Ukraine faces agricultural sector pressures in EU accession talks

Ukraine faces agricultural sector pressures in EU accession talks
A major reform of the EU’s Common Agricultural Policy will be necessary before Ukraine is allowed to join the bloc. / bne IntelliNews
By bne IntelliNews April 10, 2024

Tariffs on Ukrainian agricultural products are a pivotal sticking point in EU accession negotiations, reported Politico, with some countries fearing an influx of cheap food disrupting the common market. A major reform of the EU’s Common Agricultural Policy will be necessary before Ukraine is allowed to join the bloc.

The measures, aimed at addressing trade imbalances, have sparked debate over their impact on Ukraine's agricultural sector.

Poland, advocating for the tariffs, argues that they are necessary to shield European farmers from competition rather than halt imports from Ukraine entirely. However, Ukraine views these restrictions as unjustified, given the strong demand for its products from the EU food industry.

"There is no evidence that EU farmers are suffering from competition," Politico noted, supporting Ukraine's stance on the matter.

MEP Andrzej Halytsky, spearheading the restrictions, suggests they offer insight into the future of Ukraine's agricultural sector within the EU. He asserts that negotiations for Ukraine's EU accession should commence on realistic terms, starting with agriculture before addressing other issues.

Meanwhile, the European Parliament and the Council of the EU have reached a provisional agreement to extend trade liberalisation with Ukraine. Import duties and quotas for Ukrainian agricultural products will be suspended until June 5, 2025, with provisions allowing the European Commission to swiftly implement measures in case of market disruptions.

The agreement also includes discussions on permanent tariff liberalisation as part of the Association Agreement review process, pending approval by the European Parliament and the Council.

Ukraine's agricultural prowess was underscored by its export earnings of $2bn in March, with agricultural exports contributing significantly to the trade balance. However, concerns persist over the disparity in prices between Ukrainian exports and imports, suggesting potential for increased value addition in agricultural exports.

Experts highlight the need to enhance the added value and prices of agricultural exports to ensure Ukraine's competitiveness and sustainable growth in the sector.

As bne IntelliNews reported, Ukraine effectively won’t be able to join the EU until the Common Agriculture Policy is significantly reformed. A third of the EU’s budget already goes on paying subsidies to farms and farmers. Adding Ukraine to the EU will add another 30mn hectares to the EU’s existing 100mn ha, but the subsidies will be proportionately even higher as wages and investment in Ukraine are so low.

As Kyiv would be entitled to approximately €186bn of EU subsidies over seven years, that would cause a revolution in how Brussels’ budget is generated and force a deep reform on the way the EU works before Ukraine can be admitted.

“All member states will have to pay more to and receive less from the EU budget; many member states who are currently net receivers will become net contributors,” concluded an earlier paper by the secretariat of the EU council, as cited by the Financial Times.