Ukraine EU membership

It’s not about the costs

Seems like scaremongering by someone but note this FT piece where the costs of Ukrainian EU membership are being “kitchen sinked”.

https://www.ft.com/content/a8834254-b8f9-4385-b043-04c2a7cd54c8

I would make the following observations:

First, Ukrainian agriculture is already internationally competitive and it does not need EU bailouts. 

Ukrainians want EU accession for all the soft benefits like rule of law, human rights and democracy anchors, not EU bailouts. If you asked them for carve outs on things like CAP, or very long transition periods, if that meant accelerated membership, they would bite your hand off.

The point is, there are solutions.

Second, and I would argue that the problem with CAP is it’s own lack of long term sustainability whatever happens to Ukraine’s EU bid. CAP needs reform as does broader EU funding formulas and structures and voting rights. Mij Rahman at Eurasia makes the salient point that EU enlargement will require fundamental change in how the EU operates - I think this is already obvious in how smaller countries like Hungary have recently been able to hold the rest to ransom on issues such as Ukraine. Indeed, only this week leaks have suggested that the EC is recommending concessions to Hungary on rule of law issues to be able to get new EU funding for Ukraine over the line. That cannot be right when rule of law is the big selling point for the EU and the driver for the likes of Ukraine, and the eight other potential new entrants, queuing up to join.

The EU needs reform irrespective of the decision around Ukrainian membership.

Third, costs of Ukrainian EU accession will be significantly shaped by actions we take now in funding its victory in war and post war reconstruction. The quicker Ukraine is given the resources to win the less damage inflicted on the Ukrainian economy and the higher base as a starting point. Meanwhile, the more assured we are on financing options - absolutely using the frozen $400bn in Russian assets - the stronger and more assured messaging from the EU on its commitment to green lighting EU membership for Ukraine likely the stronger private sector investment into Ukraine will be and the greater reform momentum at home. This will help put Ukraine on a higher growth plain seeing its per capita GDP catch up more quickly with the EU average thereby ultimately cutting the structural fund costs for other EU states in supporting Ukraine’s accession.

Fourth, as noted in point 1 above, costs of accession for Ukraine can be moderated by giving less ambitious entry dates and offering longer transitional arrangements for key areas such as the CAP. The key though is in being able still to sell any entry date as being credible and realistic as to it actually happening. But note back in the Copenhagen Treaty decision in 1994 to enlarge the EU to former Communist states in Eastern Europe by 2004, the key was offering a hard date as it acted as a rallying call by these states to deliver key reforms and for investors as a signal of real intent by governments to deliver which spurred inward investment. 

Conclusion - Ukraine needs to be given a specific entry date for EU membership. Whether that is five or ten years hence is less important than the credibility of the offer, that the date will be honoured if Ukraine meets reform KPIs, or acquis.

Fifth, I think we need to think about the costs of not giving Ukraine real EU accession perspective. And therein I think the risks are of political, social and economic failure with resultant huge costs to the rest of Europe.

Just imagine here that millions of Ukrainians are fighting for the European ideals - freedom, rule of law, democracy, human rights. We have given them hope, in our signalling, that EU membership will eventually come. What happens when the war ends and we fail to deliver? How will that shape Ukraine’s future economic debate? I would say disastrously which means disappointment and likely social and political unrest - and then huge outward migration West.

In making the case for Ukraine’s EU membership I have long used the comparison with Poland and Russia. I have also called out those arguing that Ukraine’s rightful position was some form of neutral status, a kind of bridge between East and West. The reality was that has been the case for the past 32 years of independence. And what did it bring? Well Ukraine had a similar per capita GDP as Poland and Russia in 1991, of around $3k. But by 2013, Poland and Russia had seen their per capita GDP increase to $14k, while Ukraine’s was stuck at $3k. Why? Because it was unable to chose the model of direction - neither the EU anchor as chosen by Poland nor the kleptocractic commodity model as Russia. But it was kept in a no man’s land of oligarchic rent seeking - which might have suited both Russia and the West but it failed to deliver development for the bulk of Ukrainians. Ukrainians have now chosen the EU path and only that is now the key to the country’s successful economic development.