EU's upcoming decision may further disrupt Ukrainian exports: what consequences it entails

The European Union (EU) may meet Poland halfway and impose restrictions on the import of agricultural products from Ukraine to neighboring countries. Most likely, this will include Poland itself, as well as Hungary, Romania, Bulgaria, and Slovakia. If this happens, Ukrainian exports, which have already suffered from the border blockade, will be severely affected.

The European Commission (EC) will make a decision on the possible embargo this week (by January 28), the Financial Times (FT) reports. The information was confirmed by European Trade Commissioner Valdis Dombrovskis.

"The EC intends to offer additional guarantees to countries bordering Ukraine when it extends duty-free and quota-free access (to EU markets - Ed.) from June (2024 - Ed.)... The proposal is due this week and is likely to include 'country-specific safeguards' that allow Brussels to block imports in case of market overcrowding in a particular country," the article says.

According to analysts at the Center for Economic Strategy (CES), such a decision would significantly worsen Ukraine's overall exports. It will remain almost twice as low as in 2021: $36 billion in 2023 compared to $68.2 billion in 2021.

In November 2023 alone, the Ukrainian budget lost UAH 9.8 billion due to the blockade of the Polish border. Other countries, such as Hungary, Romania, Bulgaria, and Slovakia, are also demanding restrictions on Ukrainian exports from the EU.

"Ukraine lacks the ability to effectively negotiate at the sectoral level. More active lobbying is needed. Establishing public organizations of Ukrainian entrepreneurs could help prevent similar aggravations in the future," Yana Okhrimenko, senior economist at CES, commented.

Ukrainian exports under European restrictions can be supported by sea transportation, which was the most popular type of logistics before Russia's full-scale invasion of Ukraine. According to CES experts, the situation here is far from hopeless.

"In December, the Ukrainian maritime corridor overtook the grain corridor that was in place earlier (the one implemented together with Russia - Ed.) in terms of exports. Exports of ferrous metals have also partially resumed. Currently, steel mills are operating at about 70% of their capacity," the experts say.

As a reminder, Poland has been banning imports of Ukrainian agricultural products since spring 2023. The European Commission's decision in September of the same year to lift restrictions on the import of Ukrainian products did not affect the position of the Poles and a number of other neighbors of Ukraine, although it contradicts EU trade rules.

Poland, Slovakia, and Hungary imposed unilateral restrictions on Ukrainian imports. The World Trade Organization (WTO) is dealing with this issue in parallel with the European Commission, and the Ukrainian side has already filed a complaint with the WTO.

As reported, earlier, the European Commissioner from Poland Janusz Wojciechowski, who is responsible for agriculture in the European Commission, threatened to disrupt the extension of EU trade preferences for Ukraine. Among other things, the European Commissioner demanded a ban on imports of Ukrainian grain, as well as quotas on sugar and poultry.

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