The Implementing Regulation is a Somewhat Better Option Than Returning to the Basic DCFTA Conditions

On May 22, the European Commission approved a list of transitional measures for Ukrainian exports to the EU. They will take effect on June 6, following the expiration of the Autonomous Trade Measures (ATMs), which have provided duty-free access for Ukrainian goods to the European market since 2022.

The Implementing Regulation will be in effect until December 31, 2025, and is essentially a compromise that involves the return of about 30 quotas that were suspended for certain types of agricultural products during the ATMs. However, the restrictions will amount to 7/12 of the normal annual volumes that were available to Ukrainian companies in 2021.

Although the transitional measures limit the export opportunities for Ukrainian agricultural producers, the Implementing Regulation is a much better option for us than returning to the basic conditions of the DCFTA—the Deep and Comprehensive Free Trade Area established by the Association Agreement signed in 2014.

Products cleared through customs in the EU as of June 5 will enter the territory of EU countries without any restrictions, with the exception of seven categories of goods deemed sensitive by Europeans. The 30 quotas effectively begin on June 6. However, using the example of honey, we can see that the introduction of these transitional provisions is not the worst-case scenario.

For instance, in 2024, under the ATMs, the permissible annual volume of duty-free honey exports to the EU was 44,000 tons; from January 1 to June 5, we can bring in 18,500 tons duty-free. If the transitional measures had not been introduced, the quotas stipulated by the DCFTA would have returned after the ATMs expired, under which the annual export of honey could not exceed 6,000 tons. However, the 7/12 principle will allow for an additional 3,500 tons of honey to be supplied to the EU market duty-free by the end of the year. Thus, in 2025, we will be able to import a total of 22,000 tons of this bee product duty-free, which is significantly more than the baseline DCFTA quota from 2021.

However, the transitional provisions could hit processors, particularly flour millers, quite hard. The quota for wheat is 1 million tons per year. But the wheat quota, just like the corn quota, applies to both the grain and its processed products simultaneously. And the quota system works on a “first-come, first-served” basis. Grain reaches the border faster than flour or groats. Consequently, raw wheat exhausts the quota. So, after June 6, it will be much more difficult for flour millers. Unlike grains, processed products are transported abroad in packaging, not in bulk, which is currently problematic as the number of container ships in the ports of Odesa is insufficient for free export to third countries. If flour is left without the ability to be exported to the EU, it will be a major problem for producers.

Seven specialized Ukrainian agricultural associations have previously appealed to the government to request the separation of quotas for raw materials and processed products. After all, finished goods are a completely different category of products, usually exported in smaller volumes than raw materials. However, whether this can be implemented in a new version of the trade agreement depends on the European side and the negotiations themselves. According to WTO rules, Ukraine and the EU can determine mutually acceptable market access conditions within a free trade area. Therefore, the issue of separating quotas is a matter for negotiation. In my opinion, it should not be a problem for the Europeans to separate finished products from raw materials and define separate market access conditions for these categories of goods.

Ethanol is also returning to the quota system, as is bioethanol, the production of which is actively developing in Ukraine. Over 80% of this product is exported to the EU, with the rest going to Switzerland. But it was only last year that Ukraine, for the first time since signing the Association Agreement with the EU, exhausted the quota, which stands at 100,000 tons per year. Now, under the 7/12 conditions, Ukrainian producers will be able to export 58,000 tons by the end of 2025.

Given the potential of this industry and the EU’s demand for bioethanol, I think this issue will also become a subject of negotiations within the review of Article 29 of the Ukraine-EU Association Agreement on the Deep and Comprehensive Free Trade Area (DCFTA).

Indeed, Deputy Prime Minister for European and Euro-Atlantic Integration, Olha Stefanishyna, announced that by the end of July 2025, there is clear political will from European partners to find a balanced solution regarding trade conditions between Ukraine and the EU.

Such a timeline is quite logical, considering that the Ukrainian side, based on the vision of its business community, already has a proposal.

Article 29 of the Association Agreement stipulates that five years after the DCFTA’s implementation, at the request of one of the parties, negotiations may take place to review the trade conditions with the aim of accelerating and expanding trade between the parties. The main goal of this article is the gradual integration of Ukraine into the European market. Thus, the ability to review trade conditions every 5 years essentially represents steps, each bringing us closer to the full accession of our economy to the European Union.

So, in a few weeks, the parties will meet to reach an agreement on Article 29. A real compromise will only be achieved when both sides make concessions, which could be very painful. Accordingly, the Ukrainian side needs to look for niches where we could strengthen the European economy, making it genuinely interesting and beneficial for the EU market.

After Ukraine and the European Commission agree on the updated trade rules, the document will be submitted to the Council of Ministers, where each member state must vote. However, the decision must be adopted by a qualified majority, which consists of 55% of the member states, representing a total of 65% of the population. In addition, the European Commission must report to the European Parliament, but the deputies will not have a direct influence on the vote, as was the case with the ATMs.

After translation into the national languages of the EU member states, the document will be provided for review, and each country must give its response and approve the text. Then, the Association Committee in Trade Configuration, which includes representatives of the Ukrainian government and the European Commission, will be convened. This body must approve the decision on Article 29 by a joint decision. Only after this can the updated Agreement come into force. However, we can only talk about possible timelines for the document’s consideration once there is a proposal from the European Commission and after European industry associations and stakeholders have expressed their views.

And although this will be a rollback in export opportunities for Ukrainian producers compared to the ATMs, it is something that must be endured while simultaneously watching the reaction of the European market to continue the dialogue with European partners for building long-term relationships.

Specially for AgroTimes