What challenges Ukrainian business are facing after changes in trade conditions with EU

The European Union reinstated tariff quotas for Ukraine this year, but with increased limits.

Tariff quotas within the framework of the Deep and Comprehensive Free Trade Area (DCFTA) set a strict "ceiling" for certain Ukrainian products, especially for high value-added finished goods.

A telling example is powdered skimmed milk, whose quota was exhausted early in the summer, making further duty-free exports to the EU impossible.

Additionally, businesses have faced uncertainty amid the process of updating the trade agreement and unilateral restrictions on Ukrainian imports imposed by certain member states.

Read more the difficulties Ukrainian businesses face under the new EU trade conditions in the column by Iryna Kosse of the Institute for Economic Research and Policy Consulting: Who has been most affected by the change in Ukraine-EU export conditions. 

The author notes that, unlike high value-added products, grains and oilseeds, contrary to expectations, have weathered the change in trade rules relatively well.

This has resulted in a paradox, Kosse points out.

On one hand, Ukraine continues to serve as a feed base for European livestock: grains, oilseeds and meal are exported in large volumes, maritime logistics for bulk cargo works and agro-exports by tonnage look solid.

On the other hand, producers of butter and powdered milk face the reality that their "premium" products lack both stable access to the main market and a reliable physical route to new buyers.

"At the rhetorical level, it’s about a shared agro-food ‘soft power’ between Ukraine and the EU, but in practice, a division of labor is being reinforced where Ukraine sells feed rather than finished products," writes Kosse.

According to Vice Prime Minister for European and Euro-Atlantic Integration Taras Kachka, "Ukrainian agriculture is perceived as very strong due to absolute yield figures, but it is weak and fragile, suffering from full-scale war, fragmented logistics, expensive financing and almost no state financial support."

"For the EU, the question is not whether Ukraine is too large for the single market, but how to strengthen the European agro-food system through partnership with Ukraine, including through processing," emphasises Kosse.

She reminds that "shared soft power" starts with rather mundane matters.

First, with transparent and predictable trade rules, where businesses understand how quotas and safeguard mechanisms will operate not for three months, but for several years ahead. Ideally, this includes expanding quotas specifically for finished and processed products.

Second, with scaling insurance schemes like Unity for war-related risks, specifically designed for container and refrigerate

Third, targeted investments are needed in container and cold-chain capacities at Black Sea and Danube ports, so that producers of finished products have not only a contract with a buyer but also a realistic way to deliver their goods. This also entails developing rail and road infrastructure to handle container flows to the ports.

"Without this, Ukraine will continue to be a large but vulnerable supplier of raw materials, while the finished agro-product sector will operate from quota to quota and from one insurance solution to the next crisis," concludes Kosse.