Banning Food Imports From Ukraine: The Impact - Selina Wamucii

At least three governments in the European region, the EU, have put a temporary stop to the transit of wheat and other food imports originating from Ukraine.

Here is a sketch of the evolving reasons that have led up to the ban, followed by an assessment of the impact likely to offshoot from this economic defensive action.

Early 2023, the European Union removed multi-border tariffs to facilitate seamless transportation of grain from Ukraine to countries on the other side of the Mediterranean. The aim was to help the nation walk off the economic ramifications of its ongoing war crisis with Russia.

In April, matters came to a head when many farmers of countries mainly bordering Ukraine to the west saw their interests undermined with the glut of cheap imports from Ukraine that stayed in their country rather than transited through them.

Thus, by 19 April, at least three of the most affected countries, namely Hungary, Slovakia and Poland, and later, Bulgaria invoked temporary bans on the duty-free imports. Hungary further banned the transportation of Ukrainian food products en-route its borders.

The impact, in brief, is assessable by the temporary rather than permanent ban. It means that the governments are taking an impartial approach to the matter rather than risking a total ban in a world where global grain prices are already a concern.

Here is a look at the countries involved.

Multi-billion losses in Poland

Several news sources have described the influx of cheap grain, particularly wheat, from across the border into Poland as a crisis in hindsight of the original EU intentions. The European Union had originally invoked the lifting of import duty from the former Soviet country, now locked in a two-year war with Russia, as a move to help the lush Ukrainian agricultural sector find markets in far-flung areas in Africa and the Middle East. This apparently, did not materialize, as powers that be took advantage of the crisis and sold the cheaply accessible grain locally.

In Poland, the impact is already taking ugly shape at the social and local market level even before the after-impact of the ban unfolds. Aljazeera reported that local farmers are staring at the losses amounting to 10 billion zlotys, equivalent to 2.3 billion dollars, as of Mid-April 2023. The problem, local trade unions cite, are government proxies converting cheap grain inflow into the country as a means to enrich themselves. Indeed, most of the wheat in Poland today is of Ukrainian origin but flour mills and resulting products of bakery are all being labeled Polish, to the detriment of the local producers of grain.

Thus, when on the 16th of April the government hearkened to the farmers’ and unions’ cries and banned temporarily the entry of the grain, only allowing pass through to other countries, it knew it was paying a democratic price. In fact, the impact came in the guise of a political blow on the leading Law and Justice Party (PiS), which has foreseen a likelihood of losing election taking place later this year due to the oversupply tiff, which has stagnated the Polish economy.

During the ban, PiS chief, Jaroslaw Kaczynski echoed his Agrarian Minister’s nuance of an economy under attack by oversupply: he enforced not only the ban of grain “but also dozens of food (from Ukraine).” This is a contravention, one must remember, of an existing bilateral convention between the two neighbors, which allows some produce barter between them. The ban is therefore hitting deeper than just the EU tariff-lifting issue: it has a political and economic impact. Furthermore, it will hit hard on the hitherto 10 percent of total exports from Ukraine to Poland before the ban.

Bulgaria government toes the farmers’ line

Bulgaria is another nation that has bowed down to the local farmers’ cries of trade justice. Reading an address to the nation on April 16, the caretaker administration in the country cited the influx of huge volumes of wheat as well as multiple other farm products to the detriment of local prices, as the reason for the temporary ban.

Bulgaria’s Caretaker PM, Galab Donev hinted on the impact his country might have to face if it did not ban grain imports from Ukraine while other countries did: “”extremely serious consequences,” for local trade may be the result, he implied. The trade ban is going to last three months at least till the end of June.

Hungary enforces total ban

Before enforcing a unilateral ban, Hungary was representing at least 6 percent of all food exports from Ukraine. Now, the administration has laid off both transport of the produce through its borders to other countries and banned its import till mid-2023. This means leaving a huge hole in the Ukrainian export coffer.

Slovakia ban: A dire choice

Slovakia is a major ally of Ukraine and had considered donating war planes to support the Ukrainian war effort against Russia.

Thus, its decision to ban the food import from the country and fortifying its borders against passing by trucks carrying grains to other countries has come as a hard decision.

The government said that it would leave its borders open as pass through for Ukraine’s grain to third-party nations, but had to follow Poland’s lead of enforcing a ban, lest the economy bows down to surplus.

Spain’s context

Developments in Spain indicate that farmers are also feeling the heat of the low cost of grain in the Mediterranean region country, citing sinking prices.

Also Read: Spanish grain sector raises alarm over grain imports from Spain

The government had, in April 2022, switched to South American grain but by September of the year, had reverted to rail import of the same from Ukraine. Thus, it remains to see what will happen if the state hearkens to its farmers’ powerful voice and enforces a ban too, like the other EU countries.

Impact on Ukraine

Ukraine’s reaction is one of shock and regret that the EU lets other countries go back on their word to let through its goods’ transit, duty-free, to third party countries outside the economic bloc.

It is essential to note that Ukraine is partly not to blame for its grains staying put in the EU bloc countries: in 2022, Russia invaded and virtually sealed off some grain getaways along the Black Sea ports, which doomed the grain to stay inside the European borders due to heavy logistical issues.

Kiev has written to the European Commission terming the multiple-ban move as unacceptable.

World impact

Another icing on the pie is the fact that Ukrainian grain has also partly remained within the European borders due to lack of points of sale outside the EU, because prices there are also meager: “low global prices,” cites a Ukrainian official. Thus, the worldwide market is still in the same pitfall as the one the European market is facing, meaning there is surplus worldwide and this ban may not change much globally.

The EU has been trying to find a resolution following this initial ban by at least three countries. The bloc’s preliminary investigations show that Poland’s, Slovakia’s and Hungary’s actions are not about ‘sanctions’ since these countries have been doing their best to aid Ukraine’s economic struggles by allowing grain from the war-embattled country. Thus, it will be a resolution based on the democratic principles of the EU.

Analysts outside the European Union opine that it is rather rare that EU countries can decide to impose “unilateral trade action,” as per Ian Mitchell from the Center for Global Development in London. According to Mitchell, this is just a sign that farmers and their unions have a powerful impact on EU matters and their voices cannot go unnoticed.

As Romania also intends to add its flanks on the ban list, the realization in all this is how powerful farmers’ voices can be over a big economic bloc such as the EU.

Dig deeper into Ukraine market insights for a wide range of food products from Ukraine.

For deeper price insights on wheat from Ukraine, please check out this comprehensive analysis of changes in prices of Ukraine wheat over select years.