Association “Ukrainian Agribusiness Club” (UCAB) welcomed the historic decision of the European Council from 1 February, when all 27 EU member states gave the green light to the Ukraine Facility. This financial lifeline support tool from the EU gives Ukraine the much-needed confidence in its financial stability and ability to continue the fight for its independence and common European values against Russian aggression.

At the same time, UCAB is concerned about the latest European Commission's proposals from 31 January regarding trade preferences for the next calendar year, starting from 6 June 2024. Unfortunately, the proposed regulation introduces EU import restrictions for the most important product groups for Ukrainian agro-exports (poultry meat, sugar and eggs). Although these restrictions are presented as safeguard measures in accordance with EU and WTO trade legislation, in fact, they provide for the automatic return of tariff quotas in case imports of these products from Ukraine exceed the arithmetic mean imports for 2022-2023.

UCAB emphasizes that these preferences have been particularly important for the Ukrainian agri-food sector, as they allowed Ukrainian exporters to maintain production and jobs and ensure foreign exchange earnings during 2022-2023. As we know, Russia's intentional economic warfare against Ukrainian Black Sea ports has pushed out more than 50% of Ukraine's agricultural exports to the EU market.

In 2023 Ukraine's exports of agri-food products totaled $21.9 billion and accounted for 61% of total exports of goods from Ukraine (against $23.4 billion and 53% of total exports of goods in 2022). At the same time, the EU's share in total exports of agri-food products from Ukraine in 2023 was 56.6% (55.1% in 2022) or $12.4 billion ($12.9 billion in 2022).

Later this year Ukraine may face macroeconomic crisis and currency devaluation if international financial support does not materialize.  

Last October the balance of payments deficit of Ukraine reached 2,95 billion USD per month. This is the worst possible indicator since the 2008 financial crisis, when the balance-of-payments deficit ran at 2,3 billion USD per month. Back then, in 2008-2009 the Ukrainian hryvnya had to be devalued by 70%.

The 2024 national budget will run a deficit at the level of 43,5 billion USD. 41 billion USD of this deficit is supposed to come from international donors, particularly the US. If only half of these funds arrives, by National Bank of Ukraine estimates, the currency will have to be devalued by 25-30%. If no financial support will be coming, the devaluation will have to be at 40%-50%. 

Therefore, the issue of maintaining open access for Ukrainian agri-food products to the EU market will be vital for Ukraine's trade balance. Make no mistake: if proposed trade restrictions are introduced, Ukraine may face macroeconomic crisis.

On the other hand, as the European Commission acknowledges in the draft regulation explanatory note, there has been so far no evidence of a negative impact of imports from Ukraine on the EU market. In 2023 agricultural imports from Ukraine constituted only 9% of overall EU agrifood imports.

At the same time, EU countries continue to import Russian agri-food products. The bare numbers are confusing: during the 2022/23 marketing year, the EU imported 835 thousand tonnes of grain from Russia. For comparison, in 2021/22, these volumes were slightly higher - 1 million 152 thousand tonnes. In less than five months of 2023 these volumes have already reached 811 thousand tonnes. Do we understand correctly that the EU not only tolerates Russia's brazen expansion of its position in the global food market, but actually facilitates it?

UCAB calls on the EU institutions to follow the example of the bold and ambitious decision on the Ukraine Facility and abandon proposed restrictions on imports of Ukrainian chicken, sugar and chicken eggs. The most effective step would be to extend trade preferences for a longer term, for example for a 4-year period, while monitoring the impact of imports on the EU market and maintaining a close dialogue with the Ukrainian side within the framework of the EU-Ukraine Trade Coordination Platform established for this purpose.