to Turkey; and for every Syrian returned to Turkey from the Greek islands, another Syrian will be resettled from Turkey to the EU. As part of the deal, a significant financial support (up to 6 billion EUR) was promised to Turkey, and accelerated implementation of Turkey’s roadmap for visa liberalization; however, only the budgetary chapter, 33, was accepted to be negotiated. This delay has been criticized vastly by democracy supporters. The media outlet Financial Times reported “The move [delay] has been hotly debated for weeks because a delay appears to favour the party of Recep Tayyip Erdoğan, Turkey’s president, whose authoritarian tendencies were a deep concern for the EU until the migration crisis blew up”. (Barker and Wagstyl 2015). The Atatürk Society of America published an open letter stating that “We do not want to believe that the EU is willing to trade its own founding principles over untrustworthy promises of an autocrat” (Atatürk Society of America 2015). Al-Monitor wrote “…the biggest shame lies with Juncker and his declaration that the EU withheld a report in order to improve Erdogan’s chances in the Nov. 1 election” (Mortimer 2016).

Although 2015 and 2016 progress reports emphasized the backsliding in fundamental rights, democratic institutions and rule of law, the lack of vigilance at the supply side of the democratization process decreased the effect of EU’s conditionality on Turkey. The 2015 report stated that the pace of reforms had slowed down, the independence of the judiciary and the principle of separation of powers had been undermined (Commission 2015). The 2016 report was one of the toughest reports published by the EU, drawing attention to the detentions and arrests of several HDP members of Parliament, the lack of enforcement of rights stemming from the European Convention on Human Rights, changes in the structures and composition of high courts which are not in line with European standards, arbitrary

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application of the law having negative impact on freedom of expression, freedom of assembly and freedom of the press (Commission 2016).

Demand in Turkey for EU to act as a democratizing force

On the demand side, the opposition parties’ and the government party’s positions on the EU are distinct from each other. Although AKP governments had been active in implementing the reforms with an aim to start the negotiations, the enthusiasm regarding the membership and democratization reforms gradually faded away as years passed by. After the publication of the EU-Turkey Statement on refugees, there has been an enthusiasm observed regarding visa liberalization. The statement expressed that “the fulfilment of the visa liberalisation roadmap will be accelerated vis-à-vis all participating Member States with a view to lifting the visa requirements for Turkish citizens at the latest by the end of June 2016, provided that all benchmarks have been met’ (European Council 2016). The debates on the deal in the public sphere lacked the details of the benchmarks, in total 72, including revising legislation and practices on terrorism in line with European standards (European Commission 2016). In May 2016, President Recep Tayyip Erdoğan reacted to the changes asked by the EU in legislation on terrorism by stating that “We’ll go our way, you go yours”, (BBC Turkish 2016). Ömer Çelik in an interview said that Turkey had survived “a coup attempt by a terrorist organisation”, adding: “We have the PKK, Daesh (Isis) and other groups launching attacks so it would not be intelligent to make an amendment in the terrorism law at this point” (Pitel and Brunsden 2016). In another speech after the European Parliament’s recommendation on freezing relations with Turkey, President Erdoğan once again reminded the EU of the refugee agreement and said “If you go any further, these border gates will be opened. Neither me nor my people will be affected by these empty threats” (Weise ve Foster 2016). In 2013, then Prime Minister Erdoğan had criticized the EU’s attitude towards Turkey by saying “the EU has strategic importance, but how much? After a certain point, we will decide as well. We are continuing with patience, but of course we will put an end. Is EU indispensable for us? No. If they do not take us in, it is not end of the world. We continue our way with stability” (Ergin 2013). Similar speeches have been given by former PM Davutoğlu (Başbakan Davutoğlu’ndan AB’ye vize resti 2016) and Minister of Foreign Affairs Çavuşoğlu on other occasions, i.e. “visa liberalization is not a favour. This is to end a double standard and injustice. Even citizens of countries which are not candidates got this” (Erdoğan’ın ardından Çavuşoğlu da rest çekti: Başımıza kakmayın 2016).

The literature argues that the rising support for the AKP made it unnecessary to utilize the EU in domestic politics as was the case in 2002 when AKP came to power (Uğuz and Saygılı 2016). Especially after the membership of Cyprus in 2004 and the aforementioned political quarrels, the EU seemed less attractive to Turkey. In addition to these quarrels, the Eurozone crisis affected the Union dramatically, forcing it to adopt more introverted policies. While the EU was hit by the economic crisis, the diversification efforts of Turkey in terms of markets helped the country at the time. This illusion of economic well-being decreased the enthusiasm towards the Union in general. Keyman and Düzgit argue that Euroscepticism in Turkey after 2005 was shifted to the “weak EU-strong Turkey” axis (Keyman and Düzgit 2013). This understanding found its place in the public as well. Eurobarometer surveys demonstrate that in 2004, 62% (European Commission 2005) of the respondents

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supported the future membership of Turkey to the EU; in 2016, support had decreased to 39% (European Commission 2016).

Although there is a decrease in support for EU membership at the governmental level and among the public, the parliamentary debates demonstrate an interest in the relations with the EU as a way to improve democratic practices among the two opposition parties, CHP and BDP/HDP3. The third opposition party, MHP, is the least enthusiastic party as regards the EU; however, its parliamentarians still refer to the relations with the EU or EU norms and values when discussing the way to achieve a more democratic country. Historically, MHP’s position towards the EU has been sceptical and it has been argued that “EU demands for minority rights constitute a direct threat to the power of the Turkish state and the unity of the nation by continuing the centuries-old Western strategy of dividing the Turkish nation by creating ‘artificial minorities’, taking them under Western patronage and provoking them to rebel against the state” (H. Yılmaz 2011).

Opposition parties in the Parliament as demanding actors

This section dwells upon the opposition parties’ speeches between 1 January 2011 and 31 August 2016, regarding relations with the EU and improving democratic practices. The speeches of parliamentarians from CHP, MHP, BDP/HDP opposition parties are included in the analysis. When one looks at these speeches giving reference to the EU in relation to problems faced in democratic practices, it has been seen that CHP and BDP/HDP members were the most vocal in the Parliament, while MHP members’ participation in the debates were limited. The CHP and BDP/HDP parliamentarians’ speeches main points show similarities with each other in terms of the steps that should be taken in strengthening the democratic practices in the country. In terms of rhetoric, these two parties are also closer to each other than CHP and MHP.

MHP parliamentarians’ speeches in 2011 drew attention to the freedom of speech and press, detention of journalists (Türkkan 2012), independence of the judiciary (Çelik 2011), the need for an inclusive constitution revision process (Korkmaz 2011) in reference to the EU and democracy. In 2012, MHP parliamentarians criticized the judicial regulations since they were not able to meet the standards set in the EU acquis (Adan 2012), while Tuğrul Türkeş, who became a member of AKP in November 2015 after he was expelled from MHP, associated EU membership with the democratization in Turkey (Türkeş 2012). In 2013, once again MHP criticized the judicial reforms and claimed that the new regulations implemented are far away from the EU acquis. (Bal 2013) In 2014, MHP continued to give reference to the EU acquis and the need for steps taken in judicial reforms to meet the European standards; in 2015, we could observe a decline in the number of speeches on these issues. During the

3 This paper uses BDP/HDP as the acronym to specify the Kurdish parties since the names of the parties have been changed in the period of this analysis. In 2007 and 2011 elections, Barış ve Demokrasi Partisi, due to the 10% threshold in the electoral system entered into the elections with an independent candidate block which gave them the opportunity to form a group in TGNA. In June 2015, Halkların Demokratik Partisi, decided to enter the elections as a party and got 13.12% of the votes. In the November 2015 elections, their support decreased to 10.76% against the backdrop of the terrorist attacks of the PKK and the rising tensions not only in the Southeast Anatolia, but all around the country.

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2015 debates, only three speeches were delivered referring to the EU, judicial reform needs and the standards. In 2016, criticism of the EU increased from MHP benches, accusing the EU of supporting terror (Akçay 2016); harmonization with the EU education systems were seen as damaging due to the lack of respect of Turkish values (Depboylu 2016) and EU reports were seen as ways to interfere with domestic politics in trying to humiliate the President, Recep Tayyip Erdoğan (Koçdemir 2016).

The minutes demonstrate that BDP/HDP’s and CHP’s talking points show similarities regarding the EU process and issues being debated in the parliament. Both parties emphasized the importance of EU norms and values and the need to align with them. CHP parliamentarian Namık Havutça clearly stated that Turkey’s direction should be reaching the contemporary civilization level, EU norms and high democracy standards (Havutça 2014). İdris Balüken reminded the parliament that retreating from EU norms means retreating from democratic rule of law (Balüken 2014). The data also shows that independence of judiciary is another common concern of these two parties. In 2016, CHP parliamentarian Zeynel Emre reiterated that the 2015 Progress Report warns Turkey about political pressure on the courts and, in his speech on 29 June 2016, Mithat Sancar gives reference to the Venice Commission together with the 2015 Progress Report regarding concerns about the independence of the judiciary in Turkey. (Sancar 2016) Freedoms of press and expression appear as two other debating topics of CHP and BDP/HDP parliamentarians in reference to the EU accession process. Ekşi, who was a journalist before becoming a CHP parliamentarian, emphasized the importance of the free press in a number of speeches in the parliament, giving references to the EU Progress Reports and the detention of journalists (Ekşi 2011, 2012).

Since 2011, minority rights have been on the agenda of CHP. Both CHP and BDP/HDP parliamentarians raised the problems faced by Roma people and HDP specifically raised the Kurdish problems i.e. education rights and decentralization as part of their party raison d’etre. It should be said that from the CHP parliamentarians these issues are not vocalized in the parliament speeches. Tütüncü refers to the rights of the minorities, specifically Roma, and has accused the Government of pretending to introduce legislation to comply with the EU norms, but, in reality, to continue the discrimination against the Roma people (Tütüncü 2011). Long pre-trial detentions, the importance of opening Chapters 23 and 24, freedom of communication and internet bans, secularism, excessive use of police force and EU’s role as an anchor for Turkey have been other topics that both parties’ parliamentarians raised their voices on. In 2011, Hamzaçebi, CHP parliamentarian, said that “Out of 128 thousand people in the prisons, 55 thousand are not convicted. This fact is not suitable for a country aiming to be an EU member state in the 21st century” (Hamzaçebi 2011). On his part, Mengü highlighted the importance of complying with EU regulations in audio-visual media services in order to prevent arbitrary practices regarding the broadcasting activities of opposition TV channels (Mengü 2011). In 2012, Aydoğan referred to the EU as “a democratic culture and an entity aiming to spread democracy around”’ (Aydoğan 2012). Kaplan in his speech on 20 June 2012 focused on Chapters 23 and 24 regarding the fundamental rights and judiciary, while Buldan talked about freedom of the press and international agreements, including the responsibilities under the EU membership in 2011 (Buldan 2011). Respect for the Copenhagen criteria, internalization of EU norms and values have been brought into the debates in TGNA by BDP group members. In 2012, CHP parliamentarian Erdemir read

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a letter to the PM consisting of 12 points on suggestions to overcome structural problems in Turkey. One of these points focused on the importance of the EU not only for economic purposes, but also for democracy and human development of the country (Erdemir 2012). Korutürk outlined the need for democracy, rule of law, respect for human rights, fundamental freedoms, gender equality, workers’ rights and, more importantly, secularism on the way to EU membership (Korutürk 2012). CHP parliamentarians in 2016 focused on Chapters 23 and 24. Sibel Özdemir’s speech emphasized these chapters’ importance in order to prevent political pressures on media and protect the freedoms of the press and expression (Özdemir 2016).

After analysing debates in the TGNA, we come to realize that in 2016 the debates on democratization, rule of law and EU references have been the highest since 2011. CHP and HDP parliamentarians’ speeches emphasized the independence of judiciary, rule of law, freedom of the press, respect for fundamental human rights, protection of religious freedoms, freedom of expression, the need for good governance, protection of secularism, transparency, and gender equality, and both of the parties criticized the EU in delaying its progress report in 2015. The EU’s decision to delay the report until after the general elections in Turkey on 1 November 2015 has been criticized widely, not only in the Turkish Parliament, but in the international media and among the civil society organizations. Leaked transcripts of a meeting between President Recep Tayyip Erdoğan and Juncker and Tusk raised questions regarding the delay in relation to the 2016 refugee deal between Turkey and the EU. These questions have found their place in the debates at the TGNA. On 20 April 2016, HDP parliamentarian Ahmet Yıldırım said “this delay harmed the dignity of the EU, in the name of protection of this government which is in power for 13 years” (Yıldırım 2016). On 1 March 2016, CHP parliamentarian Haluk Pekşen stated that “this delay shows that there is a negotiation between the government and the EU and this is the shame of the EU. Where is the rule of law?” (Pekşen 2016).

Among three opposition parties, BDP/HDP has been the only one highlighting decentralization as a policy to achieve EU norms in democratization. This rhetoric found no supporters on CHP and MHP benches. In 2011, Nazmi Gür’s speech pointed out that if EU membership is to be pursued, this can be done through strong local governments, emphasizing the importance of reaching the level of EU standards: “if we aim to be an EU member state then we need to strengthen local administrations, subsidiarity principle to strengthen democracy and endure a democratic Turkey” (Gür 2011). In 2012, it was argued that an inclusive democratization can be achieved through the decentralization (Balüken 2012) process and in 2014 the need to accept and implement the European Charter of Local Self Government is mentioned (Zozani 2014). The same demands from HDP benches continued in 2016. The other two distinctive points raised by HDP parliamentarians have been the rise in security oriented policies damaging freedoms, i.e. the security-freedom dilemma, and linking the EU membership to the peace process in Turkey. HDP member Filiz Kerestecioğlu Demir, in her speech in June 2016 says “Turkey can move forward on the way to the EU if the peace can be established in Turkey and democracy is provided” (Demir 2016).

The Gezi protests and the following conflicts with police forces in 2013 were also reflected in the parliamentary debates. Hasip Kaplan, from BDP, spoke on 19 June 2013 highlighting

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the importance of Chapters 23 and 24 regarding the freedom of assembly, judiciary reform, fundamental rights and the fight against discrimination, in order to prevent protests such as Gezi spreading across the country. (Kaplan 2013) CHP parliamentarian Ali Özgündüz pointed out the necessity to prevent excessive use of police force in social movements as a principle under the Copenhagen Criteria and as a part of the regulations of the European Court of Human Rights (Özgündüz 2013). In 2014, CHP member Nazım Havutça’s speech once again referred to these points, while Ali Haydar Öner said the “EU opened only 13 chapters. Where is the progress? During the Gezi Park protests their evaluation is very bad. What are they saying? Europe’s assessment is that civil society is not considered an important part of democracy and a legal stakeholder in Turkey” (Öner 2014).

Although the EU has been perceived as an important actor for Turkey to move forward in its democratization efforts, the opposition parties’ parliamentarians also criticized the EU after the failed coup attempt on 15 July 2016. As a democracy promoter, it was expected from the EU to react sooner to the attempted coup. Former President of the EP Martin Schulz visited Ankara only in September and his statement following this visit read:

I once again firmly and clearly condemn the attempted coup. The European Parliament’s support for democracy in Turkey remains unequivocal. I have paid tribute to the courage of Turkish citizens who took to the streets to defend democracy and derailed the plan of the plotters. It was their civic vigilance and the unity of Turkish political forces that stood up for democracy. Some paid the highest price for this: they deserve all our memory and gratitude (European Parliament 2016).

However, this was a rather late response to an attempted military coup which hit the parliament not only politically, but also physically. CHP parliamentarian Öztürk Yılmaz’s speech criticized the EU since it did not respond as strong and as fast as it should to the events of 15 July, but he also highlighted the importance of EU norms and values and its ability to criticize Turkey on protection of fundamental rights since Turkey is a negotiating country. (2016) MHP parliamentarians’ criticisms have been tougher, i.e. on 16 August 2016 Ruhi Ersoy says “Here, hypocrisy; the steps taken after the 15th July coup attempt, in fact junta, and indeed terrorist attempt have been perceived as violations of human rights by the West. Yes, EU can warn Turkey, but we would like to see the EU warn the terrorists and support democracy as well” (Ersoy 2016).

Conclusion

The data collected from the speeches of opposition party members in the parliament between 1 January 2011 and 31 August 2016, demonstrates that CHP and BDP/HDP parties have commonalities when they refer to democratization and relations with the EU. CHP supporters are known to be critical of Kurdish demands regarding local governments and educational rights; therefore, one cannot see the support of CHP on these issues in Parliament debates. However, when it comes to the freedom of speech, assembly, press, independence of judiciary, and the separation of powers, their attitudes are similar to each other. In this framework, Chapters 23 and 24 are highlighted as crucial chapters to be opened in the negotiations.

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This data, while showing the similarities of opposition parties’ concerns on democratic practices and perception of the EU as an actor in strengthening democracy in the country, also demonstrates that the EU, as the supply side, overlooked concerns of these parties especially on the amendments regarding the judicial system. As the parliamentary debates have revealed, the opposition parties clearly oppose the changes, arguing the risk of politicization of the system. However, we see that the Progress Report of 2011 concluded that the new composition of the High Council was pluralistic and representative of the judiciary. Only in 2014 did the concerns of the opposition parties find their place in the Progress Report. As the literature suggests, the international organization aiming to supply the mechanisms for democratization needs to keep a vigilant eye on the developments in the country where it wishes to see democratic reforms. The EU policies towards Turkey, including the migration deal, removed the most important principle of the relations, the conditionality.

The high support for the main political party, the lack of incentives to further democratic reforms in relation to the EU, and the EU’s lack of vigilance as a supplier have created a gap in Turkey-EU relations. Nevertheless, two of the opposition parties in the Parliament still rely on the Union to move towards a strengthened democratic system. Since 2011, one can see an increasing trend in the parliamentary debates among CHP and BDP/HDP parliamentarians to give references to the EU as an anchor and a democratizing force. During the referendum debate in 2017, the gap between the president’s office, Government, and MHP and the EU continued to be visible. “No” campaigners, mainly CHP, HDP and opposition group among MHP voters, continued to give references to the need for democratic reforms. However, relations with the EU were not the main debating topic since the public opinion also showed negative tendencies when it came to closer relations with the EU. Further research may focus on the speeches of the “No” campaigners and the usage of relations with Europe as part of the campaign.

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ROMANIAN JOURNAL OF EUROPEAN AFFAIRS Vol. 17, No. 1, June 2017

European Integration of Ukraine: Tool for Internal Reform, Source of Problems or Pass Ticket to EU Membership?

Oleh Poshedin, Maryna Chulaievska1

Abstract: Despite the signing of the EU-Ukraine Association Agreement, there would seem to be no alternative to the European choice for Ukraine, given the current Russian aggression; there are different views on the objectives and results of the European integration of Ukraine. This article examines three of the most common points of view related to this process: European integration as a tool for internal transformation in Ukraine; European integration as a pass ticket to the EU membership; European integration as a source of problems in Ukraine.

Keywords: Ukraine, European Union, European integration, Russia

Introduction

Ukraine’s intention to build relations with the EU in view of integration was first proclaimed in the Decree of the Verkhovna Rada of Ukraine on 2 July 1993 “On the main directions of the foreign policy of Ukraine” (1993). The document noted that the long-term goal of Ukrainian foreign policy is the membership of Ukraine in the European Community on the condition that it will not harm its national interests.

The first legal basis of the relations between Ukraine and the EU was the Partnership and Cooperation Agreement signed on 14 June 1994 (entered into force on 1 March 1998). The agreement laid the foundation for the bilateral dialogue between Ukraine and the EU on political and sectoral levels, streamlined trade regime between the two sides on the basis of the GATT/WTO principles, defined the priorities of the adaptation of Ukrainian legislation to the norms and standards of the European Community (acquis communautaire) in certain sectors of the Ukrainian economy (1994).

1 Oleh Poshedin is an Associate Professor, Globalization, European Integration and National Security Management Department, National Academy of Public Administration, Office of the President of Ukraine. He served 32 years in the military, Colonel (rtd), PhD in History, author of over 70 scientific, methodical and journalistic papers. Research interests: International Relations, European Integration, Euro-Atlantic Security. E-mail: poshedino@gmail.com.Maryna Chulaievska is an Associate Professor, Globalization, European Integration and National Security Management Department, National Academy of Public Administration, Office of the President of Ukraine, Senior Training Fellow of EU “Assotiation4U” Project, PhD in Public Administration, author of over 30 scientific, methodical and journalistic papers. Research interests: Ukraine-EU Member States relations, Ukraine-EU relations development, EU common immigration policy, the free movement within EU, EU foreign policy, the Association Agreements system. E-mail: a4u.chulaievska@gmail.com.

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Within the framework of the Partnership and Cooperation Agreement the following priorities for cooperation between Ukraine and the EU were identified: energy, trade and investment, justice and home affairs, the approximation of Ukrainian legislation to the legislation of the European Union, environmental protection, transport sphere, cross-border cooperation, cooperation in science, technology and space.

Ukraine’s later course towards European integration was confirmed and developed in the Strategy of Ukraine’s integration into the EU which was approved by the Decree of the President of Ukraine in June 1998 and which identified the main priorities of the executive authorities for the period until 2007, during which the necessary preconditions had been created for Ukraine’s membership in the European Union (1998).

In September 2000, the President of Ukraine approved the program of Ukraine’s integration into the EU. It was expected that this program would be a major tool for the overall strategy of bringing Ukraine closer to the EU in all areas of cooperation: political, social, financial, economic, trade, scientific, educational, cultural and others (2000).

The parties developed and approved the EU-Ukraine Action Plan – (a bilateral political document) during a meeting of the Cooperation Council on 21 February 2005. This document allowed significantly expanded bilateral cooperation between Ukraine and the EU with a view to providing a new impetus to bilateral relations and to take into account the new conditions of cooperation, particularly in the context of the EU enlargement wave in 2004. The content of the Action Plan contained a list of precise commitments of Ukraine to strengthen democratic institutions, the fight against corruption, structural economic reforms and the development of cooperation with the EU in sectoral areas (2005). Among the key achievements in the development of relations within the Action Plan period were: granting Ukraine a market economy within the framework of the anti-dumping EU law status, granting Ukraine the right to adhere to foreign policy statements and EU positions, the conclusion of the Agreement on the facilitation of the issuance of visas (2007) and the Agreement on readmission of persons (2007), the extension to Ukraine of the European Investment Bank’s financing, and others.

In September 2008, at the Paris Summit, Ukraine and the EU reached a political agreement on the conclusion of a future agreement in the framework of the Association Agreement, to be built on the principles of political association and economic integration.

During the 15th EU-Ukraine Summit in Kyiv on 19 December 2011 the completion of negotiations on the future Association Agreement was announced, and on 30 March 2012 the text of the future Agreement was initialled by the heads of the negotiating teams of Ukraine and the EU. In 2014, the Association Agreement was signed (2014). The political part of the Agreement was signed on 21 March 2014 and the economic part was signed on 27 June. This was preceded by the tragic events of 2013–2014 which developed into the so-called “Euromaidan”, during which the Ukrainians defended their European aspirations.

At the same time, despite the signing of the EU-Ukraine Association Agreement, there would seem to be no alternative to the European choice for Ukraine in the context of the current Russian aggression; for many residents of Ukraine there does not yet exist an unambiguous answer to the question of what is the European integration for the state. The

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authors of the article, by virtue of their work, regularly take part in discussions on the topic: “What actually is the European integration of Ukraine: an instrument of internal reforms, a pass ticket to the EU membership, or a source of problems for our country?”. These are the questions that we try to answer in the present article.

1. The European integration policy as tool for internal transformation in Ukraine

The Association Agreement is the most important tool for internal reforms in Ukraine. Given the length of this document, it is not possible to analyse it in detail in the present article. Thus, we consider only some aspects of the Association Agreement, and how its implementation can affect the future development of Ukraine. The success of reforms in Ukraine depends on the reform of the public administration sector, i.e., improving the efficiency and effectiveness of public service. Adapting the regulatory norms of the EU will contribute to the improvement of public administration in Ukraine, primarily by upgrading the system of state regulation.

In the area of customs regulation, it is necessary to develop joint initiatives on import, export and transit operations, cooperation on the automation of customs and other trade procedures, exchange of information in order to develop common positions in relevant international organizations. The gradual approximation to the EU Customs legislation, as defined by the EU standards and international standards, will promote transparency and simplification of customs procedures, avoid discrimination, reduce the length of various customs procedures and so on.

The tax system must also undergo significant reform. Ukraine agrees to apply the principles of good governance in the tax area, in particular the principles of transparency, exchange of information and fair tax competition. The Association Agreement also provides for cooperation between Ukraine and the EU in the fight against tax fraud in both the private and public sector. The number of such offenses can be reduced dramatically by simplifying foreign trade relations between Ukraine and the EU, as foreign trade operations are one of the important mechanisms used for criminal activities. As the European Union single market provides for the free movement of people, goods and capital, the problem of tax fraud in the country is quite acute. Ukraine will introduce international standards of regulation and supervision in the financial services aimed to combat tax evasion and to improve cooperation with the EU in the fight against the smuggling of excisable goods.

In order to simplify the movement of capital, goods and services between Ukraine and the EU it will be necessary to establish rules that correspond with those in the EU single market. They need to pursue the abolition of restrictions on production, import, export, transit, re-export of goods, capital and services including: the technical, fiscal and physical aspects, combined with the removal of discrimination. The Association Agreement provides for the exchange of information, experience and best practices.

In the area of fiscal policy: the development of a medium-term budget forecasting/planning system; improvement of a program-target approach in the budget process and the analysis of efficiency and effectiveness in the implementation of budget programs; improving the exchange of experience and information on the planning and execution of the budget and the level of public debt.

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In the area of external audit: the implementation of standards and procedures of the International Organization of Supreme Audit Institutions, as well as the exchange of best practices in the field of EU external control and audit of public finances, with a special emphasis on the independence of the respective bodies of the EU and Ukraine.

In the area of public internal financial control: the further development of the system of public internal financial control through harmonization with internationally recognized standards and best practices of the European Union’s internal control and internal audit in government.

In the fight against fraud: improvement of methods aimed at ending fraud and corruption and preventing these destructive practices, in particular by boosting the cooperation between the relevant administrative authorities.

Ukraine and the EU must unite their efforts in order to ensure transparency in the area of public assistance. To this end, each party is to send the other an annual report on the total amount, types and the sectoral distribution of any public assistance which may affect trade. Prohibited are any forms of public assistance that distort competition and, with that in mind, the provided legal guidelines for public assistance should be compatible with European Union regulations.

In the area of public procurement, Ukraine will adapt legislation to regulate public contracts, contracts with utilities and infrastructure sectors, strengthening administrative capacity at all levels, including the bodies of appeal and control mechanisms. The introduction of the progressive electronic public procurement system ProZorro in Ukraine was an important step in this area and has become mandatory for all institutions that use taxpayers’ funds in August 2016.

Public institutions and enterprises of Ukraine spend up to 250 billion UAH (about € 8.7 billion) a year (ProZorro, 2016). Previously, all the requests for tenders were submitted in envelopes and the agreements took place in closed rooms, meaning that honest business had little chance to win any bid to get a public contract. Today, public procurement is made online. Anyone, including media representatives and regulatory authorities, can be virtually present in the procurement. An attempt to corrupt the tender immediately goes public. The system keeps a history of all changes and allows seeing the deleted documents. The public process of selecting the winner is clear. Of course, the corresponding reform of public procurement significantly narrows the field for the adoption of non-transparent, non-competitive solutions, and consequently reduces the chances of getting shadow income.

Overall, the impact of the Association Agreement on the development of public administration is public, transparent and legitimate, and the controlling influence of the EU becomes, in this case, an important factor of internal transformation in Ukraine.

It should be noted that cooperation in the economic sphere, which is provided by the Association Agreement, is not confined to certain industries or sectors of the economy, and is associated with other spheres of public life. Experts believe it will attract as best practices and regulation reforms in such areas as information society, audio-visual policy, healthcare, education, training and youth, culture, development of sports and physical culture and so on, along with the direct development of the relevant industries and sectors of the economy (Alexander Sushko, 2012).

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It is worth mentioning that the Association Agreement with the European Union devotes considerable attention to the environmental issues. Their relevance to Ukraine is beyond question (we need only recall the tragedy and the loss of life at the landfill near Lviv and the mass poisoning of people in Izmail, which occurred in 2016). The Association Agreement enables Ukraine to improve its environmental standards in the following areas: air quality, water quality and water management, waste management and resources, industrial pollution and so on. It should be noted that there are no transparent and clear procedures for environmental assessment of any economic activity in Ukraine. The Law on environmental impact assessment should fix this matter. It provides for the introduction in Ukraine of a European model for an environmental impact assessment procedure. Its rules are written in such a way as to mitigate corruption opportunities at every stage of the process. Most importantly, officials are denied contact with businesses (all the documentation in the review process shall be entered into publicly accessible registers of environmental impact assessment), and it requires mandatory reviews on any assessment which was adopted by an authority (Semerak, 2016).

The Association Agreement with the European Union provides for large-scale institutional and structural reforms. The fulfilment of obligations requires appropriate capabilities of public authorities to provide for competent civil servants.

In view of this, the need for civil service reform, which has been repeatedly stressed by European and national experts, is of particular relevance, since the adoption by Parliament of laws should ensure their implementation in practice, and the quality of the public service sector is a crucial condition here.

The European Union is currently one of the largest donors that supports the implementation of reforms in Ukraine in all sectors of public administration. The Centre for Adaptation of the Civil Service to the standards of the European Union was established on the foundation provided by the National Agency of Ukraine on Civil Service, which is the national coordinator for the implementation of European Institution Building Instruments Twinning, TAIEX, SIGMA and the projects of the Ukraine-EU Comprehensive Institution Building Programme.

EU assistance in the area of institutional development of the state creates additional opportunities for the implementation of important reforms in Ukraine. The EU offers Ukraine not only financial assistance, but is also ready to share its experience and expertise that will certainly contribute to the implementation of commitments made by Ukraine in accordance with the Association Agreement. Implementation of institutional development tools with the support of the European Union is a unique opportunity to accelerate and effectively implement compelling public administration reforms in Ukraine with the assistance of the best European practices.

In order to support Ukraine in the implementation of the Association Agreement of 10 April 2014 the Support Group for Ukraine has been established by the European Commission (2014). The Working Group is based on the EU-Ukraine Association Agenda (2014), which is a joint practical tool for training and promotes the full implementation of the Association Agreement. This document is the main mechanism for monitoring and evaluating the progress of Ukraine in the implementation of the Association Agreement, as

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well as monitoring and evaluating all the achievements of the goals of political association and economic integration.

Another important tool for internal transformation of Ukraine is the European Agenda for Reform (2014) which has been jointly developed by the Ukrainian Government, the European Commission and the European External Action Service. This document is not only about the smooth delivery of the EU support package, but it encompasses a wide-ranging set of measures that reflect the priorities of the Ukrainian Government and the expectations of the Ukrainian people (assistance to constitutional reform, cooperation on energy matters etc.).

The signing of the Agreement on the support of private sector development and economic recovery EU SURE was an important step on the way to support small and medium business of Ukraine by the European Union (2015). According to the program - EU SURE (EU Support to Ukraine to Re-launch the Economy), Business Development Centres will be created in 15 regions of Ukraine, which will provide advisory assistance to SMEs. The amount of donor assistance under the EU SURE program is €55 million. Primarily, the newly established centres will help to launch businesses in sectors such as agriculture, energy, environmental management, improving the quality of public services and infrastructure, and innovative technology. It will provide advice on legal and market issues of doing business in Ukraine and abroad in modern conditions. According to Deputy Minister of Economic Development and Trade of Ukraine Yuri Klimenko: “This is the first program in the last 4-5 years to support small and medium enterprises on a national scale in Ukraine. We hope that it will help those who were forced to begin life with a clean sheet in the new location to start a new business.” (Ukrainian small and medium enterprises, 2015). As additional initiative to provide assistance to Ukraine in the development of small and medium-sized enterprises, the European Union also plans to provide €40 million to finance a loan guarantee fund. In other words, Ukrainian banks will receive an additional incentive to lend to small and medium-sized enterprises. The program’s authors expect that medium and small businesses can get loans up to a total size of €300 million with the leverage effect in the 7-8%.

The next step in this direction was the joining of Ukraine to the European program to support SMEs COSME (Ukraine joined the EU program for small and medium enterprises COSME, 2016). The program for 2016 consists of 25 sub-programs, which are classified in three areas: the simplification of the output of small and medium-sized enterprises on foreign markets, improving competitiveness, and creating a culture of doing business. It supports projects on various subjects, including tourism, chemical industry, facilitating access to public procurement; reduce the administrative burden, the protection of intellectual property rights for companies operating in countries outside the EU.

The European Union Advisory Mission (EUAM) (2014) plays an important advisory role in the reform of the civil security sector. The EUAM assists the Ukraine government authorities towards a sustainable reform of the civilian security sector through a strategic advice and hands-on support for specific reform measures based on the EU standards and international principles of good governance and human rights. The goal is to achieve a civilian security sector that is efficient, accountable, and enjoys the trust of the public.

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The EU-funded project “Support to Justice Sector Reforms in Ukraine” (2014) aims to support consolidated justice sector-wide reforms in Ukraine. This initiative was implemented with the financial support of the European Union and contributed to strengthening the rule of law in Ukraine. In general, the project was divided into six key components and is led by a group of international and national experts: Justice Sector Reform Strategy, Support to Execution of Court Decisions, Prosecution Reform, Access to Justice and the Right to Defence, Independence of the Judiciary, Prevention and Fight Against Corruption.

The EU’s support for reforms in Ukraine consists of different types of financial aid, without which it would be impossible to properly implement the Association Agreement and recover from the economic crisis. In 2014, the European Commission proposed a series of measures aimed at stabilizing the economic and financial situation in Ukraine and to encourage political and economic reform. By 2020, there is a desire to attract more than €11 billion (European Commission’s support to Ukraine, 2014). Another financial aid package was proposed in January 2015, amounting to €1.8 billion (EU-Ukraine, 2015).

EU assistance to Ukraine is carried out in a variety of programs, advisory missions, projects, sectoral and direct budget support. Given the importance of the European assistance to Ukraine’s reform, today the number one task for Ukraine is not only to increase the amount of financial assistance that is certainly very important for macroeconomic stability of the country but also improving of its effectiveness.

The effectiveness of financial assistance was assessed in the Report “EU assistance to Ukraine”, which was prepared by the European Court of Auditors. The conclusion of the report was not too optimistic: “EU assistance to Ukraine has been partially effective in supporting the country’s transformation into a well governed state in the areas of public finance management, the fight against corruption and the functioning of the gas sector” (EU assistance to Ukraine, 2016). According to the report, a positive aspect is that the greatest number of changes in all three of these areas has occurred in the 2014–2015 timeframe, after the change of power in Ukraine. However, during that period many reforms took place under considerable pressure from the public and European partners. So, Ukraine must do much more to ensure that EU assistance is used effectively in order to become a successful state with proper management.

The fight against corruption is the most urgent problem in Ukraine and one of the most urgent needs for reform. If Russian aggression in Ukraine represents the most serious external threat, the greatest internal threat to it is the inability and unwillingness of authorities to fight corruption. This is also clear to our Western partners (David J. Kramer, 2016). In addition, the foreign investment in our country directly depends on the situation regarding the fight against corruption. According to the President of the American Chamber of Commerce in Ukraine “corruption is an acute issue that concerns all potential investors because it is the number one barrier to doing business in Ukraine” (Andrew Gunder, 2016).

An example of the EU-Ukraine Action Plan on Visa Liberalization clearly demonstrates the contribution of the European integration in the fight against corruption in Ukraine (2010).

In May 2015, the European Commission published the Fifth Progress Report on the Implementation by Ukraine of the Action Plan on Visa Liberalisation (2015) where it was

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stated that the anti-corruption benchmark is deemed to be only partially achieved. Among other things, the Commission recommended to establish such institutions as an independent National Anti-Corruption Bureau, a Specialized Anti-Corruption Prosecutor’s Office, a National Agency for the Prevention of Corruption, a National Asset Recovery Agency. The latter institution was created in accordance with a EU directive 2014 (Directive 2014/42/EU 2014).

The gradual establishment of these institutions began at the end of 2015. It is clear that it is not only necessary to adopt relevant legislation and create corresponding institutions, but also to ensure their proper functioning. It will not happen quickly, however, it is an indisputable fact that, thanks to the implementation of the Action Plan on visa liberalization for Ukraine in the fight against corruption, a lot more has been accomplished than in all previous years since the Ukrainian independence.

In Ukraine, the first stage of E-Declaration for public servants’ assets in 2015 ended on October 2016. They were required to disclose their assets in accordance with the new law on combating corruption. More than 70,000 top government officials, including judges, deputies and civil servants, published their declaration. The launch date system was postponed several times due to political pressure and technical problems. This is understandable. Declarations accounted for numerous properties: houses worth millions of dollars, millions in cash and dozens of apartments under one owner, works of art and antiquities, all in the property of different officials. But the fact is that the E-Declaration is only the first step in the long fight against endemic corruption. As noted by The Economist, “It is now up to Ukraine’s newly created anti-corruption agencies to investigate suspicious declarations. A daunting task indeed”. It is important that officials who use their positions for illicit enrichment be brought to justice. That is exactly what will be the real indicator of the fight against corruption (The Economist, 2016).

For Ukraine, European integration remains a way to modernize the economy, overcome technological backwardness, attract foreign investments and new technologies, create new jobs, improve the competitiveness of domestic producers, access to world markets – especially the EU market. This makes it possible to lay the foundations for a new model of socio-economic development for Ukraine and to get rid of the Soviet past. Among the most positive potential effects of European integration for Ukraine could be: the consolidation of the rule of law, the development of the freedom of speech, human rights, energy efficiency and security, environmental focus of economic development, the establishment of a fair and competitive market environment, and the introduction of advanced methods and tools for public administration.

2. The challenges of Ukraine’s European integration

An important question is whether or not European integration is a source of problems for the Ukrainian state. Giving an answer to this question, first of all, requires consideration of how the reforms are carried out in Ukraine in the context of the European choice. As already noted, European integration promotes the comprehensive improvement of state governance. However, it should be said that only the draft law “On civil service”, the adoption of which

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was provided by the Association Agreement between Ukraine and the EU and which was developed with the assistance of the European Union, was adopted by the Verkhovna Rada of Ukraine (Parliament) only after the 20th attempt (History of the Draft Law “On State Service”, 2015). But even after that, the attempts to revoke the law of the Verkhovna Rada did not stop, arguing that the decision did not meet the requirements of the European Union. The situation was only saved by the intervention of the EU Delegation to Ukraine.

The former Head of the EU Delegation to Ukraine, Jan Tombinski, made a statement which noted that the bill takes into account international experience and the principles of public administration as they are applied across the EU and OECD countries. In addition, Jan Tombinski said that the adoption of this draft law is also a condition in bilateral assistance programmes between Ukraine and the EU, namely, the State Building Contract, the Macro-Financial assistance, as well as for possible future assistance programmes on public administration reform (Responding to the discussion in media on civil service law, Jan Tombinski, 2015). On 1 May 2015, the new law “On civil service” came into force and has launched the reform of the public administration system. However, even after this, there are continuing attempts to make certain changes and amendments.

The real test of commitment to democratic reform was the implementation by Ukraine of an anti-corruption package, which was provided by the Action Plan on visa liberalization. The implementation of this package has caused a real tsunami in Ukrainian political life: from outright conflict between the Ministry of Foreign Affairs and the General Prosecutor’s Office to fierce debates in Parliament.

For example, the heated debate revolved around the creation of the Specialized Anti-Corruption Prosecutor’s Office (SAP). This structure was necessary to start the work of the National Anti-Corruption Bureau. It is another authority that must investigate corruption offenses committed by senior officials authorized to perform state functions or local government. Again, the EU Delegation to Ukraine was forced to intervene in this case, explaining the position of the European Union, and trying to prevent the control of the Specialized Anti-Corruption Prosecutor’s Office by the various political forces. The fact is that such control would block the investigation of any case and turn this body into an instrument of struggle between political opponents.

The European Commission President Jean-Claude Juncker added pressure on the Ukrainian authorities and said in his letter that the progress in reforms in the area of the fight against corruption remains a key priority for achieving visa-free travel to the EU for Ukrainian citizens (No lifting of the visa barrier for Ukrainians, 2015).

One confirmation of the importance of these reforms for Ukraine and of the resistance against change from the old system became apparent in the case of bribing draft scandal involving a judge who tried to bring to justice the Specialized Anti-Corruption Prosecutor’s Office. The Head of the SAP, Nazar Kholodnitskiy (who is the Deputy Prosecutor General of Ukraine), openly said on Facebook that the Prosecutor General of Ukraine sabotages the process of criminal prosecution against this corrupt judge (2016).

Also, it is worth remembering the scandal that was associated with the launch of electronic declaration, which is part of the package of visa-free Ukraine’s commitments. For some civil

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servants occupying high posts, the new declaration system posed a threat (so it seems to the authors and Ukrainian citizens). For them it was important to delay the start of the declaration system for at least several months, at all costs. And only thanks to the efforts of civil society and the firm position by the European Union, has this problem been solved.

Thus, European integration creates problems for those Ukrainian officials and politicians who are not ready for radical changes in the country and are not interested in the quality of life for average Ukrainians. European integration is a challenge for corrupt officials in the government, whose main task has become the protection of their own business interests. Of course, today, all the European Union’s efforts to combat corruption, judicial reform, etc. are subjected to fierce resistance from officials both in the Parliament and in the public administration system.

In addition, European integration creates problems for those individuals who do not want to improve their condition, by means of speaking English and having an appropriate level of knowledge about the functioning mechanisms of assistance from the EU.

Finally, the Russian officials, mass media of Russia and pro-Russian forces in Ukraine actively disseminate the idea that the European choice of Ukraine has brought continuous problems and it is harmful and destructive for our country.

The common feature of these interviews, articles and statements is an outright lie to manipulate public opinion in order to discredit both Ukraine and the European Union. In December 2015 at a press conference, Vladimir Putin (where he did not even call Ukraine as the state, but used the term of Soviet times that is the sister Republic) cited several reasons for withdrawal from free trade regime with Ukraine within the Commonwealth of Independent States (2015).

In turn, the European Commission has published a list of myths about the Free Trade Area agreement between Ukraine and the EU (Trilateral Talks on EU-Ukraine DCFTA, 2015). This edition convincingly refuted “arguments” of the Russian President. In particular, it notes that the allegations of the Ukrainian market closing for Russian goods in connection with the transition of Ukraine to the EU standards do not correspond to reality. The European Commission noted that Ukraine has already brought 24 sectorial technical regulations for industrial products in line with EU regulations and no Russian company had yet complained that it faced difficulties in exporting its products to Ukraine due to technical regulations.

It should be noted that during the negotiations on a Free Trade Area, Russia demanded the EU data on each transaction concerning exports to Ukraine. By itself, such a requirement is unprecedented and directly violates the rules of the EU Data Protection.

Confirmation of the unfriendly and negative attitude of Russia toward Ukraine and the European Union is clear in an official statement of the Russian Ministry of Foreign Affairs about the Free Trade Area between Ukraine and the EU. Here is the quote in full: “We remove the brackets around the myth of the profitability of the Association Agreement for Ukraine. We cannot interfere with the current leadership in Kiev which is currently acting as a loss (highlighted by the authors). It is an internal affair of Ukraine to blow up and to subordinate the economy to external forces of the country. As officials say in Kyiv and Brussels it is its ‘sovereign decision’. It is unclear just why Russia should pay for this choice?

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We have our own economic interests that we do not intend to sacrifice, especially to meet the ambitions of others” (Brussels named the six Russian “myths”, 2015).

The authors of this article often address this issue and carefully discuss it in classes in the course of their work. It is safe to say that almost all the requirements of Russia pursued a single goal – to postpone the implementation of the Free Trade Agreement between Ukraine and the EU. The purpose of such determination is to stop Ukraine’s exit from the sphere of Russian influence. Moreover, Russia never intended to seek common ground in the negotiations (which demonstrated a clear rejection of the European Union Code). When entry into the Agreement became irreversible, Russia has adopted, as always, trade sanctions against Ukraine.

Thus, the problems of Ukraine are not linked to European integration, but are due to Russia’s subtle and not so subtle efforts to subordinate Ukraine to its influence and control. It is significant that no country of the Commonwealth of Independent States other than Russia imposed on Ukraine claims concerning the entry into force the Free Trade Agreement between Ukraine and the EU.

In order to punish Ukraine, Russia is taking measures that have nothing to do with the functioning of a Free Trade Area. In January 2016, the Russian Federation imposed restrictions on Ukrainian goods transported through their territory, in order to prevent Ukraine’s trade with other countries of the Commonwealth of Independent States. On 3 July 2016, by decree, the Russian President introduced some additional restrictions on the transit of goods originating from Ukraine through Russian territory (Presidential Decree of 01.07.2016). Existing restrictions on the transit of goods to the Republic of Kazakhstan extended to the transit in the Kyrgyz Republic. In general, these Russian actions are aimed at blocking Ukraine’s terms of trade with all the countries of Central Asia and to undermine the Ukrainian economy as a whole.

According to the official information of the Ministry of Economic Development and Trade of Ukraine, due to Russia’s transit blockade during the year, the Ukrainian economy has lost about half a billion dollars. This is an additional loss of GDP of 0.3 per cent. During this time, the export of goods to Kazakhstan and Kyrgyzstan and Ukraine’s traditional markets in Central Asia fell by almost 44 percent and 47 percent respectively (As Kyiv overcomes the consequences of the “transit war” with Russia, 2017).

In Ukraine, the failure of the idea of the European choice of Ukraine is actively supported by pro-Russian policy-makers. One of them is the former Head of the Presidential Administration of Ukraine (2002-2005) Viktor Medvedchuk. The list of his arguments against Ukraine’s Association Agreement with the EU is traditional. This list includes the decline in GDP, inflation, meagre quotas in trade, Ukraine’s trade turnover decline. And all this, according to Medvedchuk and politicians like him, is due to “European integration scam” of our state (The Association Agreement has changed the course of history and the fate of a multimillion nation, 2016).

There is no doubt that Russia’s aggression against Ukraine was directed against the European choice of Ukraine and the fear of losing influence in our country. It should be noted that the Russian assertion that the EU has forced Ukraine to choose between Russia

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and Europe is irrational and can be easily refuted. Ukraine is interested in maintaining good relations with the Russian Federation because of having close historical and trade relations with Russia – not to mention many personal and family ties. However, Russia forced Ukraine to elect only the Eastern vector of development through trade sanctions and threats. Finally, the entire juridical base of our relations has been destroyed as a result of military aggression. So, Russia is punishing Ukraine for its independent foreign policy and its European choice.

Ukraine has suffered a huge human, territorial and economic cost because of Russia’s aggressive and destructive actions, and not because of the Association Agreement. About 44 thousand sq. km. of the Ukrainian territory were occupied as a result of the annexation of the Crimea and military operations in the East. Approximately 10,000 Ukrainians were killed in the East and more than 20,000 were injured. Today in Ukraine there are 1.8 million internally displaced persons. The communal, social and industrial infrastructure was destroyed in the Donbas and Luhansk regions. Ukraine has lost about 20% of its economic potential (Mikhail Pashkov, 2016).

In fact, given the state of war with Russia, Ukraine has to allocate 5% of its GDP to defence and security, depleting the economy and not properly funding social needs (Poroshenko says unpredictable Russia makes Ukraine spend 5% of GDP on defence, 2016).

Thus, the vast majority of the arguments of opponents to the European integration of Ukraine are the result of Russia’s military aggression and economic sanctions of the Russian Federation which are used to destabilize our country and to attempt control over all spheres of Ukrainian life, and it is not the result of European integration.

3. Prospects of Ukraine’s Relations with the European Union

Ukrainian politicians at different levels often stress that European integration will inevitably lead to the membership of Ukraine in the EU. There are references to specific dates from 10 to 15 years. This right is claimed in the official Ukrainian documents. Thus, the Strategy for Sustainable Development “Ukraine 2020”, which was approved by the Decree of the President of Ukraine on 12 January 2015, states that the requirements of the Association Agreement between Ukraine and the EU gives Ukraine a chance to become a full member of the European Union in the future (2015). On the basis of our own experience, the authors could argue that a significant number of Ukrainian citizens are also convinced of the direct connection of the implementation of the Association Agreement and the prospects of Ukraine’s membership in the EU. It should be remembered that the Agreement itself does not contain any statements regarding the prospects of Ukraine’s full membership in the European Union.

However, among a large number of analysts in Ukraine, it is believed that it is unlikely that our country will become a member of the EU in the foreseeable future (Peter Dickinson, 2016). The reasons are due to the slow pace of reforms in Ukraine, Russia’s aggressive policy against our country, problems within the European Union and others. Germany rejects the talk of Ukraine’s membership in the European Union as a most pressing issue. In July 2016, the press secretary of the Ministry of Foreign Affairs of Germany stressed this again. She noted that currently, the prospect of Ukraine’s admission to the EU is not on the agenda

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of the Federal Government of Germany (Berlin does not see the prospects for Ukraine’s membership in the EU in the foreseeable future, 2016). German Chancellor Angela Merkel has expressed repeatedly the same position. In June 2016, speaking about the chance of Ukraine becoming a full member of the EU, she said that it is “not appropriate to raise false hopes about Ukraine’s accession to the EU for it is not on the agenda” (Groisman in Berlin: Is there a chance that Ukraine will become a member? 2016). Why do Germany and some other EU Member States maintain such a negative position as a subject of the separate study? It is more than obvious that today European politicians and officials do not want to even talk about the prospect of Ukraine’s membership in the European Union.

The lack of prospects of Ukraine’s membership in the EU is often used by the anti-European and pro-Russian forces in the propaganda war against Ukraine. Using statements about the future leadership of Ukraine’s membership in the EU on the one hand and the political leaders of the European Union on the other, these forces are trying to dishearten the citizens of Ukraine because of their European choice. Consequently, for many citizens, the launch for European integration is losing its meaning.

Under these circumstances, the authors recommend that the effort toward Ukraine’s membership in the EU should be discontinued and directed toward reforms in Ukraine that will promote positive development of the country. However, this position is also subject to the attack of Russian propaganda. The most common question posed to the authors of this article is: “How can the EU help Ukraine implement reforms? We can do this independently and without instructions from Brussels.” In addition to the standard arguments about the advisory and financial assistance from the European Union, there is another, no less important matter. Relevant official EU statements clearly indicate that full and effective implementation of the Association Agreement, and, more specifically, the DCFTA, is a key priority which, accompanied by reforms, will result in approximating international standards and EU legislation and standards. This will lead to the gradual economic integration of AA/DCFTA partners in the EU internal market and therefore to the creation of an economic area (Joint Declaration of the Eastern Partnership Summit, 2015). That is an issue which Ukrainian authorities should focus on, explaining the advantages of the status of relations with the European Union for Ukrainian society.

As practice shows, it is the successful implementation of the Association Agreement that will be the real challenge for the Ukrainian government and a test of its ability to carry out reforms to match common European standards. The “Ukrainian centre of European policy” analysed the commitments that Ukraine had to perform under the Association Agreement during the past year and a half, since 2014, when the agreement officially started to gain momentum. The document emphasizes that, during this period, Ukraine has done a lot. It was the agreed upon framework for legislation in the field of food safety, standardization, metrology and technical regulation. Therein is the most effective operation in the energy field, namely, in the framework of regulating the gas market directives. At the same time, the analysis noted that Ukraine has not fully implemented any obligation in the field of adaptation of the Ukrainian legislation, which are clearly defined in the Agreement for the period from 2014 to the first half of 2016. This relates to acceptance of the 15 EU acts in the fields of energy, transport, environment and public health and the adoption of a specific policy document on the implementation of legislation in the field of sanitary and

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phytosanitary measures. During the reporting period Ukraine has only started to fulfil its obligations in all the above areas, but at different speeds, efficiency and specificity. Most of those commitments have been only partially implemented or relevant bills are still under consideration of the Verkhovna Rada (Akulenko L., 2016).

A positive result of the Association Agreement is the fact that the European Union definitively became a major trading partner of Ukraine. According to the data of the State Statistics Service of Ukraine: “in spite of the general decline in the overall performance of both exports and imports for the period from January to October last year compared to the same period of the previous year, the volume of trade with the EU continue to grow. As such, exports of goods to the European Union grew in the same period by 2.4% and now accounts for 37.3% of total exports. Whereas imports grew even more in exchange rates by 7.9% and reached 43.8% in the structure of Ukrainian import” (Alexander Golubov, 2017).

Therefore, in the opinion of the authors, Ukraine today should focus on the unconditional implementation of the Association Agreement and maximum use of the opportunities that it provides for the reform of Ukrainian society. Only afterwards it will be worth talking about the prospects of our country’s membership in the European Union.

Conclusions

1. Today we can confidently assert that the movement toward European integration has contributed to important reforms in Ukraine. This beginning can be successful, fuelled by political will in Ukraine, or fail, despite the support of the European Union.

As we have seen, the active cooperation of Ukraine with the EU began in 1998. It may seem that 18 years is enough time to carry out the necessary reforms. Unfortunately, this process has only just begun in Ukraine. The reasons for this situation are many, but the main, according to the authors, is the lack of political will to reform. As in previous years, today there are demands of reforms in various fields. The main progress has been made at the level of the adoption of legislation, but citizens of Ukraine, as well as the European Union, expect concrete implementation of these laws.

In Ukraine, there is a belief that political pressure from the European Union and the Ukrainian civil society on the Ukrainian authorities with the simultaneous binding financial assistance to the specific positive results encourages it to reform. As we have seen, this approach only partially works. But it cannot continue for a long time. Any changes are doomed to fail if senior management is not interested in their implementation.

Ukrainian reforms must occur, not despite, but because of the actions of all branches of the government. In the end, the EU may lose patience and willingness to help Ukraine.

The success of our country towards the implementation of European Union reforms is the context under which Ukraine can and must overcome Russian aggression. Russia needs Ukraine as a weak country that cannot progress and move forward. A stable and successful Ukraine will evoke negative responses from Russia, which eagerly awaits the failure of Ukraine’s European aspirations and hopes for revenge against the pro-Russian forces in our country. Kremlin propagandists have provided information on this issue with lies, as usual.

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These are evident, as it can be seen in an article entitled “Return to Ukraine”, which was published in the journal “Russia in Global Affairs” in 2015. The authors of this article do not doubt the failure of reforms in Ukraine, and this should, in their view, be taken advantage of by the Russian Federation (Edward Ponarin, Boris Sokolov, 2015). Unfortunately, these expectations have certain grounds today. According to an opinion poll conducted from 22 to 26 April 2016, only 14.2% of respondents believe that the situation in the country is developing in the right direction, 72.2% - in the wrong (Citizen assessment of the situation in the country, attitudes toward public institutions, electoral orientation, 2016).

A clear sign that Ukraine is only beginning to move in the right direction is the world’s Corruption Perceptions Index 2016. Ukraine ranked 131 out of 176 countries. This place with 29 points along with Ukraine shared Kazakhstan, Russia, Nepal and Iran. “This is 2 points higher than last year but not enough for a country whose authorities called the fight against corruption a top priority. The anti-corruption reform promotes an improvement of our position in the world rankings but the lack of an effective judicial system and the de facto impunity of corrupt officials does not give Ukraine room to overcome a 30-point barrier”, says Transparency International Ukraine (Transparency International Ukraine, 2017). So, the real effectiveness of reforms is determined not by the presence of certain institutions and legislation, but rather by concrete results that demonstrate the ability and willingness of the authorities to implement the changes.

2. European integration is not exactly a source of problems for Ukraine, regardless of how certain political forces attempt to portray it.

European integration is a source of problems for Ukraine only through the aggressive actions of Russia, which does not stop attempts to impede Ukraine’s movement toward the West, by resorting to open military assault, trade sanctions and an unprecedented information war, both in the Russian Federation and abroad.

European integration creates problems for those political forces that are not interested in the de-monopolization of the Ukrainian economy and the replacement of its oligarchic economic model. The rest is due to the typical pro-Russian propaganda that is designed to justify Russia’s aggressive actions against Ukraine.

3. Today, it is premature and inappropriate to consider the European integration of Ukraine as a pass ticket to the European Union membership.

In the future, European integration may become a pass ticket to membership of Ukraine in the EU. However, the idea of membership should not be an end in itself.

The issue of Ukraine’s membership in the European Union will be on the agenda possibly in the distant future.

Frankly speaking, it is necessary to say that the European Union has no plans to expand in the current regional context. Moreover, due to such a troubled country like Ukraine, the EU will focus on domestic reforms in the future. The question of Brexit, establishing relations with the new American administration, and all the delicate issues revolving around the ongoing migration crisis will be a difficult test for the European Union in the near and mid-term future. Another cliff-hanger for the European Union will constitute the elections

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in France and Germany. The potential victory of a Eurosceptic candidate in the race for Elysee could have set a dangerous precedent for the repetition of similar policies in other EU countries. Particularly important for the future of the EU is the electoral outcome in Germany, which will hold parliamentary elections in the autumn.

Under these conditions, the EU may lose interest in Ukraine and reduce the amount of resources spent on their Neighbourhood Policy. It can be assumed that further development of relations between Ukraine and the European Union in many respects determines the decisions of the next Eastern Partnership Summit to be held in November 2017 in Brussels.

European integration is a process of transformation for Ukraine. The end result of this process is to improve people’s livelihood and the transformation of Ukraine into a free democratic state with a positive reputation in the world. Unfortunately, today in Europe, the mention of Ukraine quite often causes negative emotions in ordinary citizens. In April 2016, in the Netherlands, ahead of the referendum on the Association Agreement between Ukraine and the European Union, an opinion poll was conducted and found out that 59% of respondents would vote against the Agreement because they did not believe in Ukraine, in particular due to the high level of corruption (The referendum in the Netherlands will not affect the provisional application of the agreement EU-Ukraine, 2016).

Ukraine should try and consolidate its European identity within the state in order to become more attractive for Europeans rather than beg for the prospect of EU membership. After all, Ukrainians dream of living their lives in accordance with such European values as human dignity, freedom, democracy, equality, the rule of law and respect for human rights. Apparently, it is impossible to build such a society without European integration.

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