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Extension of trade support for Ukraine, yet with new restrictions

Svitlana Taran

Date: 28/03/2024

On 27 March, EU ambassadors (COREPER) agreed on a new compromise text for extending the suspension of import duties and tariff quotas on Ukrainian agricultural products for another year (until 5 June 2025). This includes new safeguard measures for certain sensitive agricultural products. Reaching a compromise was challenging, as EU members needed to find a balance between support for Ukraine and protection of EU agricultural markets”. The decision still needs the green light from the European Parliament. A vote is expected in April.

The extension of the duty-free regime is good news for wartime Ukraine, given that Kyiv wants to sustain and facilitate its major agri-food exports and reduce dependence on international financial support. However, it was necessary to find a compromise on some issues. The new rules, for example, introduce “safeguards for EU farmers to protect them in the event of market disruptions. However, this would make it harder to access the EU market and thus further reduce Ukraine’s agri-food exports to the EU. Some EU sectors might also be impacted as they are more dependent on imports of maize, sugar and other agri-food from Ukraine.

The new safeguard measures entail capping duty-free volumes of sensitive products from Ukraine. If their import flows exceed the average volumes during the established reference period (see below), safeguards will be automatically applied, and the products will be subject to tariffs. This cap aims to prevent further import surges from Ukraine into the EU.

EU member states diverged on how restrictive the safeguard measures should be – in terms of the list of sensitive products, to which safeguards will be applied, and the permitted level of their duty-free imports. The agreed list of sensitive products includes eggs, sugar, poultry, oats, maize, groats, and honey. Ukrainian wheat is not included, but its export to the EU will be also carefully monitored.

The permitted level of duty-free imports is determined by the reference period. The European Commission initially suggested the post-invasion 2022-2023 reference period to calculate the average flows when Ukrainian imports were higher. In this case, the cap would not have meant a significant decline in duty-free access for Ukrainian products. However, Poland and France sought to add 2021 to the reference period, when pre-war tariff rate quotas (TRQs) were in place and the volume of Ukrainian agri-food imports was much lower. For example, EU imports of Ukrainian eggs reached about 40,000 tonnes in 2023, 17,000 tonnes in 2022, while only 4,500 tonnes in 2021 (TRQ was 6,000 tonnes). As a compromise, EU ambassadors eventually agreed to include only the second half of 2021, thereby balancing their positions.

The new restrictions may place further pressure on Ukraine’s agri-food exports, which already face significant impediments in the EU neighbouring countries, including the months-long border blockade by Polish farmers. Ukrainian exporters will rapidly need to find ways to reorient export flows to other markets. This will require further support from the international community.

As temporary trade preferences are not sustainable, EU-Ukraine trade needs to be further liberalised on permanently(including the revision of rather small tariff rate quotas for agri-food products), which is possible under Ukraine’s Association Agreement with the EU (Article 29). Negotiations are expected to start already in 2024 with the goal of reaching an agreement by June 2025. Meanwhile, imposing prohibitive tariffs on Russian agri-food products, as suggested by the Commission could ease pressure on EU farmers and provide more opportunities for Ukrainian exporters to replace them in the EU markets.

Overall, the compromise of 27 member states on trade support of Ukraine is a good temporary achievement considering the significant divergence of interests in the EU. Other systemic measures to facilitate uninterrupted and less restricted EU-Ukraine trade are pending.

Svitlana Taran is a Fellow in the Europe in the World Programme at the European Policy Centre. 

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This Flash Analysis is part of the Ukraine's European Future project.

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