EU approves new terms of trade liberalization with Ukraine: UCAB names potential losses for the economy
Kyiv • UNN
The UCAB named potential losses for the economy as the EU agreed on new terms of trade liberalization with Ukraine.
The EU has preliminarily agreed to extend the suspension of import duties and quotas on Ukrainian exports to the EU until June 5, 2025, while strengthening protective measures for sensitive agricultural products. The potential losses for Ukraine's economy could amount to approximately 300 million euros. This was reported to UNN by Oleksandra Avramenko, head of the UCAB European Integration Committee.
It should be noted that the regulation will include two safeguard mechanisms to protect the EU market, including a new automatic safeguard mechanism that will oblige the European Commission to reintroduce tariff quotas if imports of poultry, eggs, sugar, oats, corn, cereals and honey exceed the arithmetic average of the volumes imported in the second half of 2021, 2022 and 2023.
One of the biggest difficulties we may face is the lack of predictability, as the calculation of the critical import volume from the EU starts on January 1, 2024, and we still do not fully understand what the final critical import volume will be. As of now, the European Parliament's Committee on International Trade has confirmed its approval of the latest version of the draft regulation, which takes into account the second half of 2021, the whole of 2022, and the whole of 2023. But at the same time, we still don't understand how all this volume will be calculated
According to her, there is no understanding of what the critical volume of imports will be, but it will start to be counted from January 1, 2024.
"That is, it may happen that by the time the final text of the regulation is adopted, we will have already used a significant portion of this critical volume. And then Ukrainian exporters will need to make a decision quite quickly whether to continue exporting and in what volumes to the EU market, or to look for additional markets and additional routes to other countries, because, for example, products that come in bulk from the ports of Odesa are one logistics and price story, and finished products that travel through the EU, via the Solidarity Roads, and which have more expensive logistics, are another," Avramenko said.
Avramenko pointed out that the biggest problem is the inability to properly plan its export activities and the lack of a full understanding of exactly how much Ukraine can export to the European Union.
"In addition, the draft regulation does not answer the question of how the volume of critical imports will be calculated, what customs codes include "sensitive" products, i.e. there are many nuances that can change the entire calculation. Accordingly, we still need to wait for the final text of the regulation and the European Commission's clarification," Avramenko said.
According to her, it turns out that Ukraine will be exporting for half a year without fully understanding the limit.
"This, of course, affects the mood of Ukrainian exporters. As of now, we understand that there will be a certain critical volume of imports, after which restrictions should be imposed in the form of a return to the level of quotas and customs tariffs on imports," Avramenko explained.
She noted that the products could become uncompetitive in the European market.
"Accordingly, the products that were previously limited by quotas and rather high import duty rates, usually did not continue to be exported to the EU after the quota was exhausted. This means that, given the customs rates, the products became uncompetitive on the European market, which makes us think that this time the products will not go to the EU market after the critical import volumes are exhausted," Avramenko said.
Thus, according to her, the potential losses of Ukraine's economy may amount to approximately EUR 300 million.
The calculations prepared by UCAB are quite preliminary. According to the current text of the draft regulation, about 300 million euros are potential losses not just for the agricultural sector, but for the Ukrainian economy itself
She noted that exports to the EU are profitable for Ukraine because the EU is "right next door" in logistical terms, and this market is quite marginal for Ukrainian exporters of value-added products.
"When exporting to the EU, we have enough road logistics, which is much less expensive compared to logistics through the EU to third countries, which is much more expensive. At the same time, the price in third markets should be lower, and the products will be less marginal. That is, there is a certain level of profit that we will not receive," Avramenko said.
