How EU is strengthening protection of its market and what Ukraine should do

Due to the inevitable long duration of accession negotiations, Ukrainian industries risk becoming effectively cut off from the EU internal market, whose access is now rapidly tightening.

The driver of this process is a fundamentally new EU trade policy, which is moving away from the principles of open, rule-based global trade. Instead, it is embracing the ideology of economic security and reciprocity.

Moreover, trade policy is increasingly becoming an integral part of an explicitly protectionist EU industrial policy. We are witnessing the formation of an economic Fort Europe, governed by the ideology of a "besieged fortress".

Read more about this paradigm shift and what Ukraine should do in the article by EU trade policy expert Nazar Bobytskyi: Fort Europe is closing its doors: what challenges the EU’s new trade policy poses for Ukraine.

This shift in paradigm has occurred literally over the past year or two, although the groundwork has been laid over the past decade.

Its cornerstone is the EU Industrial Accelerator Act (IAA), presented by the European Commission in March and currently under consideration by the European Parliament and the Council of the EU.

The act is intended to become a multi-layered response from Brussels to the challenges facing European industry.

A key element of the mechanism is the Made in Europe criterion.

This feature turns the IAA into a powerful trade barrier capable of effectively closing the EU market to strategic competitors such as China, and potentially in the near future – even to Ukraine.

The IAA regime will be complemented by other EU legislative initiatives at various stages of development.

These are designed to protect specific strategic sectors, such as steel and aluminum production. They operate at the intersection of trade policy, decarbonisation and sustainability, effectively turning the latter into de facto trade barriers.

While accession talks have not yet reached their final stage, it is critical for Ukraine, as a candidate country and strategic EU partner, to enter the "perimeter" of this economic Fort Europe.

For example, this could include:

• recognition of Ukrainian products and components for European strategic industries as "Made in Europe" in the context of access to public procurement; 
• exemption of Ukrainian steel from the new system of protective tariff quotas, similar to arrangements for EFTA countries (Norway, Iceland, Liechtenstein); 
• in the absence of political will from EU member states, temporary exclusion of Ukraine from the CBAM (Carbon Border Adjustment Mechanism), agreement on recognition of a national emissions trading system equivalent to the EU ETS, and a similar CBAM-type mechanism of voluntary carbon payments within Ukraine (these systems would first need to be adopted and implemented);  
• expansion of the future EU mutual recognition agreement on conformity assessment for industrial products (ACAA, known as the "industrial visa-free regime") to other high value-added export categories, such as pharmaceuticals.

Such arrangements should form the economic core of an accelerated EU integration package for Ukraine, giving it the necessary political weight. Without this, any EU proposals on integrating Ukraine’s defence industry into future European defence unions would be disingenuous.

There are many obstacles to this vision. These include not only protectionism within EU industries and slow, low-quality implementation of EU legislation in Ukraine, but also the lack of a clear industrial policy vision for Ukraine as an EU candidate country.