Brussels proposes to extend EU-Ukraine free trade. But restrictions on grain will be easier to slap

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The European Commission on Wednesday proposed extending free trade with Ukraine until June 2025, but with a new change to allow the kind of domestic restrictions Kiev has complained about.

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The U-turn means that if one or more member states were to face a glut of Ukrainian agricultural products, Brussels could give the green light to limit the sale and storage of these products within the affected country. A total ban will also be possible, as the proposed law was deliberately drafted in indefinite terms.

So-called “corrective measures” will need to be supported by economic evidence, which tends to be strongly influenced by political considerations. Once approved, the restrictions will last as long as the market turbulence lasts.

Furthermore, the Commission has launched a new safeguard to keep under control the “most sensitive products” from Ukraine, namely poultry, eggs and sugar. If these import volumes increase above the levels seen in 2022 and 2023, an emergency brake will automatically be activated and pre-war tariffs will be reintroduced.

Corn and wheat, the most traded commodities, will not be considered “sensitive” because the European market is traditionally receptive to these flows, while the surge in poultry, eggs and sugar has largely defied historical patterns.

Speaking to journalists, Margaritis Schinas, one of the Commission’s vice-presidents, defended the new regime, arguing that it represents a balance between support for Ukraine and concerns raised by Eastern countries and the agricultural sector.

“While our monitoring has not shown any negative effects on the EU market as a whole, we are aware that these Ukrainian imports may have some more localized negative effects,” Schinas said.

While the final decision to restrict trade and impose tariffs will be up to the Commission, member states will have a “larger role” in the process and will be able to make recommendations and advice, he added. “This allows for greater ownership.”

Wednesday’s announcement comes as farmers take to the streets in Germany, France and Belgium to denounce the cost of living crisis, the elimination of tax breaks, delays in payment of subsidies, environmental regulation and loss of competitiveness.

The growing movementwhich the far right is trying to exploit to its electoral advantage, has put Brussels under intense scrutiny and cast doubt on its ambitious Green Deal.

Asked whether the discontent had anything to do with the tightened proposal, Schinas rejected a direct cause-and-effect relationship but expressed the “utmost respect” for the protesters. “European farmers know that they have no better ally to safeguard their income than the European Commission,” she said.

The draft regulation must be subject to negotiations between the Council and the European Parliament before entering into force.

Grain, a long-running saga

Ukraine is one of the world’s leading exporters of essential goods such as sunflower oil, barley, corn and wheat. Russia’s all-out war on the country and subsequent blockade of the Black Sea have severely hampered the country’s ability to ship its goods, raise a crucial source of revenue, and access foreign currency.

In June 2022, Brussels lifted all tariffs and quotas on Ukrainian imports to facilitate transit via land routes and provide an easy alternative to the Black Sea. But the free trade regime has led to a surge in Ukrainian grains in countries neighbors, triggering protests from local farmers, who said the cheap produce was driving down prices, filling inventories and causing unfair competition.

The dispute erupted in April 2023, when Poland, Hungary and Slovakia overnight imposed nationwide bans on a range of agricultural products from Ukraine. Romania and Bulgaria immediately warned that they would follow suit.

Taken by surprise, the Commission he reacted, denouncing the bans as unacceptable, illegal and contrary to the bloc’s spirit of solidarity. A group of 12 countries, including Germany, France, the Netherlands and Belgium, we read in a joint letter that the integrity of the single market was in danger.

The standoff lasted months and saw multiple attempts to resolve the situation through diplomacy. But the bans never completely disappeared, forcing Kiev to file a lawsuit before the World Trade Organization (WTO).

Currently, Poland, Hungary and Slovakia apply various restrictions on the consumption and storage of Ukrainian wheat and other agricultural products, while Romania and Bulgaria have negotiated a licensing agreement with Kiev to control the flows.

The Commission hopes that by offering the guarantees as an olive branch, the East will put an end to its unilateral and uncoordinated bans, which violate EU law and impinge on the exclusive competences of the executive.

ANNOUNCEMENT

If they put their foot down, Schinas warns, legal action will be taken.

“We, the Commission, have repeatedly asked these Member States to remove their national measures,” he said. “All options remain on the table.”

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