Ukraine Faces Economic Bump as EU Trade Preferences Expire
The European Union has revoked trade benefits for Ukraine.
The European Union has let the trade preferences supporting Ukraine, under attack by Russia for three years, expire. The EU Commission enacted transitional rules at midnight German time, intended to hold till negotiations on a new trade agreement are finalized.
What's in Store for Ukraine?
Ukrainian agricultural organizations predict these changes could result in billions of dollars in losses for Ukraine. They estimate a decline in foreign exchange earnings of around 3.3 billion euros and a fall in economic performance of approximately 2.5 percent this year. When asked if the EU would now extend financial aid to Ukraine, an EU Commission spokesperson stated it's too early to tell.
Which Easements Get Axed?
Post the Russian invasion in 2022, the EU had suspended import duties for Ukrainian goods to boost the country's economy, focusing primarily on agricultural products. The Eastern European country has a substantial agricultural sector, accounting for more than seven percent of economic output.
Last year, the trade easements were extended, but the EU imposed stricter requirements for certain food imports, including poultry, eggs, sugar, oats, maize, coarse grain, and honey.
The Contentious Easements
The relaxation of tariffs for Ukrainian goods sparked disagreements amongst European farmers, particularly those in eastern neighbors like Poland and Hungary, who complained about unfair competition from cheap agricultural imports from Ukraine. France also advocated for stricter customs rules, and national agricultural sector interests played a part in the current debate on the expiration of trade easements.
Bernd Lange, the chairman of the EU Parliament's trade committee, found it unacceptable that a consensus solution couldn't be reached before the expiration of the trade easements, calling the absence of tariff exemption an inappropriate consideration for Polish sensitivities.
Current Rules in Play
Since midnight, the EU Commission stated that tariff quotas from an agreement dating back to 2016 are again applicable. This means seven twelfths of the annual quantities from the old trade agreement are available until the end of 2025, considering almost half of the year has already passed.
Next Steps
EU and Ukrainian negotiators are engaged in talks about a permanent new agreement. With the expiration of the previous easements, the pressure on Ukraine to reach a result as soon as possible has amplified. The length of the negotiations remains unknown. Trade politician Lange hopes to "now achieve a result quickly."
- The expiration of EU trade preferences has raised concerns about economic and social policy in Ukraine, as agricultural organizations predict losses of billions of dollars and a potential decline in economic performance by 2.5 percent this year.
- The financial sector is also affected, as it remains unclear whether the EU will extend financial aid to Ukraine following the expiration of the trade preferences.
- The current situation in politics and general news surrounding Ukraine includes contentious discussions about trade and policy-and-legislation, as disagreements arise between EU farmers and Ukrainian agricultural sector over easements and tariffs, particularly in the area of agricultural products.
