Ukraine-EU: finalisation of the DCFTA review

On 13 October, the EU Council decided to reduce or completely abolish duties on a number of agri-food products imported from Ukraine, including dairy products, fruit and vegetables and meat and its preparations. This is the consequence of the first agreement reached by the European Commission (EC) and Kiev on 30 June to revise the Deep Free Trade Area Agreement (DCFTA). On 14 October, Ukrainian Deputy Prime Minister for European and Euro-Atlantic integration Taras Duck announced that the final decision to amend the agreement was taken at the EU-Ukraine Association Committee meeting. The text of the paper was not published, but according to erstwhile information (including Duck) it provides for an increase in the tariff quota limits for the part of the agri-food production imported from Ukraine, after which duties are imposed. According to the Council's press release, a (unprecise) safeguard mechanics has been envisaged to be launched if any of the associate States encounter marketplace disturbances. Following Russian aggression, the EC temporarily introduced the alleged ATM (Autonomous Trade Measures), suspending the duties and tariff quotas provided for in the DCFTA, but it was withdrawn in June this year, which meant restoring the pre-war trade rules.

The change of the agreement towards liberalisation of trade between Ukraine and the EU is 1 of the Kiev objectives which seeks to increase its exports, in peculiar agricultural products. However, according to the available knowledge, the increase in tariff quotas will not play a more crucial role. For the main commodities entering the Union market, it will be comparatively tiny (e.g. for wheat from 1 million to 1.3 million tonnes) and well below the Ukrainian export level to the EU. At the same time, the assessment of the impact of the DCFTA amendment on the markets of individual associate States makes it hard to have detailed data on the simplification of work rates which are crucial for the profitability of exports.

Comment

• The proposed increase in tariff quotas will not lead to a clear increase in Ukrainian sales to the EU. In the case of cereals, they are considerably lower than the current level of exports, but Kiev is likely to find alternate outlets. The situation is akin for many another commodities, specified as sugar and poultry meat. In turn in relation to any (e.g. spirit) Ukraine did not even exhaust the existing limit. respective increases in the quota (e.g. powdered milk from 5 to 15 000 tonnes per year) concern very tiny quantities, so the changes will not importantly affect the European marketplace for the production concerned.
• Without information on the scale of the simplification of duties on the different good effects of the proposal, it is hard to assess, as the rate of work had a fundamental effect on the profitability of Ukrainian food exports to the EU. For part of the goods (e.g. honey), sales continued even after the quota quota was exhausted. For others (e.g. dairy products), the existing duties made them uncompetitive in the EU. At the same time, it is very complicated for them, unlike for cereals, to find alternate outlets for the EU, due to the logistical barriers linked to transport to further countries.
• The proposed changes are likely not to satisfy the EU's neighbours of Ukrainewho, in consequence to the ATM flood of their markets, have introduced many restrictions on imports from this direction. They mainly afraid cereals, but besides oilseeds and their processing products (e.g. rapeseed expellers) which were not subject to any restrictions under the DCFTA. However, it may be possible that this protective mechanics will keep the existing sharpening. specified a precedent had already taken place between May and September 2023, erstwhile the EC sustained the embargo on agricultural production introduced by the neighbouring states of Ukraine. For her, too, exports (in peculiar cereals) to EU neighbours are of no importance, as the overwhelming majority of Kiev's goods are sold through black sea ports.