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POLITICO: How the EU lost control in Ukraine grain fight

28-9-2023 |

It's one thing to be dealt a weak hand. It's another to play it badly.

But that's exactly what the European Commission has done in the crisis caused by a glut of Ukrainian grain that has put Kyiv at odds with its European allies and, in particular, left Brussels at the mercy of Polish electoral politics.

The EU's eastern capitals had warned that they would impose their own import bans if EU-wide restrictions expired, as planned, on September 15. Nevertheless, the Commission let them lapse. Ukraine gave notice that it would sue at the World Trade Organization if that happened, and has duly done so.

Now, because trade policy lies in its remit, the Commission finds itself representing Poland, Hungary and Slovakia in a looming fight at the global trade body — even though it disagrees with their stance.

"This is a terrible outcome for Ukraine and the European Union as a whole,” said trade expert David Kleimann, a visiting fellow at the Brussels-based Bruegel think tank.

“It is incomprehensible how the Commission President allowed for the grain imports via the EU solidarity lane to develop into a bilateral Polish-Ukrainian confrontation.”

Not only do the import restrictions deal an economic blow to Ukraine — farm produce earned two-fifths of its export revenues before Russia's full-scale invasion last year — but they also represent a violation of the rules of the EU single market.

EU trade chief Valdis Dombrovskis could, for example, have attempted to call the unruly easterners to order by opening an infringement procedure. Why hasn't he?

It's already too late, said one EU official. The time to act would have been in the spring, when Poland, Hungary, Slovakia, Bulgaria and Romania imposed unilateral import bans. Instead, the Commission caved in and introduced the bloc-wide restrictions that expired this month.

“It’s the same as with kids: you give them a finger and they’ll take a whole hand,” said the official, who was granted anonymity to speak candidly. “It was a mistake not to intervene in the spring.”

In April, a group of frontline countries led by Poland imposed bans on Ukrainian grain following protests by local farmers unable to sell their crops. Russia's blockade of Ukraine's Black Sea ports had caused a supply glut, redirecting cheap Ukrainian grain into continental markets.

The import crackdown sparked outrage among other EU countries, which said this undermined the bloc’s single market and broke solidarity with Ukraine, effectively reversing the EU's suspension of import duties on Ukrainian goods following the Russian invasion.

To avoid a fight, the European Commission chose to retroactively ratify the curbs by introducing emergency safeguard measures for wheat, maize, rapeseed and sunflower seeds.

That put the EU executive in a difficult spot, as it had to decide by mid-September whether or not to extend the restrictions — just over a week before Saturday's election in Slovakia and one month before Poland goes to the polls.

"This is quicksand that the Commission created by granting the exception the first time around," said one EU diplomat. "By giving in to the blackmail then, it's very difficult to get out in an elegant way now."

A majority of EU countries had argued against extending the import ban, which is widely seen as a purely political move to appease the Polish conservative government, led by the Law and Justice (PiS) party, ahead of the election.

Only at the very last minute did the Commission decide to end the restrictions, claiming there were no longer market distortions in the five countries bordering Ukraine. At the same time, Ukraine agreed to introduce measures to control exports to avoid a new grain surge.

Hungary, Poland and Slovakia quickly announced their own unilateral import bans, after which Ukraine sued the three countries at the World Trade Organization. It now falls to the Commission to represent those three countries in the dispute, as the EU is in charge of trade policy.

“This is what a lack of political leadership looks like,” said Kleimann. “This impression is reinforced by the fact that the Commission has so far signaled no intention whatsoever to sue Poland and Hungary for their clear violation of EU law.”

So how can the EU get out of this mess of its own making?

The more optimistic EU and Ukrainian officials argue that, from here on, tensions can only ease — although bilateral talks on Wednesday between the Polish and Ukrainian agriculture ministers brought no immediate progress.

On Thursday, the European Commission will bring together the antagonists to seek progress on controlling Ukrainian exports. The idea is to create an export licensing system, which provides more flexibility.

Agriculture Commissioner Janusz Wojciechowski, who is Polish, has already lashed out against that proposal, saying it would be “corrupting.”

Although trade is outside his remit, Wojciechowski, a member of the Polish ruling party, has plunged headlong into the grain fight, saying he would not “lay down arms” in his push for the Commission to reinstate the restrictions. In announcing its ban, the Polish government thanked Wojciechowski for “his cooperation.”

Either way, not much is likely to change before the Polish election, officials admit, as there is too much political noise.

The hope is that once the Polish ballots close, the political posturing can stop. Ukraine will introduce its measures, the three EU countries can also lift their bans and the WTO dispute can be stalled, or even better, resolved diplomatically.

But that hope may be naive, said Piotr Buras, senior policy fellow at the European Council on Foreign Relations.

He argues that Poland’s growing assertiveness in its relation with Ukraine will not disappear after the election.

“In Poland, ‘after the election’ is also ‘before the election’,” said Buras. “The election campaign will continue, as the formation of government will be difficult and a snap election in spring 2024 cannot be ruled out.”

If the de-escalation European officials are hoping for turns out to be a mirage, it would put the European Commission in a bind. Other EU countries are growing nervous over the precedent for the single market's boundaries being set by the unilateral bans.

For now, Commission officials dismiss calls to begin an infringement procedure as they hope to find a political solution. But the longer the row drags on, the more such legal action will become unavoidable, an EU official said, as the three countries aren't just flouting EU law; they are openly bragging about it.

Polish Agriculture Minister Robert Telus, for example, struck a defiant tone at the last meeting of EU farm ministers in Brussels, telling reporters he wasn't worried about possible retaliation from the Commission.

“On April 15 we did much more, we blocked everything. And what happened?" he said. "Nothing.”

Source: POLITICO