Kyiv Faces Looming Economic Hurdles as EU Tariff Exemption Expires
Overnight abolition of EU tariff exceptions for Ukraine products
In a blow to Ukraine, the European Union has ceased its trade preferences, implying significant financial repercussions for the war-torn nation. The EU Commission announced the termination of transitional measures at midnight, and these rules will stay in effect until a new trade agreement is concluded.
Ukrainian agricultural organizations anticipate the reforms could cost the country billions in lost foreign exchange earnings, potentially up to 3.3 billion euros, and a corresponding decrease in economic performance by around 2.5% this year.
Apolitical Consideration?
When inquired about offering additional financial aid to Ukraine, a EU Commission representative expressed reluctance to commit. They stated that such discussions would be addressed during negotiations with their Ukrainian counterparts.
Which Concessions Have Been Withdrawn?
Following the initiation of the Russian aggression in February 2022, the EU suspended import duties on Ukrainian goods to foster economic recovery, largely focusing on agricultural products. As the Ukrainian agriculture sector contributes more than 7% to the country's GDP, this provision was a vital lifeline.
In 2023, the trade facilitation measures were prolonged; however, the EU introduced stricter guidelines for certain food imports, impacting poultry, eggs, sugar, oats, corn, coarse grain, and honey.
The Controversy
The EU's aid to Ukrainian farmers encountered considerable resistance, particularly from neighboring countries such as Poland and Hungary. They contended with the uneven competition from inexpensive agricultural imports from Ukraine. France also backed stricter customs regulations, while EU diplomats cited national agricultural interests as influential factors driving the debate surrounding the expiry of trade facilitation measures.
Bernd Lange, chairman of the trade committee in the EU Parliament, denounced the lack of a mutually beneficial solution before the expiry of the trade facilitation measures, labeling the exclusion of tariff exemptions as an "inappropriate" consideration for sensitivities in Poland.
New Rules Go into Effect
Since midnight, the EU Commission has reinstated the quota limits defined in a 2016 agreement. With more than half of the year already elapsed, this means that Ukrainian agricultural product imports will be subject to limits calculated from the old trade agreement until the end of 2025.
The EU Commission vows to expedite negotiations for a new agreement, addressing the concerns of European farmers and select EU member states in the process. Ukrainian and EU negotiators are currently engaged in discussions over a permanent new agreement, placing increased pressure on Ukraine to reach a resolution swiftly.
Source: ntv.de, mdi/dpa
Enrichment Data:
- The new rules and conditions for Ukrainian agricultural product imports into the EU represent a shift towards pre-war trade conditions, with minor adaptations.
- The EU has reinstated tariffs and quotas on various Ukrainian agricultural products from June 6, 2022, placing limitations on Ukrainian exports until the end of 2025.
- The EU is negotiating a new trade agreement with Ukraine to establish a more balanced trade framework, addressing concerns raised by both sides.
- The expiration of the EU tariff exemption for Ukrainian agricultural products, as stated by Bernd Lange, is an "inappropriate" policy decision that disregards the sensitivities in Poland and other European nations regarding uneven competition from inexpensive imports.
- The community and employment policies of the EU are being tested, as the reinstatement of tariffs and quotas on Ukrainian agricultural products could potentially lead to job losses for Ukrainian farmers and impact the overall economic performance, especially in the agricultural sector, which contributes more than 7% to the country's GDP.
