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Brussels Troubled As Cheap Ukrainian Grain Distorts EU Market

  • On April 15, Poland and Hungary announced they would block all food products coming from Ukraine until the end of June.
  • Imports of foodstuffs from Ukraine into Eastern Europe have risen phenomenally since 2021.
  • The unilateral moves by Poland and Hungary cause a real dilemma for Brussels as trade policy is an exclusive EU competence.

Brussels was shocked when, on April 15, Poland and Hungary announced they would block all food products coming from Ukraine until the end of June. The measure was a direct response to the drop in prices on local markets because of the influx of foodstuffs from Ukraine.

Slovakia and Bulgaria soon followed suit, with Romania still mulling such a ban. These countries, which have been among Kyiv's biggest political supporters within the EU, have been struggling with two key initiatives the EU introduced last year to alleviate economic pressure on Ukraine.

The first was the solidarity lanes, which were aimed at facilitating the export of Ukrainian goods, mainly agricultural, to the EU and beyond via European roads, rail, and waterways as Ukrainian Black Sea ports faced Russian blockades. The second measure was the decision by the bloc in June 2022 to remove all tariffs and duties on Ukrainian goods entering the EU for one year.

The unilateral moves by Poland and Hungary cause a real dilemma for Brussels as trade policy is an exclusive EU competence, meaning member states legally cannot act alone. At first there were rumors Brussels would take measures against Budapest and Warsaw, either via fines or dragging them to court, but now there seems to be an understanding that farmers in countries neighboring Ukraine really are suffering.

To give a little perspective: In 2021, Poland imported 2,800 tons of wheat from other countries. In 2022, that number had risen to 500,000 tons. For maize, the increase was even more extreme, with imports reaching a staggering 1.8 million tons in 2022, compared to 5,800 tons the previous year. Poland is no outlier. Similar figures can be found in the other so-called frontline states.

Deep Background: On April 18, a few days after announcing it would block imports, Warsaw signaled it had struck a deal with Kyiv in which all Ukrainian products would be allowed to transit Poland but not enter its market.

According to the deal, which became valid on April 21, truck convoys with sealed goods would be monitored via GPS. While Brussels welcomed this as a first step, it is still looking for a uniform solution so as not to create trade imbalances on the EU's single market.

European Commission officials met with the trade ministers of Bulgaria, Hungary, Poland, Romania, and Slovakia, as well as their Ukrainian counterpart, in Brussels on April 19 with the hope of finding a common agreement. The EU proposed the introduction of safeguarding measures that could be taken immediately and would last until June 30 on four Ukrainian products: wheat, maize, rapeseed, and sunflower seeds.

Under the proposed measures, these four food products could transit the five EU countries but not stay there -- with Brussels pledging to consider putting other foods on the list. While this was similar to the deal Poland struck with Ukraine, the five affected countries didn't give the EU proposal the thumbs up, as they were also looking for safeguards on eggs, poultry, honey, and various berries.

Drilling Down:

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  • Talks are continuing, with the hope of coming to an EU-wide agreement when the bloc's agricultural ministers meet in Luxembourg on April 25. A sweetener could be financial support to compensate the farmers. In late March, Bulgarian, Polish, and Romanian farmers received 56 million euros ($62 million) in direct support from the EU budget. Another package worth 100 million euros, this one including Slovak and Hungarian farmers, is also on the way.
  • Then, on April 26, EU ambassadors could also prolong the tariff-free regime with Ukraine for one more year. This was proposed by the European Commission earlier in the spring -- back then, it was seen as something of a no-brainer. But with the latest crisis, the vote that was supposed to be held last week was postponed.
  • When it comes to trade measures -- such as a temporary tariff-free regime with Ukraine -- you don't need unanimity for an extension. Instead, the issue can be settled by qualified majority voting (QMV), meaning 55 percent of member states (roughly 15 out of 27) representing 65 percent of the total EU population have to vote in favor. The Swedes, who are currently chairing the rotating EU presidency, are confident of securing the required QMV but would prefer to reach a consensus on such a political hot potato.
  • Regarding the solidarity lanes, they have been hugely beneficial for both Ukraine and the EU. Kyiv has managed to export 63 million tons of goods in the past 12 months, of which around half is grain, earning the country 26 billion euros. And the EU has exported 23 million tons of goods to countries outside the bloc, worth up to 48 billion euros, since the start of Russia's full-scale invasion of Ukraine in February 2022 -- "everything from diapers to Kalashnikovs," as one EU official put it.
  • With such heavy traffic, the EU-Ukraine border crossings and the solidarity lanes are under strain -- notably the Danube River, through which around half of all Ukrainian exports are shipped. The EU has earmarked 25 million euros of investment, which would mean bigger barges and the possibility of nighttime navigation to extend the hours of transport.
  • Another problem is the solidarity lanes' logistical costs are too high, accounting for about 40 percent of the total price of exports, a figure that should be no more than 10 percent. Even last year, when droughts damaged most of the EU harvests, Spain found it cheaper to import maize from Latin America than to get it from Ukraine.

By RFE/RL

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