27th Feb 2024

EU curbs on Ukraine imports could be economic 'catastrophe'

  • Poland, Hungary, and Slovakia currently have in place bans on Ukraine grain imports (Photo: grrrrl)
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The European Commission is set to unveil on Wednesday (30 January) a proposal to extend its duty-free trade policy with beleaguered Ukraine — but some argue that potential restrictions on certain imports would have a "catastrophic" impact on Ukraine's economy.

The renewal of the so-called Autonomous Trade Measures (ATMs) is expected to introduce various changes to the first iteration, which was activated in June 2022, a few months after the Russian invasion of Ukraine.

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New safeguard mechanisms, designed to address concerns from neighbouring countries, would include an emergency mechanism for imports of sensitive products such as eggs, poultry and sugar to protect the markets of member states, when necessary, according to EU diplomats.

And emergency measures could be activated when problems are identified just in one EU country, not in the EU as a whole.

"The mood has changed," an EU senior diplomat said, referring to the thinking of the EU commission — which initially ruled out any quotas.

However, according to the head of the Federation of Employers of Ukraine, Dmytro Oliinyk, the introduction of restrictions on agricultural products could have a "catastrophic" impact on Ukraine's economy.

"Any trade barriers to Ukraine's exports could undermine its macroeconomic stability and necessitate more direct monetary support from the EU," he said in a letter to EU commission president Ursula von der Leyen.

Oliinyk also warned that any significant export restrictions will have consequences for the stability of Ukraine's rural areas, reducing the likelihood of retaining people in the country.

An end to bans?

The new proposal — which would enter into force in June — is expected to extend the duty-free trade agreement with Ukraine until mid-2025.

And it could also help Poland, Slovakia, and Hungary to drop their current bans on Ukraine grain imports, which led Kyiv to file a complaint with the World Trade Organization in September last year.

Frontline neighbouring states have argued that their local markets and producers have experienced disruptions due to a surge in cheaper Ukrainian imports.

But introducing certain restrictions in the EU legislation would in effect "legalise" such bans, according to Oliinyk.

"Implementing further trade barriers to Ukraine's agricultural exports will undoubtedly undermine the country's ability to fight off Russian aggression. Our European neighbours should really consider whether buying some of our grain is really worse than facing the onslaught of Russian guns," Oliinyk told EUobserver.

While the commission deems the bans illegitimate, no sanctions have been imposed to encourage diplomatic efforts and dialogue.

"So far, the monitoring has not shown adverse effects on the union market," a commission spokesperson told EUobserver.

Since the change of the government in Poland following the October elections, Warsaw has been holding intense talks with Ukraine and the EU Commission. And their ban could likely be dropped before June.

Alternatives for maize or rape seeds

Slovakia, Bulgaria, Hungary, Romania and Poland previously raised concerns about the impact of the suspension of import duties, quotas, and trade defence measures on Ukrainian exports to the EU.

Slovakia, for example, has seen exports of wheat and maize to Germany decrease from 313,000 tons in 2021 to 91,000 tons in 2023.

Additionally, they have also called for the introduction of tariff quotas for the most sensitive agricultural products in a letter to the commission.

Echoing the same concerns, centre-right MEPs also said farmers and producers in the poultry, sugar and eggs sectors are the ones facing significant challenges due to significant surges in imports from Ukraine.

An EU diplomat told EUobserver that for maize or rape seeds, which already have zero import duty as per the EU customs tariff, reintroducing tariff rate quotas isn't an option — and that instead, alternatives should be found.

The proposal comes just before EU leaders meeting in Brussels to try to reach an agreement on providing some €50bn in urgently needed aid for Ukraine.

It is estimated that Ukraine's food exports accounted for 61 percent of all its exports in 2023.

This article has been updated to clarify new safeguard mechanisms

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