The European Union will allow Eastern partners to temporarily restrict the entry of Ukrainian food products and will spend an additional 100 million euros to compensate farmers who have been affected in the last 12 months by the entry of massive amounts of corn, wheat, sunflower seeds. In March, Poland, Hungary, Slovakia, Bulgaria or Romania submitted a formal request to the European Commission to study what could be done, as the “flood” of Ukrainian products was having “harmful” effects on their economies.
The grain, they argued, not only crosses the country, as expected, but in many cases it stays there, driving down prices, causing bottlenecks and punishing local production. In the absence of a solution, Warsaw and Budapest announced a total ban on the entry of these cereals a few days ago, so Brussels has chosen to intervene.
The idea is to appeal to the emergency mechanisms, which do not require long deliberations or go through the European Parliament, to temporarily allow, for a few months, that the affected countries prevent the entry of certain products to their markets, but at the same time authorize the cereals cross borders to reach other community destinations or countries such as Pakistan, India or Egypt.
Ukraine is one of the world’s main granaries, but after the invasion its ports were closed. An agreement with Moscow, under the umbrella of the UN, allows the departure of food by land, to the neighbors of the EU, who then channel it. But because they are competitively priced, and because the EU has abolished tariffs to support Ukraine in its war and economic recovery, these foods end up displacing more expensive local production.
The community vice president, Valdis Dombrovskis, met this Wednesday in Brussels with the ministers of the affected states to explain the aid packages and the details of those decisions. “The measure that we would have in mind would allow imports into the five member states bordering Ukraine only for export purposes, that is, for transit and then to reach other EU member states or the rest of the world,” explain European sources. “This would affect wheat, corn, rapeseed and sunflower seeds because it is where we see that there is an exceptional circumstance that requires immediate action, to use the language of the regulation, which would justify the activation of safeguard clauses,” the same sources add.
The goal is for this exceptional situation to continue until June. And when invoking the emergency situation, it does not require the approval of the rest of the capitals or of the MEPs. At the same time, in parallel, the Commission, which has all the commercial powers, will open an in-depth investigation to gauge whether additional measures are necessary for other products. Poland, for example, had not only blocked the entry of grain, but of meat, dairy products, vegetables and others. Urgent measures are immediately applicable, a matter of days, but an investigation of this type requires months.
The agreement of those partners is key. In June last year the 27 agreed to suspend all tariffs on Ukrainian food products in June 2023 and the Commission has proposed to extend this suspension for another year. But Poland or Slovakia, which are holding important elections at the end of this course in which the rural vote is key, or Hungary, the least friendly to Ukraine in the EU, were showing reservations.
In this way, doubling the aid already granted to compensate the countryside of its eastern neighbors, and strictly limiting the entry of grain for exports in those countries of first arrival, Brussels hopes to iron out all the rough edges. Kiev had complained, but with a small mouth, because it totally depends on the EU to resist and because precisely those neighbours, Poland and Slovakia in particular, are essential allies when it comes to sanctions against Russia or the shipment of arms, in addition to your candidacy for membership.
By Tuesday night, after several days of tense meetings, Warsaw and kyiv had reached an agreement in principle to raise border barriers. “We have agreed on a mechanism to guarantee that not a single ton of grain remains in Poland,” the Polish minister said last night, explaining that for this, Customs agents would accompany each shipment that enters the country to the port of departure or the next borders.
Brussels calculates that a few less will be needed in any case to unblock the market of neighboring countries. The grain stays in Poland “because it is much cheaper than moving all these goods to Hamburg or Antwerp or the Baltic countries. We have to organize ourselves better. And on this, we have been working very closely with Ukrainian and Moldovan colleagues, but we need to improve a lot”, say Commission sources. “We are going to organize convoys of trucks, trains, barges on the Danube to make this go faster too. The reason why this is expensive is that in the solidarity lanes the logistics costs are around 40% of the total. In Under normal circumstances, it should not be more than 10%. We calculate that at this moment we have 4 million tons of grain left from the last harvest, so it will take more or less two months to export it,” the sources add.
The solution to those traffic jams and bottlenecks must be done fast, before the fall harvest. There is the Danube option, we have the corridor to the Polish ports, the German option, the Baltic and Adriatic ports are very important for transit to Africa.
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