Talks to lift bans on tariff-free Ukrainian grain fail, despite new pitch from Brussels

Talks between the European Commission and five Eastern European countries failed to resolve a growing dispute over the imports of tariff-free Ukrainian grain, which bordering nations argue is distorting the market and depressing prices for local farmers.

The standoff has exposed internal divisions inside the bloc and raised questions over how long the bloc’s solidarity with Ukraine would last.

Discussions took place on Wednesday in a video conference between Valdis Dombrovskis, the European Commission’s Executive Vice President in charge of trade relations; Janusz Wojciechowski, the European Commissioner for agriculture; and representatives from Poland, Hungary, Slovakia, Romania and Bulgaria, as well as from Ukraine.

Before the talks, Brussels had pitched a series of “exceptional” measures that would have allowed the transit of Ukrainian wheat, maize, rapeseed and sunflower seeds through the five countries but without being purchased for domestic consumption nor being stored in their territories.

A new package of assistance for affected farmers worth €100 million was also on the table.

“We underlined the importance of rapidly following a common EU approach, rather than unilateral solutions to avoid multiple bans and solutions which put the internal market at risk,” Dombrovskis and Wojciechowski said in a short statement after the unsuccessful negotiations, which dragged on for several hours.

“The Commission took note of the views presented by participants. We agreed to continue political consultations in the coming days in view of a swift solution.”

The five concerned member states, four of which border Ukraine, had for weeks complained that low-cost Ukrainian grain was flooding their markets, filling up storage and putting local producers at a disadvantage.

As part of its assistance measures to Kyiv, the European Union agreed last year to suspend tariffs and duties on a wide range of Ukrainian products, including foodstuffs, with the aim of helping the country sustain its fragile economy and compensate for the disruption in the Black Sea route, which is under tight Russian control.

The move helped ease the transport of Ukrainian cereals, on which many developing countries heavily depend, and had a positive effect in bringing down global prices.

But in recent weeks, the five Eastern European countries began raising the alarm about a growing problem of oversupply that was creating jam-packed warehouses, logistical bottlenecks and excessive downward pressure on prices.

Fearing devastating financial and job losses, farmers took to the streets to demand emergency action from their national governments, including public assistance and the re-introduction of tariffs.

Tensions came to a boil over the weekend, when Poland and Hungary slapped temporary bans on the import of various types of grain and agricultural products coming from Ukraine.

Slovakia and Bulgaria followed suit in the following days with similar prohibitions. In the case of Slovakia, authorities said they had found a pesticide illegal under EU law in 1,500 tonnes of Ukrainian wheat.

The European Commission quickly criticised the decisions and reminded member states that trade policy was an exclusive competence in the hands of the executive.

The bans, which made international headlines and cast doubts over the EU’s solidarity with Ukraine, forced the intervention of European Commission President Ursula von der Leyen, who in a letter addressed to the leaders of the five member states promised to take “preventive measures” to address the situation and a €100-million package to compensate farmers.

Von der Leyen acknowledged the “unintended consequences” of the suspension of tariffs but said a coordinated approach was needed to preserve the integrity of the single market and the customs union.

“Unilateral measures can only play into the hands of the adversaries of Ukraine and should not erode our unwavering support for Ukraine,” von der Leyen wrote in the letter, released on Wednesday.

Her deputy, Valdis Dombrovskis, then convened the video conference with his counterparts to present the proposal with the intention of replacing the unilateral bans with an EU-wide solution.

But the pitch failed to win over the frontline countries, as reflected in the brief statement that followed the virtual meeting.

The points of disagreement were not immediately clear but the Commissioners underlined the proposals on the table were “subject to member states lifting their unilateral measures.”

Prior to the video conference, Poland, one of Ukraine’s staunchest supporters, had made tweaks to its ban to permit the transit of goods, although it kept intact a prohibition for domestic consumption.

Under the deal designed by Brussels, Ukrainian wheat, maize, rapeseed and sunflower seeds would be allowed to transit through the five Eastern European countries without making a stop.

The cargo would then be purchased by other EU member states or be shipped to developing nations around the world.

Speaking on condition of anonymity, senior EU officials defended the executive’s response to the crisis and refuted criticism that it waited too long and only reacted when the bans were slapped.

Officials point out a series of temporary trends and structural obstacles, such as the undeveloped transport network in Eastern Europe and the diverging track gauges between the bloc and Ukraine, that have come together to alter the dynamics of the free market.

Despite the hard-line stance adopted by the Eastern group, the Commission insists it will not reintroduce tariffs or any kind of quota on Ukrainian imports.

In fact, the executive maintains its plans to prolong the suspension of duties until June 2024.

The new suspension, which includes an “expedited safeguard” to monitor and address market disturbances, still needs to be approved by member states and the European Parliament.