Will the EU stop free trade with Ukraine? Economist explains what restrictions may be imposed

The Free Trade Area (FTA) between Ukraine and the European Union (EU) will not expire in the summer of 2024. However, at the moment, there is an issue of partial return of quotas and duties on exports of a number of "sensitive" goods from Ukraine to Europe. In particular, these are eggs, chicken, and sugar.

Veronika Movchan, head of the Center for Economic Research, told OBOZ.UA. As for the FTA, it is indefinite. In the summer, autonomous trade preferences, which the EU introduced for Ukraine in 2022 in addition to the FTA to fully open the market, will expire.

"The free trade zone is not coming to an end in any case, the free trade zone is an Association Agreement, it has no end date. The Association Agreement says that the FTA should be fully formed within 10 years after it enters into force. Usually, they count from 2016, when Section 4 (of the Association Agreement – Ed.) came into force. That is, it takes 10 years to finalize it, and then it (the FTA – Ed.) is still in effect," Movchan explained.

Nevertheless, in the Association Agreement, and as a result of the FTA, the European Union retains incomplete market opening for some goods. "The governments agree that for certain sensitive goods, the opening is incomplete, or they remain closed, or, as in the Association Agreement, some goods have a zero duty rate, and the rest simply apply the regular rate," the expert said.

In June 2024, the preferences that provide for the abolition of quotas and duties for all Ukrainian goods will expire. However, Ukraine is interested in maintaining its preferential trade regime.

"Now, amid protests in Poland, the government is trying to maintain maximum access... But it's also important because Ukraine is heading to the European Union, there will be negotiations and so on, and in general, we want to have an open market, fully open as soon as possible," Movchan said.

The European Commission has already proposed extending autonomous trade preferences for Ukraine. However, the Europeans are planning to partially limit the supply of Ukrainian agricultural products.

"The decision has not yet been made... The EU Council still has to vote, but now, amid farmers' protests and calls from some EU member states, especially Poland, they are talking about returning to certain restrictions... There was a proposal that if the export of certain goods – as far as I remember, it was eggs, chicken, sugar, and a few other goods – reaches a certain level, it will be possible to return the import duty on the remaining volume," the expert said.

However, even now, trade preferences are not working at full capacity due to restrictions imposed by certain countries. For example, Poland has completely banned the import of wheat, which, according to Movchan, does not really comply with the EU-Ukraine Association Agreement.

"We'll see, it will be formed and agreed upon. The European Commission and European countries support Ukraine and want to maintain the most liberal access to support the Ukrainian economy. It is also obvious to them that the more Ukraine trades, the more Ukraine exports, the less external support it needs. This is not to say that we don't need it at all, but a functioning economy is much better than a non-functioning economy," Movchan said.

She reminded that, on the other hand, farmers' protests put pressure on the European authorities. Among other things, farmers are demanding to limit imports from Ukraine, although it is not the reason for the collapse of purchase prices for agricultural products in Europe.

"Against the backdrop of a global drop in agricultural prices, it is clear that farmers are looking for someone to blame, someone to close the market from to try to preserve their income. I am not sure that this is the right approach, but we have it. That's why the government is now really actively working with the European Commission to preserve the liberal regime as much as possible. The Ukrainian goal is, of course, to ensure that no additional restrictions are imposed and that there is no return to the regime that existed before 2022... There are many factors, many things that determine the competitiveness of goods, but the Ukrainian goal is to have free, duty-free trade for all goods. And the Europeans are now trying to deal with their protests, also having an interest in supporting Ukraine," the expert summarized.

As reported by OBOZ.UA, earlier the First Deputy Minister of Agrarian Policy and Food of Ukraine Taras Vysotsky, commenting on the situation with the border blockade, stressed that not only Ukrainian but also Polish producers lose income from the reduction in trade in agricultural products and food with Ukraine. According to him, the potential position of the European Union on the extension of trade preferences for Ukraine depends on this agreement.

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