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The impossible is possible: EU granted trade concessions to Ukraine

Author : Yuriy Panchenko

14:15, 3 October 2016
The impossible is possible: EU granted trade concessions to Ukraine

Author : Yuriy Panchenko

European Union agreed to increase export quotas for Ukraine's products

14:15, 3 October 2016

Read the original text at eurointegration.com.

 

eurointegration.com.ua

Less than a year after the launch of a free trade agreement, the European Union agreed to increase export quotas. European Trade Commissioner Cecilia Malmström has personally brought to Kyiv news about it.

Specifically, the EU agreed to the introduction of autonomous preferences that will operate for three years.

This means that until the Association Agreement will make no corrections, and these changes are recorded as a unilateral concession by the EU.

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Why did they chose this way? First, because of the old fear of reaction from Russia.

Last year Ukraine, the EU, and Russia have been holding endless tripartite talks, trying to persuade Moscow that free trade commitments between Kyiv and Brussels does not threaten the economic interests of Russia.

In response, the Kremlin has sought to rewrite the treaty, which meant the need to negotiate every word from the beginning.

"How can we agree to Kyiv’s proposal to increase quotas, if it requires to amend the Agreement? Moscow would immediately call Berlin and say why Brussels takes Kyiv’s initiative amendments and ignores the Russian ones," high-ranking source in the European Commission claimed.

As you can see, even a year later, and most importantly, after the failure of tripartite negotiations, resulting in a suspension of Russia free trade regime with Ukraine, the EU is trying once again not to prevent Moscow from saying about "violation of interests of Russian producers."

Related: Tusk: EU Council startled by success of Ukraine’s economy

Reviewing the results of a mere nine months of the free trade regime is a precedent for the EU. Usually these reviews occur after two or three years of the FTA.

Now, after the Commission formally presented to such initiatives, European Parliament and the Council should adopt them. However, the Commission itself think that it will not create problems, and preferences will come into force next year.

However, according to the Adviser to the Minister of Agrarian Policy Vladyslava Rutytska, Commission proposals do not mean their easy passage in Parliament. "We need to get serious lobbying of this issue. We need to persuade MEPs that this step is really important, and for each position," she said.

So what are concessions of the EU?

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Action autonomous preferences are applied to both food and non-food products. As for food, it means an increase in quotas for duty-free exports.

In particular, quota for export of honey increased for the 3000 tons, grape and apple juices – for 500 tons. These are the most demanded quotas that are exhausted in the early days (and sometimes - in the first hours) of the new quotas.

Quota for export of tomatoes has increased for 5 thousand tons. This is one of the greatest achievements of Ukrainian negotiators. Quota for duty-free export of oats has increased for 4 thousand tons, cereals and flakes – for 7.8 thousand tons.

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It stimulates the increase of quotas to export to the EU products with greater added value. Zero duties allow Ukrainian producers to compete in this market.

The increase quotas for grain is relatively small - only 100 thousand tons a year. However, the EU is forced to reset duties on grain for all producers.

Sources in European institutes say about another reason for such a step. "It is always possible to export flour. At it set a zero rate, and this is a product with higher added value," says our source.

A much larger quota is for maize (650 thousand tons) and barley (350 thousand tons). In these positions, the EU demand was high, especially on corn. Therefore, increasing pressure on the issue of quotas was both from the Ukraine and European sides.

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New preferences do not apply only to two product groups that are important for Ukrainian exports.

First - poultry (chicken), where the annual quota is 26 thousand tons. This position has always been sensitive to the EU, and therefore Ukraine could not be obtain concessions.

It is worth to recall the scandalous statement of the owner of "Nasha Ryaba" agricultural holding and "MHP" Yuri Kosyuk. In January, he said that opening of the EU market has not happened, and that "the praised free trade zone is a deception of Ukraine."

As it turned out, this tactic did not produce results. Last but not least - because of the concentration of several companies in the Ukrainian poultry market.

For comparison, juices is also quite sensitive for EU commodity group, but in this case, Europe leads many companies deliveries. This made it possible to talk about an increase in quotas as support for small and medium businesses.

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Ukrainian sugar producers did not obtain any preferences (annual quota was 20 thousand tons).

In the group of preferences for non-food goods quotas are replaced by zero rates.

So, over the next three years zero rates to be established on chemical fertilizers, as well as aluminum products, copper rods and wires, men's and women's footwear.

Another position for resetting rates would be TVs, tuners and video cameras - frankly amazing. After all, Ukraine has almost never exported such equipment to the EU.

However, it is unlikely that Ukraine included this item in a list of suggestions for revision, not having good reasons. Rather, it was a response to an application from the domestic or foreign business. In any case, it means that such exports could leave the EU soon.

Related: 5 facts about agreement on Ukraine-Canada free trade area

What will be the effect of global autonomous preferences to the EU?

It is difficult to estimate it, because the Ukrainian export opportunities are not limited with these quotas. In most positions, exports exceeding the quotas.

However, the quota increase will enable Ukrainian business to better compete on EU markets.

And besides, the preferences were granted for those positions in which European buyers are interested. This means that Ukraine is gradually integrating into the European trading system.

Consequently, new preferences are quite possible. We just need to constantly show that Ukrainian goods are really in demand in Europe.

Related: Reuters: Merkel supports free trade zone with Russia

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