The agricultural community addressed to the Government with proposals to support the agricultural sector of Ukraine
UCAB, together with the leading agrarian associations that are members of the Public Union "Ukrainian National Agrarian Forum" – Public Union "Agrarian Union of Ukraine", Public Union “Ukrainian Agrarian Council”, Association “Poultry Union of Ukraine” appealed to the Prime Minister of Ukraine Denys Shmyhal with a request to resolve the critical situation with the export of Ukrainian agri-food products, as well as to take a number of measures to support the agricultural sector.
Unfortunately, the full-scale Russian military aggression against Ukraine resulted in an almost complete blockade of Ukrainian seaports, as a result of which the export of agri-food products from Ukraine was in danger of a complete halt. Subsequently, the negative effects of this situation were mitigated to a certain extent thanks to:
- implementation by the EU of the initiative "Solidarity Lanes", which made it possible to reorient the traditional export cargo flows of Ukrainian agricultural products to the use of new routes;
- the adoption by the European Parliament and the EU Council of Regulations (EU) 2022/870 and 2023/1077, which provide for a temporary suspension by the EU of import tariffs and quotas for Ukrainian products, in particular agricultural and food products;
- Agreement between the European Union and Ukraine on the carriage of freight by road, which provides for the EU's refusal from the licensing procedure for granting Ukrainian carriers the right to carry out road transport across the territory of the EU Member States.
We sincerely thank the President of Ukraine, the Government of Ukraine, as well as representatives of the European Commission, the European Parliament and the Council of the EU for these important support steps for the Ukrainian economy in such difficult times for our country.
At the same time, we are deeply concerned about the latest initiatives of individual EU Member States and the European Commission, which jeopardize the implementation of the above decisions, and also carry the danger of destroying the Ukrainian agricultural sector of the economy.
In particular, Ukrainian farmers and food producers are very concerned about these 10 conditions:
1) Factual destruction of the Solidarity Lanes initiative
Geographically, all of the new logistical routes that have been established as part of the Solidarity Lanes initiative pass through the territory of five EU Member States, which recently initiated the introduction by the European Commission of a ban on the import of Ukrainian grain to certain EU Member States.
As a result of this ban, not only the export of Ukrainian grain to such individual EU member states collapsed, but also its transit through the territory of these states to other countries of the world.
In particular, according to the (Acting) Director-General of the Directorate-General for Mobility and Transport (DG MOVE) Maja Bakran, as of June 2, 2023, within the framework of the Solidarity Lanes initiative, the transit of Ukrainian grain amounted to only 30% of the volume that occurred prior to the European Commission's May 2023 ban on Ukrainian grain imports to five separate EU Member States.
Thus, the EU initiative Solidarity Lanes was compromised by the EU itself and, de facto, ceased to satisfy the needs of Ukrainian farmers.
2) the risk of a return to the permissive procedure for granting Ukrainian carriers the right to carry out road transport across the EU
In May 2023, Polish carriers blocked the possibility of any (even transit) trucks crossing the state border of Ukraine with Poland. The block lasted almost two weeks. The main demand of the protesters is the return for Ukrainian carriers of the licensing procedure for the implementation of international road freight transport through the EU.
That is, blackmailing the physical blocking of Ukrainian exports, the carriers of one of the EU member states demanded the de facto termination of the Agreement concluded between Ukraine and the EU, which provides for the liberalization of freight transport by road.
Unfortunately, this is not the only such case. So in February, April and early June 2023, our exports were blocked by Polish, Bulgarian and Romanian farmers. As a result of such blocking, the electronic queue for leaving Ukraine each time reached a “length” of 3-4 thousand trucks.
Thus, the export of agricultural products from Ukraine, both by road and by sea, is becoming increasingly unpredictable. It also gives rise to doubts about the EU's readiness to ensure the real liberalization of road freight transport, as provided for by the relevant Agreement.
3) continued existence at the level of individual EU member states of decisions to ban the import and transit of Ukrainian grain
Unfortunately, not all EU member states have yet canceled their national decisions on the one-sided ban on the import and transit of Ukrainian grain (for example, Hungary has not yet done this). This continues to damage and harm the interests of the Ukrainian agricultural sector.
Moreover, this neutralizes the significance of the decisions taken by the European Parliament and the Council of the EU (in particular Regulation (EU) 2022/870 and Regulation (EU) 2023/1077) on the temporary liberalization of the trade regime between Ukraine and the EU.
We believe that this situation requires a more strong reaction from the Ukrainian side at all levels in order to quickly remove artificially created obstacles to the export of Ukrainian agricultural products.
4) the emergence in the EU of practices that violate the terms of the Association Agreement and are discriminatory towards Ukraine
In accordance with Article 35 of the Association Agreement, neither Party shall impose any prohibition or restriction on the import of any product of the other Party.
Thus, the practice of EU adoption of restrictions on the import of Ukrainian grain into the territory of five separate EU member states violates the above provisions of the Association Agreement and discriminates against Ukraine.
The discriminatory practice of the EU is also evidenced by the provisions of paragraph 9 of the preamble to Regulation (EU) 2023/1077, which establishes that Ukraine must refrain from imposing any restrictions on trade with the EU. That is, the Regulation (EU) requires Ukraine to waive its right
to take any protective measures in response to restrictions unilaterally imposed by the EU on Ukraine.
At the same time, we draw attention to the fact that, in accordance with Article XXI of the General Agreement on Tariffs and Trade (GATT 1947), all states parties to this Agreement have the right to take any action that they consider necessary to protect the essential interests of their security (in particular, economic security ) during the conduct of war or the occurrence of other emergency circumstances.
In such situation, we consider it expedient to seek by all available means from the EU the return of compliance with the provisions of Article 35 of the Association Agreement, in particular by repealing Regulation (EU) 2022/870 and Regulation (EU) 2023/1077 even before September 15, 2023.
5) rhetoric of European officials on the further introduction of quotas and investigations into Ukrainian agri-food products
On June 5, 2023, the European Commission decided to extend until September 15, 2023 the ban on the export of Ukrainian grain to the EU. The day after that, the European Commissioner for Agriculture said that in addition to the ban on the import of Ukrainian grain, the EU needs additional protective measures for the import of Ukrainian poultry meat. The European Commissioner proves this step by the fact that recently the import of poultry meat from Ukraine to the EU has increased significantly.
But this position of the European Commissioner is at least unfair. Thus, the increase in the volume of poultry meat supplies from Ukraine to the EU over the past two years is +54 thousand tons (a significant part of which were imported to the EU for the purpose of transit). This is significantly less than the increase in supplies from Brazil over the same period (+88 thousand tons, which is 1.6 times more than the increase in supplies from Ukraine). Therefore, with an objective and fair approach, the European Commissioner should deal with a significant increase in the supply of poultry meat from Brazil, and not from Ukraine.
Also, in 2021 and 2022, the largest suppliers of poultry meat to the EU were Brazil, the UK and Thailand, but not Ukraine.
In addition, according to the European Commissioner for Home Affairs, as a result of the war, more than 8 million Ukrainians were forced to leave Ukraine and move to the EU. The presence of fellow citizens in the EU affects the increase in the consumption of food and other products.
In turn, Ukraine increased the supply of poultry meat to the EU in the amount equal to six kg per year (or 0.5 kg per month) per Ukrainian who found refuge in the EU during the war. This is almost four times less than the average EU citizen consumes (23.4 kg per year, or about 1.95 kg per month).
That is, Ukraine, with the above indicator of the increase in its supplies, is still very, very far from being able to provide 8 million of its fellow citizens who have moved to the EU with poultry meat at the average European level.
Thus, statements by the European Commissioner for Agriculture are biased and there are no objective grounds for them.
6) risks of extending and expanding bans on imports of Ukrainian agricultural and food products to the EU after September 15, 2023
Unfortunately, the governments of individual EU member states do not leave their attempts to extend the ban on the import of Ukrainian grain, as well as attempts to expand the list of Ukrainian agricultural and food products that will be subject to a similar ban.
The last statement on this matter was made by the Minister of Agriculture and Rural Development of Romania on June 15, 2023 during the relevant hearings in the Romanian Parliament. In particular, he stated that Romania will apply to the European Commission with a request:
a) extend the ban on the import of Ukrainian grain until the end of 2023;
b) establish a ban on imports from Ukraine for 10 new commodity items (in addition to the ban on Ukrainian grain already established today).
Similar statements are made from time to time by officials of other EU member states (Hungary, Slovakia, Bulgaria, Poland, etc.).
Under such conditions, we believe that the risks of extending the ban on the import of Ukrainian grain into the EU after September 15, 2023, as well as extending such a ban to other Ukrainian agricultural and food products, are quite real. We also believe that in this situation Ukraine:
a) must not leave such statements without a proper response;
b) should step up work to stop and block such initiatives, even before they appear at the national level of the respective Member States;
c) must prevent the introduction of new and extension of existing restrictions on the import of Ukrainian agricultural and food products into the EU;
d) should raise before the EU the issue of the prompt introduction of bans on imports into the EU of agricultural and food products from the aggressor states (from the Russian Federation and the Republic of Belarus).
7) application by individual EU member states to Ukrainian agro-food of a regime of enhanced control
In the past few months, consignments of Ukrainian agricultural products have begun to be subjected to continuous checks by EU member states when crossing the border. As a result, the duration of cargo clearance and the number of cases of detection of minor non-compliances (for example, broken glass containers or the presence of some elements of mold in the meal) have increased.
During the first 5.5 months of 2022, when exporting Ukrainian agri-food to the EU, 11 non-compliant cargoes were detected, six of which were detected by Poland. During the same time in 2023, 74 such cargoes were already detected (an increase of 6.7 times), 70 of them were detected by Poland (an increase of 11.7 times).
In turn, the number of cases where the identified non-compliances did not carry a serious risk to human or animal health increased by 6.3 times (from six to 38 cases). The share of Poland in detecting such cargo increased by 8.3 times (from four to 33 cases).
At the same time, control has also increased significantly in the Slovak Republic. Now samples are taken from 70% of cars crossing the border. At the same time, the cost of sampling and laboratory control services is paid by the exporter.
The data presented indicate that the authorities of these countries actually introduced a non-tariff barrier in the form of a regime of enhanced control of Ukrainian agricultural and food products. The result of such actions may be the accumulation of statistical facts of identifying any inconsistencies (even those that do not pose a threat to human and animal health) and the use of such statistics in the future as an additional argument in the issue of continuing restrictions on Ukrainian agri-food products for a new indefinite period.
8) displacement of Ukrainian producers from the domestic market
According to (Acting) Director-General of the Directorate-General for Mobility and Transport (DG MOVE) Maja Bakran, as of June 2, 2023, as part of the Solidarity Lanes initiative, Ukraine supplied all kinds of products worth 30 billion euros to the EU. During the same period, the EU supplied its products to Ukraine for 51 billion euros (that is, 1.7 times more than Ukraine in the EU). Thus, Ukraine began to turn from a supplier of products to the EU into a sales market for the corresponding European products.
This is confirmed by the successful increase in 2022 by a number of EU member states of the volume of exports of their agri-food products to Ukraine (Bulgaria + 26%, Poland + 16%, Slovakia + 30%).
This situation has already led to the loss of Ukrainian manufacturers positions in the domestic market.
In particular, according to the Union "Millers of Ukraine", in a number of regions, Ukrainian manufacturers of flour products have already been squeezed out of Ukrainian retail by cheaper Polish and Turkish products (pastas, pasta, etc.).
Unfortunately, the situation is identical in the domestic market of dairy and meat products.
9) introduction by the Government of Ukraine of a ban on the export of sugar
On May 30, 2023, the Cabinet of Ministers of Ukraine adopted Resolution No. 545.
Thanks to this decision, in addition to the ban on the export of Ukrainian grain to the EU (established by the European Commission), a ban on the export of sugar (established by the decision of the Ukrainian Government) was also added.
On our opinion, such a step by the Ukrainian Government will lead to negative consequences for domestic producers and processors of agricultural products, including: non-fulfillment of foreign economic contracts; loss of payable foreign markets; gaining a reputation as unreliable suppliers; financial damage.
At the same time, the National Association of Sugar Producers of Ukraine "Ukrsugar" draws attention to the fact that there is an excess of sugar in the domestic market of Ukraine. Therefore, the ban on exports in the near future will lead to cheaper products on the domestic market and, as a result, to loss of income (and possibly even incurring losses) by sugar refineries and other agricultural producers associated with them.
In addition, such a decision of the Government contributes to the appearance of disproportions in the agricultural sector, as it encourages farmers to avoid growing sugar beets and grow other crops, the export of which (or the export of products from which) is not prohibited.
10) a significant deterioration in access to foreign markets significantly narrows the possibilities for financing the recovery of the agricultural sector
Not a single EU member state has faced what Ukrainian farmers have to deal with now: agricultural machinery, equipment, infrastructure, and livestock have been destroyed; hundreds of thousands of hectares of mined fields, fields deprived of irrigation and flooded crops; lack of adequate access to fertilizers and seeds; incredible difficulties with crop storage and broken supply chains; mass mobilization of workers of agricultural and processing enterprises.
All these circumstances significantly reduce the productivity and efficiency of the agricultural sector, and also entail the need to attract large-scale financial and other resources for recovery. Attracting bank financing for this does not yet seem possible due to its extremely high cost (the NBU discount rate has been 25% for more than a year now).
Under these conditions, the closure for any reason of each individual foreign market for each new commodity item has no less devastating consequences than the full-scale military aggression of the Russian Federation against Ukraine.
After the closure of foreign markets, domestic agricultural producers have become even more economically weakened, they cannot find financial resources for recovery and are on the verge of economic destruction.
If the situation is not changed in the near future, agricultural producers will start declaring their bankruptcy and will be forced to sell their business to foreign competitors to cover their debts for next to nothing.
Given the criticality of the situation that has developed with the export of Ukrainian agri-food products, the agricultural community calls on the Prime Minister of Ukraine to take measures to support the agricultural sector of Ukraine, in particular:
1. hold a meeting with representatives of the members of the PU “Ukrainian National Agrarian Forum” in order to coordinate further steps on the part of the Government and the Ukrainian agrarian and food business, in response to the concerns expressed in this appeal;
2. take measures to support the agricultural sector of Ukraine, in particular:
- achieve the abolition by the European Union of all restrictive measures imposed on the import of Ukrainian grain before September 15, 2023;
- prevent the introduction of new and extension of existing restrictions on the import of Ukrainian agri-food products into the EU;
- take equivalent measures to import into Ukraine products from certain EU Member States that have imposed restrictions on Ukrainian agricultural products and do not comply with their obligations in terms of lifting restrictions and ensuring the transit of these products;
- revise the Resolution of the Cabinet of Ministers of Ukraine dated May 30, 2023 No. 545, which established a ban on the export of sugar;
3. to raise questions before the European Commission:
- ensuring unhindered transit of Ukrainian exports through the territory of the EU Member States adjacent to Ukraine, as envisaged by the of the initiative "Solidarity Lanes";
- providing financial support to Ukrainian exporters of agricultural products affected by the imposed bans;
5. consider the advisability of defending Ukrainian economic interests with the help of such tools as applying to arbitration within the WTO; to arbitration under the Association Agreement; investigation of the facts of causing harm to the economy of Ukraine within the framework of the General Agreement on Tariffs and Trade of 1994, etc.