As the European Union prepares to offer Ukraine a membership perspective, Nazar Bobitski talked to Borderlex’s Iana Dreyer about how it can support Ukraine’s country’s blockaded exports, its economic integration with Europe and its post-war economic recovery.
Ukraine’s trade has been severely disrupted by the war waged by Russia. Can you give us more details?
We are first and foremost talking about the ongoing Russian blockade of Ukrainian Black Sea ports and its ruthless destruction of Mariupol, which was an important Ukrainian port on the Sea of Azov-Black Sea coast.
Before the war, seaborne trade handled 92% of Ukrainian exports. These reached not only Europe, but also the Middle East, the African continent, India and the Pacific.
Key elements of Ukraine’s exports remain ferrous metals and agri-food commodities. Disruption in seaborne trade is difficult to compensate with overland logistics via the EU-Ukraine border. This is because bulk commodities are more expensive to ship via overland routes.
Ironically, in the medium to longer term, the new circumstances might encourage Ukrainian producers to shift to higher value-added products in agriculture or manufacturing, benefitting from closer links with their European partners.
The EU has offered Ukraine help to export by suspending remaining import duties and quotas on its products. It is also offering help to trade via the land route. Is this working?
Several technical, legal and administrative bottlenecks continue to stand in the way of ramping up logistics via the EU-Ukraine overland border.
There are differences in railway gauge between the Ukrainian and European railway networks. Ukrainian railway cars cannot be used in EU member states. Goods have to be transhipped from wagons running on the wide gauge to ones on the EU-standard gauge at logistics sites near the border crossing points.
There is insufficient border crossing infrastructure. There are too few road and railway crossing points at the Polish and Romanian segments of the border and there are insufficient permanent border inspections posts to certify Ukrainian agri-food exports – mainly meat and dairy.
Ukrainian, Polish and Romanian agriculture ministers and food safety regulators are working around the clock to address the problem with the support of European Commission, particularly EU agriculture commissioner Janusz Wojciechowski.
The latest very important milestone has been the finalising of an EU-Ukraine Road Transport Agreement which will discard the inefficient system of national road transport quotas hampering circulation of trucks between Ukraine and Europe.
The European Commission is actively trying to address the overall problem of overland transit and traffic through the EU-Ukraine Solidarity Lanes initiative. However, the implementation of the initiative largely depends on the EU member states.
The extraordinary 2022 EU trade preferences offered to Ukraine are an extremely important short-term step to offer a helping hand to struggling Ukrainian exporters, as well as to demonstrate EU political will and capacity as global trade actor to help Ukraine.
The EU should be congratulated for its political courage since complete, albeit temporary, liberalisation of steel and agri-food imports from Ukraine was hardly taken easily on board by European Union steel and agricultural producers.
However, they remain a short-term, temporary solution. It is difficult to assess the effectiveness of this move at this point given the above-mentioned problems with overland logistics.
Moreover, the measure has many in-built safeguard mechanisms to take into account traditional sensitivities of the European steel and agricultural sector.
Ukraine is expected to soon officially become a candidate to join the EU. Is there something more long-term and sustained the EU could or should do on trade policy to help Ukraine recover from the war as it prepares to join?
A medium-term problem that will be relevant for post-war support of the Ukrainian economy is its more effective integration into European value chains.
Key elements for this are mutual recognition of conformity assessment with technical regulations and standards, applicable to the Ukrainian industrial products – as well as increased admission to the European market of EU food safety-compliant, higher value-added agri-food products such as beef and pork.
EU candidate status would arguably be the single most important milestone in the EU-Ukraine trade relationship.
A clear, unequivocal EU candidacy perspective would set the framework for legislative approximation to EU internal market rules, improving legal certainty for EU businesses operating in Ukraine or eyeing the Ukrainian market or assets.
Such a perspective would also offer clearer rules of engagement for EU international financial institutions such as the European Investment Bank to invest in rebuilding Ukrainian infrastructure – with a clear prospect of integration into the EU single market.
Candidate status paves the way for more significant and targeted EU technical assistance in training officials, judges, SMEs to understand better how to work with EU rules and regulations.
Other alternatives, such as only ‘potential candidate status’ would deliver sub-standard outcomes, setting the Ukrainian economy in a prolonged political and regulatory limbo. This would discourage European economic operators to plan long-term in Ukraine. In this way, the EU would ‘shoot itself in the leg’ geopolitically.
