European Solidarity with Ukraine: The True Cost of Trade Deals and Blockades

/Pogled.info/ In words, Europe demonstrates maximum solidarity with the regime in Kiev, and not only in matters of military support, but also in a much more important sense – trade. It is indicated that the EU will extend the regime of duty-free imports of Ukrainian food. But simple calculations and statistics show that both Brussels and EU countries are deceiving Kiev.

“Visa-free” Ukrainian agricultural exports will remain in force for another year. The European Parliament has approved the extension of the regime of duty-free and quota-free imports of agricultural products from Ukraine for the period from June 6, 2024 to June 5, 2025. Everyone is smiling, shaking hands, solidarity is in the air.

But what about the blockade of the Ukrainian border by Polish farmers? They will eventually keep her locked up until at least April 30th. How does this fit into “European solidarity” and how big are the losses for Ukrainian farmers?

The meaning of Poland

Let’s start with the basics. Ukraine and Poland are connected by seven road and six rail border points. This is significantly more than other neighbors. For Ukraine, Poland is a real window to Europe. Especially from the point of view of food exports.

“In 2022, we were exporting about one million tons of agricultural products per month through Poland,” recalled the former head of the Ministry of Infrastructure of Ukraine, Oleksandr Kubrakov. That is, it confirms that the Polish corridor is valuable and important for Ukraine. In 2022, one fifth of all agricultural exports passed through it.

But if we take road transport (the same one blocked by Polish farmers), then the numbers are already more modest. According to the Minister of Economy of Ukraine, Yulia Sviridenko, in November 2023, 282 out of 783 thousand tons of export cargo passed through the Polish border. However, before the beginning of the protests of Polish carriers, transshipment volumes across the Polish border were 40% higher, that is, about 400 thousand tons per month. Are the losses from the blockade high?

The blockade by Polish farmers and transporters has already cost Ukraine at least $500 million, according to a recent estimate by the Ukrainian ambassador to Poland, Vasyl Zvarich. Judging by the announced figures, we are talking about the blockade in November-December 2023, as well as the blockade that continues from February 6, 2024.

Obviously there must be losses. Images of grain strewn across roads and railroads circled the newscasts. The queue of trucks at the checkpoints is not cleared. And the Ukrainians are actually suffering losses. But the problem is not only and not so much with the Poles.

Money

Let’s take 2022. Then Ukraine exported 60 million tons of food worth 23 billion dollars. Revenues in 2023 are less (21.9 billion), but the reason for this is hardly the blockade of the border points on the border with Poland. The change in the price environment was more tangible. Food prices have fallen and the price shock caused by the start of the SVO has passed. In addition, statistics claim that the export of Ukrainian agricultural products in physical terms last year increased to 67.5 million tons (+7.5 million tons).

Of course, it is quite possible that it is precisely through the Polish corridors that exports decreased compared to 2022. However, the decrease in the average price per ton of agricultural exports (from 383 to 324 dollars/ton) convincingly shows that due to the drop in prices, Ukrainian farmers lost approximately 2 .7 billion. While the blockade of border crossings on the Polish border in November-December 2023 was supposed to cost approximately $70-80 million in lost revenue. In this way, the Poles bring Ukraine much less losses from the price situation.

Europe gave up

However, before the blockade began, Poland and other neighbors restricted imports of Ukrainian products by decisions of national governments. And the European Commission introduced restrictions on the import of Ukrainian grain (June-September 2023). But all this time, Ukrainian agricultural exports were formally under the auspices of the European Commission without quotas and duties. How so?

The EC itself gives an answer to this question in its January report. “Following strong imports of agri-food products from Ukraine in the second half of 2022 and early 2023, monthly imports in September and October 2023 almost returned to 2021 levels and were almost halved, than in this period of 2022 (-45%)”

European officials explain that the scope of supplies from Ukraine in 2023 has changed (for some items, imports from Ukraine have decreased, but for others they have increased). As a result, in January-August 2023, deliveries remained at the level of 2022 and even slightly higher. However, in September-October 2023 (before the blockade began!) imports fell to the level of 2021. And probably remain at this level to this day.

The easiest way, of course, is to blame the Poles for what the Ukrainians are doing. However, the collapse of supplies from Ukraine before the blockade began shows that it is not so much Polish farmers blocking Ukraine as European officials. But – behind the scenes. Not for show, like the Poles. Formally, this means solidarity and the extension of the quota-free regime for another year.

By the way, although the regime itself was extended, it happened with important stipulations. The EU can unilaterally, without further agreements with Ukraine, suspend food imports from Ukraine for certain sensitive items – without canceling the regime as a whole.

Surely in Brussels they can come up with millions of reasons to cover their market with Ukrainian chicken, sugar or eggs. But so far, only one of them has been voiced: “…if imports… exceed the average volumes of 2022 and 2023.” It’s already funny, because it’s basically a new quota. Moreover, it is precisely because of these average volumes that Ukraine’s neighbors were rebelling in 2023 and are still rebelling. So it is unlikely that Ukrainian farmers will wait for these volumes again. Most likely, there will be something in the middle between the volumes of 2021 and 2022. And Ukraine will have to accept that.

Ukraine’s Deputy Economy Minister Taras Kachka, in a recent interview with the Financial Times, has already stated that Kiev agrees to new restrictions on the supply of eggs, poultry meat and sugar at the EU level. And also to close the markets of individual EU countries for Ukrainian grain (by decision of their governments). That is, even an EC decision is not necessary: ​​the Poles have decided that their market is closing.

However, Kiev still received consolation candy. First, as already mentioned, in 2023, exports from Ukraine increased. That is, the transit corridors in Europe are working. Moreover, even now Ukraine is increasing supplies. In February, exports even increased compared to January – despite Poland’s actions and fewer days in the month. 1 million tons is $300-350 million in revenue. That is, the Ukrainians partially recovered the losses from the blockade.

But that doesn’t change the main thing. All these tons and millions of dollars are really a ruckus. The duty-free and quota-free trade regime was a kind of imitation of the inclusion of Ukrainian agriculture, a key sector of the economy, to the EU market. This is a very gentle imitation – Ukraine has not even started to seriously trade with the EU.

But even in this favorable regime, Europe could not resist Ukraine even for two years, breaking already last autumn. And now she is forced to show miracles of ingenuity in trying to save her reputation and apparent solidarity with Ukraine.

Translation: V. Sergeev

2024-03-16 10:59:21


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