EU-UKRAINE:  Balancing Values and Economic Realities

Unexpectedly, the war in Ukraine has endured longer than initially anticipated. As a result, almost two years into the conflict, the EU is beginning to feel the social, financial, and economic repercussions of its leaders’ decisions. While public opinion has largely supported promises to assist Ukraine “as long as it takes” or “as long as it is needed,” President Biden introduced a nuance on  12th December, stating his commitment to supporting Ukraine “as long as we can.” European leaders were hesitant to adopt such a stance until the question of “can we?” entered the public debate, championed by European farmers and small producers. For them, defending “values” translates to securing decent salaries, protection from ‘unfair competition,’ and safeguarding rural interests.

Trade Agreements

In this context, European leaders will arrive in Brussels on 1st February with the need to reconcile conflicting demands: to approve the 7-year EU budget amidst a troubled economic and financial period, to adopt a 50 billion euros aid package for Kyiv, and to navigate the promises made in their respective countries to pacify their farmers while adhering to EU free competition market rules and demonstrating solidarity. Ukraine questions Biden’s commitment, emphasizing “as long as we can” assist. Payments are still widely accepted, but the consequences of Free Trade Agreements are publicly denounced by farmers, with large public backing, pointing to meat and cereals from Brazil, milk from New Zealand, chicken and grains from Ukraine, all of which are seen as “distorting competition” due to lower production costs and inferior sanitary norms throughout the supply chain. Ukraine’s case is unique because the country entering into competition also receives significant amounts of European funds, unlike South America or New Zealand.

European farmers were already impacted by EU sanctions following the occupation of Crimea and Donbass, losing the Russian market due to sanctions against Russia. In 2022, they faced challenges from rising energy and fertilizer prices. After the February 2022 invasion, the EU made successive decisions to support Ukraine’s economy, preserving jobs and expertise, and replenishing the state’s coffers through tax collection. This involved assisting the country in exporting its two main assets: agro-production and steel. They were granted privileged access to EU markets, without customs duties, through a Free Trade Agreement that member states were now expected to extend until June 2025. Food production is a significant business in Ukraine, controlled by a few oligarchs who have benefited from EU measures and consolidated their power during the war. For example, Yuri Kosiuk, founder of MPH in 1998, boasts of being the No. 1 exporter of poultry from Ukraine. Like other food producers in Ukraine, MPH handles the entire chain, from eggs to chicken nuggets sold in the Middle East.

Dividing Lines

The revolt of European farmers should hardly be a surprise. The initial confrontation was confined to Poland, Romania, and other neighbours of Ukraine, generously hosting millions of Ukrainian refugees. Starting in September, lorry drivers protesting unfair competition by Ukrainian companies were joined by farmers in blocking borders with Ukraine. They denounced unfair competition by Ukrainian companies and the dumping of cereals, which led to their bankruptcy. The cereal issues stemmed from the creation of “solidarity lanes,” a land alternative to the blockade of exports through the Black Sea. These grains remained in transit countries, reducing prices for national farmers producing cereals, causing tension with Ukraine and condemnation by the EU. The border points were only freed at the end of January.

In other words, the revolt against the agricultural chapters of the Free Trade Agreement is not a new incident that the February summit can overlook, not only because it is not new but also because it might challenge the EU “geopolitical” Commission’s plans. Five months before the elections for a new European Parliament, largely seen as national tests, or even coupled with national ballots, the farmers’ issue might be a game-changer and has already caused division within the Commission. From autumn until the end of January, there was unanimity between the President of the Commission, Ursula von der Leyen, and Trade Commissioner Valdis Dombrovskis, who support a free-market approach and want to maintain temporary measures suspending all import duties on Ukrainian goods until June 2025. This has been opposed by their agriculture counterpart, the Pole Janusz Wojciechowski, who wants to restrict them and knows that his country will not be satisfied with Dombrovskis’ concessions on possible measures “if farm exports risk pushing prices down in Poland and other neighboring countries.” On January 25, the eve of the summit, Von der Leyen hastily met with farmers’ representatives, leaving them uncertain and leaving her with the almost impossible task of finding compromises in so many fields, considering decades-old unresolved problems and new ones linked to new EU policies, including unconditional support for Ukraine.

Leave a Reply

Your email address will not be published. Required fields are marked *