In fact, other powerful factors, including strong harvests in the Americas in 2023 continued to keep cereal prices depressed (Photo: thesetides.com)
There is a heated debate underway in the European Parliament — and far beyond, on the Hungary, Poland and Slovak borders — regarding the third yearly rollover of Europe’s trade support measures for Ukraine.
These are technically known as Autonomous Trade Measures (ATMs).
Just a year ago, the decision was taken swiftly as the reason was very clear: the West, and the EU in particular, wanted to make sure that the Ukrainian economy gets the much-needed oxygen of export revenues so that the country at war could sustain itself. This year the decision has become a hostage to the political backlash engulfing Europe.
Backlash driven by pessimistic views from the European farmers whose patience snapped under the growing weight of European climate and sustainability regulations, combined with depressed global food prices.
Plus the backlash from the Polish farmers, who are directing their grievances against Ukrainian trucks and railway cars crossing Poland in transit, but are suspected of being recycled back to the Polish market from other member states.
As one exasperated European leader once said, “Emotions trump reason, and negative emotions prevail over positive ones”. Hostage to a political backlash, Europe is pushed in the direction where even the most controversial ideas begin to be seriously entertained.
One example is a proposal by the EU agricultural lobby COPA COGECA to limit imports from Ukraine to the median levels of 2021-2022, so that the country’s trade with the EU would be squeezed between the narrow quotas of the Association Agreement (2021) and the trickle export volumes of 2022, when the Ukrainian economy was reeling from the shock of the Russian invasion.
It is suggested that imports beyond these “threshold” volumes are simply banned, a draconian measure completely at odds with EU’s commitments to Ukraine under the Association Agreement.
It is high time to step back to take a look at a wider picture.
A picture that takes into account a broad array of factors affecting the European agricultural market so that the impact of the Ukrainian imports is not overblown. A picture that includes win-win scenarios of collaboration which contribute to the long-term competitiveness of the European economy.
For instance, even a brief look at the evolution of European prices for cereals and oilseeds in 2020-2023 shows how little they were impacted by Ukrainian imports. Even after national bans were introduced by Poland and other neighbouring countries in the second quarter of 2023.
In fact, other powerful factors, including strong harvests in the Americas in 2023 continued to keep prices depressed.
Sugaring the pill
Or take another example. As Eurostat data demonstrate, Ukraine’s tiny share in the EU sugar consumption hardly makes it a threat to the European sugar producers. In fact, the increase of sugar imports from Ukraine helped to partially cover the deficit of sugar on the EU market.
Indeed, as the European Commission points out, after high agri-food imports from Ukraine in the second half of 2022 and the beginning of 2023, monthly imports in September and October 2023 were almost back at their 2021 level and 45 percent lower than the same period in 2022.
However, the same period saw a strong rise in the EU exports of cereal, dairy and meat preparations.
And it is not a coincidence that the rise of Ukrainian imports of mostly animal feed cereals helped ‘fuel’ Polish eggs, dairy and poultry production. Poland, in turn, exports many of these products to Ukraine, holding a considerable share of the market.
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Last, but certainly not least, Ukrainian transit flows of cereals and vegetable oils benefit the port infrastructure of some member states, while others still choose to miss the opportunity.
In the year ahead, Ukraine could see up to 60 percent of its cereals transit shipped through the Romanian Black Sea port of Constanta, a trend Bucharest is actively encouraging.
It is reported that Romania hopes to boost transit capacities for Ukrainian grain to four million tonnes per month by upgrading rail and road infrastructure from the Ukrainian border to the port with support of €546.8m worth of EU funding, and potentially setting the stage to become a regional price-setter for Black Sea grain exports.
This could be a lucrative prospect for Gdansk too, if Poland chooses to embrace it.
However, the Ukrainian farmers and businesses at large are taking a much grimmer view of the months ahead, and time is ticking.
Last October, Ukraine’s balance of payments deficit reached $2.95bn [€2.71bn] per month, the worst indicator since the 2008 financial crisis, when a similar balance-of-payments deficit led to currency devaluation by 70 percent.
Ukraine’s agrifood exports ($21.9bn) account for 61 percent of total exports. As the EU remains a major destination or a transit route for these exports (56.6 percent, or $12.4bn in 2023), any import restrictions imposed in Europe may have a direct impact on the country’s macroeconomic stability.
These are the realities that risk being overlooked in Europe in the grip of a political storm. Can we afford it?
Source: euobserver.com
