5 April 2016

What are the key issues in the Dutch referendum on the EU-Ukraine agreement?

Tomorrow, Dutch voters head to the polls to deliver their verdict on the EU-Ukraine Association Agreement. In an earlier blog, I explained how this referendum came about; essentially, the EU-Ukraine agreement has fallen victim to bad timing – the whole exercise is really about sending a message to the establishment. Some opponents of the agreement, such as the prominent campaigner and academic Thierry Baudet have admitted as much, saying that “everything which is wrong with the EU is wrong with this Treaty.”

Notwithstanding this broader context, below I summarise the main arguments of the opponents of the agreement and the responses of its have proponents:

“This Treaty, which is driven by the EU’s lust for ever more control, is not a trade deal but intended as a prelude to EU membership for Ukraine.”

To back up this claim, opponents cite top EU figures suggesting Ukrainian EU membership may be an option one day, such as former European Council President Herman Van Rompuy and former EU Commission President Jose Manuel Barroso.

To counter this, proponents have pointed out that the actual text of the Treaty does not mention membership and that Ukraine’s EU membership is a question for the long-term. According to Dutch Prime Minister Mark Rutte, many other countries including Latin American states, have similar association agreements with the EU. It also was revealed that during the negotiations, the Dutch government helped to block an attempt by supporters of Ukraine’s EU membership to explicitly reference this in the agreement.

My take: The truth is somewhere in the middle; the agreement strengthens and extends Ukraine’s ties to the EU but it is not a pre-accession agreement such as the “Stabilisation and Association Agreements” with Western Balkan countries, which are explicitly mentioned as “potential candidates for EU membership”. Neither does it exclude the possibility that Ukraine could join the EU one day, although there are many practical obstacles on its path.

“Ukraine’s economy is small, smaller than the Dutch province of North Holland, it is shrinking, due to corruption and war and only 0.2% of Dutch exports go to Ukraine. That’s a small fraction of Dutch exports to Russia”

One of the “Yes” campaigners, the former MEP Michiel Van Hulten, has argued that Russia’s stance on the agreement should not be the deciding factor, arguing that: “I think it’s important that we make it clear to [Russian leader] Mr. Putin that this is none of his business”.

Either way the benefits are material according to Dutch government and EU Commission estimates: Ukraine may be a small trading partner for the EU, accounting for only 0.3% of EU exports, but 38% of Ukrainian exports go to the EU, which would save Ukraine €487m annually, €383m on exports of agricultural products alone. The EU would save €391m on duties on imports into Ukraine: import duties on vehicles would be €117.3m lower, for example. Overall, Ukraine and the EU will eliminate respectively 99.1% and 98.1% of duties on their bilateral trade.

My take: It’s bold to claim that the conflict in Ukraine and ensuing sanctions against Russia would not have occurred in the absence of any EU-Ukraine Treaty. The latter was only one of many factors. So to claim that there is a trade-off between Russia or Ukraine is too simplistic.

“The Treaty has been the cause of a civil war in Ukraine”

It’s a fact that the Treaty has played a role in triggering the annexation of Crimea and the ongoing (now mostly frozen) conflict in Eastern Ukraine. As we argued at the time, the EU failed to anticipate that Russia’s unhappiness at the EU and Ukraine growing closer together would prompt such a drastic response.

“Yes” campaigners have argued that instead of weakening Ukraine’s sovereignty, the deal would protect the country in the face of Russia. Foreign Affairs Minister Bert Koenders stated the deal “is a step towards stabilising our neighbouring country of Ukraine”. Opponents have been accused of being “Putin’s useful idiots”, with the leader of the Dutch populist PVV party, Geert Wilders, firmly in the “no” camp, depicted kissing President Putin. Given the fact that two thirds of the 298 people on board of the airliner which was shot in Ukraine in 2014 were Dutch, this is a particularly sensitive charge.

My take: There are many factors which triggered the conflict in Eastern Ukraine. On the other hand, we know from experience that Treaties opening up trade and attempting to improve the rule of law in neighbouring countries aren’t game changers of themselves. This is a process which will take time and patience.

“The Treaty is bad for Ukraine itself, which will have to take over 80% of EU rules without having any influence over them.”

In attempting to open up trade, the EU doesn’t only rely on mutual removal or even unilateral removal of trade barriers, but also on bureaucratic harmonisation of norms. Given experience at the EU level, it can be doubted how much Ukraine will be able to implement, for example with regards to EU poultry regulations, which bothers both Dutch poultry farmers and animal rights activists.

My take: Given Ukraine’s problems with adhering to the rule of law it does the beg the question of whether it will be able to implement and abide by the agreement. That said, most Ukrainian politicians and much of the public sees the AA as a means to modernise the country politically and economically in line with Western norms.

“The Association Treaty gives Ukraine the right to EU funding… We already pumped €30bn into Ukraine through the EU and the IMF. Enough is enough.”

Opponents of the deal have stated that providing even more cash to a bankrupt state which is suffering from very high levels of corruption may only worsen the situation. They have depicted President Poroshenko as a dodgy oligarch, disclosing he stored €700m in the Netherlands while highlighting how he has been mentioned in the so-called “Panama Papers” list of off-shore bank account holders. The latter was called a “disaster” for the “Yes”-campaign by Dutch public media journalist Kees Boonman.

Proponents of the deal have countered this by saying that the funding is conditional on Ukraine improving its rule of law and fighting corruption.

My take: Allowing Ukrainian businesses to flourish due to removing barriers to trade is the best way to boost a middle class not dependent on crony government-controlled business. To flush a government system already very vulnerable to corruption with even more money, apart from the €100m the EU already gives to Ukraine every year, could pose problems of ensuring the money is spent properly.

“The Treaty gives Ukraine, a country in civil war, the right to military assistance and support, despite the fact no Dutch interests are at stake”.

Opponents have cited how the deal commits to “increasing the participation of Ukraine in EU-led civilian and military crisis management operations” and aims to “explore the potential of military-technological cooperation”, which they think may lead to reorienting Ukrainian military purchases and sharing of military information.

Foreign Affairs Minister Bert Koenders has argued that this is all needed because “we have reached the point where Dutch security and prosperity are being put under pressure due to developments beyond our borders”.

My take: The agreement does mention it aims to “promote gradual convergence in the area of foreign and security policy”, and it really is anyone’s guess what that would actually mean in practice. Given that there is insufficient popular support for helping to defend Ukraine militarily, it would be wise not to use the Treaty as a back-door for NATO-accession.

“The Association Treaty enables visa free travel for Ukrainians, so also for criminals”

Although Dutch Foreign Minister Bert has insisted visa free travel is being negotiated irrespective of the Association Treaty, it is nonetheless mentioned in it, and this issue has featured prominently in the campaign. The idea is to provide visa free travel for Ukrainians if the Ukrainian government undertakes a number of reforms, for example publishing data on top officials and politicians’ income. Ukraine was criticised by the EU for being slow here, and still needs to complete a number of required reforms.

Nevertheless, the EU Commission has already stated that it will “make a proposal for visa liberalisation in April.”  The Dutch referendum takes place on 6 April, so this was obviously seized upon by the No-campaign.

My take: In any case, both EU member states and the European Parliament still need to give their blessing, which isn’t likely to happen soon, in the current climate, with doubts about Ukraine’s reforms surfacing and visa liberalisation for Turkey being opposed by France and most other countries (the UK is unaffected by this, given that it’s not a member of the Schengen zone).

What do the opinion polls say?

Almost all opinion polls point towards a victory for the No-camp. A Direct Research poll, commissioned by D66, which favours the deal, was most optimistic for Yes, polling it at 35% versus 36% for No. Prominent pollster Maurice de Hond estimates 60% will vote against and only 40% in favour, while the most recent TNS poll puts the No-camp ahead with 54%, Yes at 36% while 10% are undecided.

A crucial question is whether turnout will reach 30%, which is the necessary threshold for the result to be confirmed as “official”. The No-campaign has accused the government of providing insufficient voting facilities in order to secure this. According to a new poll, 32% of voters intend to go out to vote, but this figure was only 24% a few weeks ago. A failure to reach 30% would give the Dutch government an excuse to ignore a negative result.

What would be the consequences if the Dutch vote against?

Given the referendum is non-binding, it would be down to politicians how to respond. This question has divided the governing coalition with Prime Minister Mark Rutte’s liberal/centre-right VVD party declaring that “our stance won’t change” regardless of the outcome, but the centre-left PvdA has said it will respect the outcome if the 30% turnout threshold is met.

Certainly, the Dutch government would have a big crisis on its hands, in the middle of its EU Presidency. Geert Wilders’ anti-EU formation Party for Freedom is already firmly leading the polls, gathering more votes than the VVD and PvdA combined. Rutte also said that if the Dutch parliament decides not to ratify the agreement – a big question mark right now – this would, according to him, be the “end of the exercise”, meaning that the EU would need to renegotiate or give up the association deal with Ukraine.

That said, the trade chapters of the EU-Ukraine deal have already entered into force provisionally at the start of the year, and officials have told the Financial Times that a No-vote would leave it in force – full unanimity in the Council is needed to end provisional application. Therefore, the agreement could be stuck in limbo pending a more sustainable solution. One option would be for the Netherlands could do the dirty work for other member states and block visa free travel for Ukrainians as a condition of ratifying the Treaty and appeasing Dutch public opinion.

A No vote would also have wider consequences – European Commission President Juncker has warned that it could spark a “continental crisis”, former Europan Council President Herman Van Rompuy said it would be a “disgrace for the Netherlands” while former EU Trade Commissioner Karel De Gucht, a Belgian, stated in his own very straight talking style: “I hope Rutte ignores the result of the referendum”. As much as these statements may do more to boost the No side than anything else, they make clear the international policy establishment isn’t looking forward to dealing with yet another thorny issue EU issue. A clear “No” vote would also embolden the Leave camp ahead of the UK referendum.

This all illustrates that popular dissatisfaction with “EU overreach” can lead to “collateral damage” to what should be the EU’s core business: trade. The EU has failed to properly address its many internal problems including its crisis of accountability and democratic legitimacy, prompting campaigners to take the EU-Ukraine deal hostage. Let’s just hope that TTIP, the trade deal which is being negotiated between the EU and the US, doesn’t become the next victim of the electorate’s need to send a signal it wants more control over its own fate.