Select Committee on Foreign Affairs Appendices to the Minutes of Evidence - Sixth Report

Annex A


  1.  PCAs have been negotiated with all the NIS except Tajikistan. The PCAs with Russia, Ukraine and Moldova are already in force. Those with Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan and Uzbekistan are expected to enter into force on 1 July 1999. The PCA with Turkmenistan has been signed and transmitted to the European Parliament and Member States' parliaments for ratification.

  2.  Pending the entry into force of the PCAs, the 1989 Trade and Cooperation Agreement with the USSR is applied on a bilateral basis with each of the USSR's successor states, and Joint Committees on that legal basis have so far been held with all NIS except Tajikistan; a first JC with that Country is scheduled to take place in Autumn 1999. The trade provisions of the PCAs do not require formal ratification and can be applied in advance through Interim Agreements, which as they enter into force automatically replace the trade provisions of the 1989 Agreement.

Nature of PCAs

  3.  PCAs are mixed agreements based initially on Articles 113 and 235 (EEC) and 101 (Euratom); Other legal bases have been added notably following the ECJ judgement on the Uruguay Round. The negotiations are based upon (extremely detailed) directives received from the Council in October 1992. It was the intention then that substantially similar agreements should be negotiated with all the NIS. However, the increasing disparities between them, and the outcome of the negotiations with Russia, led the Commission to propose a new strategy[7], differentiating between the "European" NIS[8], to whom the economic concessions (if not all the political ones) agreed with Russia were extended, and the rest. The Council endorsed this approach in March 1994 and subsequently approved modifications of the 1992 mandate in the case of each of the "European" NIS.

  4.  PCAs are a "halfway house" between standard framework agreements of the sort the Commission has negotiated with a number of countries round the world and the "Europe Agreement". They foresee an institutionalised political dialogue and contain detailed trade and investment related provisions, but the latter do not establish a preferential relationship (ie do not offer concessions beyond those given to GATT/WTO partners). The possibility of such a relationship in future is however raised in the PCAs with the "European" NIS; these contain a "rendez-vous" clause allowing for the circumstances to be examined under which negotiations on a free trade agreement (FTS) could be initiated.

Content of standard PCAs

  5.  These consist of the following principal elements:

    —  (i)  a preamble containing a number of statements of intention, notably regarding commitments to uphold democracy, human rights and the rule of law and the principles set out in the CSCE documents; expressing (EU) support for the independence, sovereignty and territorial integrity of the partner; and noting the importance for implementation of continuing reform. The preamble also expresses the principal objective underlying the PCA concept—ie the gradual drawing-in of the partner into the wider European space.

      (ii)  general principles which reiterate the essential elements (democracy, human rights, market economy) underlying the agreement; stress the importance of regional co-operation; and mention the future development of the relationship including, in the case of the European NIS, the perspective of an FTA.

      (iii)  A regular political dialogue is provided for at Ministerial level and below, and also at parliamentary level.

      (iv)  A section trade in goods: Both sides offer MFN treatment regarding tariffs and duties, which reserving NIS' right to conclude GATT—compatible preferential arrangements. Any intra-CIS arrangements which are not compatible must be made subject to the MFN clause by the end of 1998. Trade in goods other than textiles, coal and steel are liberalised and the latter made subject if necessary to bilateral agreements: however, both sides may , if facing damaging import flows, use the safeguard clause (more liberal for the European NIS) and the European NIS have an Annex which allows them to introduce temporary quantitative restrictions, under certain conditions. There is a commitment to apply GATT anti-dumping provisions (with a consultation clause for European NIS). Nuclear trade is subject to special conditions. All NIS except Russia commit to trade at market prices ("price clause").

      (v)  Labour conditions: These forbid discrimination on working conditions for legally-employed nationals of the other party. The European NIS also have provisions on co-ordination of social security for their workers in EU countries.

      (vi)  Establishment and operation of enterprises: This section provides that investing companies are not discriminated compared to third country companies. The NIS also offer non-discrimination compared to domestic companies (national treatment). National treatment or MFN, whichever is the better, is the basic standard for treatment of already established companies. There are special conditions for shipping agencies. The third countries give commitments not to introduce restrictive legislation without warning and in any event to allow investors a three-year grace period.

      (vii)  regarding cross-border services, there is a non-binding commitment to liberalise (on the lines of the EC's, GATS offer). For Russia and Belarus, a list of services where both sides offer MFN treatment has been agreed.

      (viii)  current payments in convertible currency and flows of direct investment capital are liberalised. There is a standstill on new foreign exchange restrictions.

      (ix)  intellectual property NIS commit to raise protection to European levels and to offer MFN treatment.

      (x)  a range of economic, legislative, environmental scientific, cultural and other co-operation chapters cover most non-military activities, including financial support which, it is specified, is provided through Tacis, the EC's technical assistance programme for the NIS.

      (xi)  with the more recent PCAs (Caucasus and Uzbekistan) new chapters on co-operation in the fields of democracy and human rights and illegal activities (including immigration) have been incorporated.

      (xii)  institutional and general provisions: including inter alia the establishment of the Co-operation Council (at Ministerial level) the Co-operation Committee (at official level) and the Parliamentary Co-operation Committee; the dispute settlement procedure; and the "suspension clause" allowing a party to suspend the agreement if the "essential elements" (see (ii) above) are breached. The agreement is concluded for 10 years with thereafter tacit annual renewal.

      (xiii)  Normally there is a single protocol, on mutual assistance in customs matters.

7   In its Working paper COM(94) 258 on contractual relations with the NIS. Back

8   Russia, Ukraine, Belarus and Moldova. Back

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