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When trying to research the start of the Maidan Revolution, I see different claims. Supposedly, the EU declared that Ukraine can't join the European Union–Ukraine Association Agreement if it joins the Eurasian Customs Union.

On the other side, there are claims that Russia declared that joining the Eurasian Customs Union means that Ukraine can't join the European Union–Ukraine Association Agreement.

How was the reality at the time? Who made demands about exclusivity?

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    Please provide links to the claims that you are seeing so that others can better understand what you are referring to.
    – Joe W
    Mar 7 at 17:31
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    I can't tell you who said it, but I could tell you why it would be impossible for a country to be part of two customs unions at once which do not want to be a part of each other. Unfortunately that's not what you are asking.
    – Philipp
    Mar 7 at 17:36

3 Answers 3

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This is about the same as the infamous Brexit Trilemma:

  • A has a common market with B.
  • B has a common market with C.
  • So A has a route for unchecked trade with C, whatever A and C say about it.

The only ways to resolve this is if trade between A and B isn't really customs-free, or if trade between B and C isn't really customs-free, or if B has an internal customs border (the solution the UK agreed to, and tried to wriggle out of afterwards), or if A and C agree to the same terms of common market. So if A and C (the EU and Russia, in this case) don't agree to a common market, B must make the choice which side they will pick.

In 2014, this was kind-of-spelled out in Article 39.1 of the treaty with the 'except insofar' part.

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    In mathematical terms, customs unions are transitive. Since they're also reflexive and symmetric, they form equivalence classes. Mar 8 at 6:53
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    @Acccumulation, o.m.: that is why a customs union isn't the same as a free trade agreement. Free trade agreements don't need to be transitive (and usually are not). Customs unions are. For example, the US and Canada have a free trade agreement, and the EU and Canada have one, but there is no free trade between the EU and the US. This answer would be improved if it didn't confuse matters by mentioning free trade agreements.
    – phoog
    Mar 8 at 20:09
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    Some more nitpicking: A customs union is not exactly a “common market”. I would associate that phrase with something like the EU “single market” or “internal market”. It requires many additional rules and is not exactly co-extensive with the EU customs union (cf. Turkey or Norway).
    – Relaxed
    Mar 9 at 9:41
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A customs union is more than free trade (o.m.'s answer). It's about e.g. having a set of standards for imported products. If (say) you can import chlorinated chicken in the Eurasian Union, but you can't in the European one, what is a country member of both going to do without breaking either treaty, etc.

Or as former deputy chairman of the Russian Central Bank explained in a 2014 article:

This point calls for a technical explanation: countries rely on several forms of bilateral and multilateral agreements to facilitate foreign trade. The two most common are Free Trade Areas (FTAs) and Customs Unions (CUs). In an FTA member-states agree to eliminate all (or the bulk) of tariffs on each other, but maintain individual tariff policies vis-a-vis third parties. Thus, when countries join an FTA, they do not commit to cooperate with each other in setting their import tariffs. A CU is a closer and more sophisticated form of international cooperation whose main feature is the establishment of the supra-national authority to which the members of the CU delegate their power to decide upon joint import tariff regime (including rates). CU members are not allowed to join another as it may lead to regulatory conflicts.

[...]

In 2007, Russia, Belarus, and Kazakhstan have agreed to establish a EACU that came into existence in 2010. The tariff policy within the EACU was delegated to the supra-national agency (initially Commission of the CU, since July 2012—Eurasian Economic Commission). As a result, Russia, Belarus, and Kazakhstan are not able to change their tariff rates alone but need to coordinate steps with two other members of the EACU. The EACU Treaty also prohibits its members to join other CUs.

And besides those, various other concerns have been raised, on the Russian side:

According to President Putin, he warned former President of Ukraine Viktor Yanukovych about the problem of European goods flooding the Russian market through the free trade arrangement with Ukraine when they discussed this issue in November 2013, on the eve of the Vilnius Summit, where the signing of the AA and DCFTA was set to take place. However, Prime Minister Medvedev was ambiguous in his statement on this issue and said only that the impact of Ukraine’s signing an AA and DCFTA was uncertain.

Expanding on Putin’s grim forecast, Russian chief negotiator in the World Trade Organization Maksim Medvedkov, has focused on a possible threat to the Russian economy as a “domino effect,” whereby Ukrainian goods will be driven out of Ukraine by European ones and will instead be sent to Russia. Alternatively, the territory of Ukraine will be used by EU companies for simple operations in finishing, assembling, and then re-exporting their products to the Customs Union.”

Other Russian leaders have sounded more dire predictions about the impact of the AA and DCFTA signing on Russian interests. Deputy Prime Minister Dmitri Rogozin has stated that “an [AA] with the EU is a change in the neutral status of Moldova. There is a certain rule that all NATO members know: in order to enter the EU, you are required to join NATO. This rule will not change for Moldova. All countries go through this. Therefore, association with the EU will be the moment when Moldova turns the doorknob of NATO.” This statement, despite it being false, appears to reflect the real concerns of Putin personally and is one of the main drivers of Russian policy.

Ulyukayev’s deputy in charge of international economic cooperation Andrei Likhachev, was also quite subdued in his comments. He focused on the possible conflict of regulatory norms in the future:

“Moldova will not be able to combine two regulatory systems: the CIS and the EU. It will be forced to make a certain choice. And if that choice will be in favor of the European system, then the CIS system will cease to be comfortable. … If Moldova signs the agreement with the EU, it may encounter contradictory obligations in customs and transport regulations, sanitary and migration control. Moreover, the most painful issue may turn out to be the differences in the application of sanitary norms and migration policy.”

The last one is actually a reiteration of my initial point.

The EU's position is less detailed in that article, but paraphrased as:

The DCFTA in its current form does not allow any of three countries to join Russia-sponsored EACU because in such a case EU should start FTA negotiations with the entire CU, while the EU is not ready for that;

DCFTA - Deep and Comprehensive Free Trade Area

AA - Association Agreement

EACU - Eurasian_Customs_Union

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    Having common standards is not a requirement for a customs union. The core feature of a customs union is harmonized tariffs.
    – phoog
    Mar 8 at 20:13
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Nobody needed to make explicit demands, it comes from the nature of a customs union, especially the requirement to have common external tariffs. Consequently, members of a customs union negotiate free trade agreements as a bloc or commit to align their trade policies (for an example, consider Turkey). It would be very difficult to achieve that in practice with two different set of countries that each have their own divergent trade policies. The EU declaration (or any similar statement from Russia) is a simple reminder of this legal fact, not an arbitrary demand from either party.

This constraint is also entrenched in WTO regulation, as it requires a carve out from the “most-favored-nation” clause (MFN). The MFN rule says that if you grant a privilege to one of your trade partners, you have to grant the same to all others. It's a way to ratchet up commitments in a multilateral setting and a key mechanism of the GATT negotiation rounds.

Since joining a customs union entails unencumbered trade (with no duties or quantitative restrictions) for goods originating in any of its member countries, triggering the MFN would require a country to give up external tariffs entirely if they wanted to join one. That's why GATT / WTO members created an exemption to allow groups of countries to facilitate stronger regional trade. That means that a customs union needs to meet the WTO definition to benefit from this exemption, including applying “substantially the same duties and other regulations of commerce by each of the members of the union to the trade of territories not included in the union”.

In other words, if a country is a member of the EU Customs Union, it has to apply the same tariffs as other members to goods coming from the Eurasian Customs Union (EACU). If the EU applies any restriction to goods from the EACU, it would be illegal for Ukraine not to apply the same restrictions while being a part of the EU Customs Union (and vice versa). That's only possible if both sets of countries form a single customs union, with no tariff at all in either direction.

While similar issues plague negotiations around Northern Ireland's status since Brexit, it might be useful to note that there is a distinction between the architecture of the EU internal market and a mere customs union. Unlike the EU internal market, a customs union does not aim at removing paperwork or formalities at the border entirely (again Turkey is a good example). It's also not required to cover all goods traded in the country but can also merely apply to goods originating in one country or have exemptions for certain categories of goods (hence the paperwork). It could therefore be possible to find some workaround to let Ukraine freely trade goods with both customs unions. The common external tariff is really the dealbreaker.

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