EU Parliament Backs Moldova Deal, as Russia Trade Tensions Persist

20 November 2014

The European Parliament voted last week to ratify its Association Agreement and trade deal with Moldova, in a move that observers say will likely heighten tensions between the EU and Russia, already under strain over the Ukrainian crisis. The news comes as Brussels and Moscow continue to disagree heatedly over trade issues, in forums ranging from the WTO in Geneva to this past weekend’s G-20 summit in Brisbane.

An overwhelming majority of EU parliamentarians – 529 of 751 – voted for ratifying the Moldova pact last week. However, the deal still needs sign-off from the national parliaments of individual EU member states to fully enter into force.

So far, seven EU member state parliaments have completed ratification. The agreement was already ratified in Moldova this past July.

Road to EU membership?

In a plenary speech before Parliament, lead negotiator and EU rapporteur Petras Auštrevičius said Thursday that the Association Agreement signalled a “new European future for Moldova and its people.”

In the short-term, the deal lifts import duties on most goods traded between the two sides, among various other provisions. The Deep and Comprehensive Free Trade Agreement (DCFTA) included in the association pact has already been applied provisionally since September.

However, many see the Association Agreement as being a potential precursor to the bigger prize of EU membership, with EU parliamentarians noting the deal “will form a backbone” for closer economic and political ties as the two sides work towards further integration.

Following the vote, Moldovan Prime Minister Iurie Leancă said that “only a European future will ensure” higher wages, living conditions, education, healthcare, functional institutions, and “access to a market with over half a billion consumers.” 

However, opposition to the deal is reportedly strong in some quarters of Moldova, particularly among the leaders of the semi-autonomous Russian-speaking Transnistria region, who argue that they were not part of the negotiation or approval processes.

After a year marred by violence in Ukraine, Moldova is the next former Soviet republic after Kiev to approve an EU Association Agreement since before the crisis began. The popular protests that toppled the former Ukrainian government had erupted after then-President Viktor Yanukovych chose not to sign a similar deal in late 2013.

That deal was later ratified by both sides this past September, under the new Ukrainian government, though implementation has been partially delayed in order to continue discussions with Moscow. (See Bridges Weekly, 18 September 2014)

As a small country that is also among Europe’s poorest, Moldova is a significantly smaller trading partner for the EU bloc compared to Ukraine, making up just 0.1 percent of the 28-nation group’s overall trade. By comparison, the EU is Moldova’s largest trading partner, accounting for nearly half of its trade.

However, given past concerns of Transnistrian intervention, EU officials have expressed concern that Moldova could be pulled into the larger conflict with Russia.

Meanwhile, the EU Parliament’s press release calls for Russia to “respect Moldova’s territorial integrity and European choice,” while criticising the Kremlin for allegedly instituting import bans on some Moldovan products in response to Chișinău’s decision. 

The vote also comes as Moldova prepares to hold elections on 30 November, with pro-Europe parties expected to win, albeit narrowly.  

Trade questions raised in Brisbane, Geneva

With tensions over Ukraine still high, the EU Parliament vote came just two days before G-20 leaders met in Brisbane, Australia for their yearly summit, where tensions over the Kiev situation reportedly came to a head among participants.

In recent months, Russian President Vladimir Putin has repeatedly criticised EU and US trade sanctions against his country, suggesting that they could be in violation of WTO rules – a claim he raised again ahead of the Australia meeting. Moscow has not yet filed a formal trade complaint on this particular matter, however.

In turn, German Chancellor Angela Merkel promised during a Sunday lecture in Brisbane to protect Moldova and other countries, warning Russia that the EU would not back down in Eastern Europe. “It’s not just about Ukraine,” she added.

Separately, questions of Russia’s own alleged WTO violations were again raised in Geneva by the EU, US, Australia, Canada, Japan, Chinese Taipei, New Zealand, South Korea, and Ukraine at the most recent meeting of the global trade body’s Council for Trade in Goods, sources familiar with the discussions said.

Moscow, in turn, replied during the 17 November meeting that it was open to constructive dialogue with members on this subject, while claiming that its initial review of the EU-Ukraine deal indicated possible incompatibilities with both other trade agreements and with WTO rules – a charge that Brussels countered at the meeting.

The EU and Russia have lodged a series of formal trade disputes against each other in recent months; while Moscow has filed two WTO challenges against Brussels, the EU has submitted four against Russia, with the latest complaint being tabled just weeks ago. (See Bridges Weekly, 6 November 2014)

ICTSD reporting; “EU-Moldova deal approved by MEPs,” EURACTIV, 13 November 2014; “European Parliament ratifies Association Agreement between Moldova and EU,” IPN,  13 November 2014; “EU Parliament gives nod to Moldova trade agreement,” RT, 13 November 2014; “Half of Moldovans favour country’s Customs Union membership – poll,” ITAR-TASS, 27 October 2014; “G20 summit: Russia sanctions ‘undermine trade’ – Putin,” BBC NEWS, 14 November 2014; “Merkel: Russia cannot veto EU expansion,” EU OBSERVER, 14 November 2014.

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