Timing is running out for Ukraine and the EU to agree a continuation of the controversial duty- and quota-free trading arrangements Ukraine has enjoyed since 2022.
Terms allowing unrestricted trade with the bloc, estimated to account for around 10% of Ukraine’s export revenue, are set to expire in June.
Speaking to the FT, Ukrainian finance minister Serhiy Marchenko described the EU as a key “trading partner” and said “it would be really damaging for us if we [found] ourselves in a situation which we had before the war”.
While European nations have pledged to up defence spending to support Ukraine following US withdrawal of military support, several EU nations have previously pushed back against the free trade measures.
Stalemate
First introduced in 2022, EU tariff suspensions, known as Autonomous Tariff Measures (ATM), are set to expire on 5 June.
Ahead of the deadline, negotiations have been ongoing between the EU and Ukraine to develop the 2016 trade deal between the two parties, though progress has been slow.
So slow, in fact, that deputy economy minister Taras Kachka took a less conciliatory tone than Marchenko at a Centre for Economic Strategy event earlier this month:
“The lack of progress on revising the trade agreement will force us to take steps to equalise the trade balance.
“And unfortunately, those decisions will be the least pleasant for the countries that are now politically slowing down the negotiations on free trade.”
Politico reports that Ukraine currently runs a US$10bn trade deficit with the EU, importing $35.7bn worth of goods from the bloc in 2024.
In order to secure a continuation of tariff-free trade, an EU official told the FT that it’s “too late” to secure a deal and a renewal of the existing ATM is more likely.
Opposition
Since their introduction, the ATMs have generated political tension within a number of EU nations, as agricultural products from Ukraine have undercut domestic farmers.
Marchenko urged Poland, currently leading the revolving six-month EU presidency, to “become a leader” in the negotiation process. However, it’s been one of the most consistently obstructionist governments.
Last year, Poland, France and Hungary led the push to introduce an ‘emergency brake’ to the duty-free arrangement, allowing the reimposition of tariffs if Ukrainian import volumes exceeded averages recorded prior to the invasion.
The brake covers seven ‘sensitive’ products, including sugar, which the bloc is already planning to cut back on importing, according to a Reuters report last week. Ukrainian sugar imports have been held responsible for a 30% fall in European prices last year, with imports surging to 400,000 tonnes in the 2022/23 season and up to 500,000 tonnes in 2023/24. Given that this exceeds the pre-war quota of 20,000 tonnes, it would justify use of the brake.
Poland, along with Hungary and Slovakia, has also maintained import bans on Ukrainian goods since 2023, a measure which contravenes EU rules.
Polish PM Donald Tusk is especially wary of upsetting farmers, a key part of opposition party Law and Justice’s (PiS) base.
Ceasefire talks
Grain has also been put on the table by Russia at the second round of US ceasefire talks, taking place today (24 March) in Saudi Arabia.
The BBC reports that Russia has proposed restarting a 2022 grain deal enabling Ukraine to export via the Black Sea without the threat of attack. In exchange, Russia is seeking to export fertiliser and agricultural products via the same route. The was ended by Russia in 2023.
Negotiations are ultimately aiming to secure a partial ceasefire agreement and have this time included Ukraine, whose delegation met with the US negotiating party yesterday.
Both Ukraine and the EU were excluded from the first round of talks, with US president Trump initially criticised for the volume of Russian concessions he was prepared to make and a subsequent heated Washington DC press conference with Ukrainian president Volodymyr Zelensky, in which he and Vice President JD Vance accused the wartime leader of a lack of gratitude for US support.
