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The European Commission yesterday adopted a proposal for temporarily removing customs duties on Ukrainian exports to the EU. 

Following the recent unprecedented events in the country and the security, political and economic challenges faced by Ukraine, on 6 March 2014 the European Council stated its support to help stabilize Ukraine's economy with a package of measures. One of these was the granting of autonomous trade preferences, set out in today's proposal for an EU Council/Parliament Regulation.

The idea is not to await the entry into force of the Association Agreement's (AA) provisions on a Deep and Comprehensive Free Trade Area (DCFTA), but to advance the implementation of its tariffs section by means of autonomous trade preferences and to start unilaterally the reduction or elimination of the EU's customs duties on goods originating in Ukraine. However, the preferences are not a substitute for the DCFTA and will be granted for a limited period only: until 1 November 2014. It is expected that the DCFTA between the EU and Ukraine will be signed and provisionally apply before the 1st November 2014 in which case the unilateral system of autonomous trade preferences ends.

Once adopted by the EU, this unilateral measure will allow Ukrainian exporters to benefit from preferential access to the EU market in full line with the schedule of concessions negotiated under the DCFTA. Ukraine will not have to provide extra access to EU exports in return. The temporary elimination of the customs duties will be total or partial, depending on the sector.

"The European Commission is committed, and ready, to support Ukraine to stabilise its economic and financial situation", said European Commission President José Manuel Barroso. "Last Thursday, the EU Heads of State and Government welcomed the 11 billion euros package of support to Ukraine presented by European Commission. The Commission is moving ahead fast with the implementation of this support package, and today has adopted the first of the foreseen measures – a set of trade provisions that will represent an economic benefit to Ukraine of around 500 million euros per year. This proposal is a concrete, tangible measure of EU support to Ukraine."

"I'm delighted that we have been able to act so swiftly to prepare the way for help to Ukraine. The idea is for the EU to open its doors to exports from Ukraine, helping to give a real boost to Ukrainian businesses with a real impact on the daily-lives of all Ukrainians", said EU Trade Commissioner Karel De Gucht. "With this rapid response, the European Commission has shown it stands shoulder to shoulder with the people of Ukraine and I would now encourage the European Parliament and the Council to fast track the approval process, so the tariff reductions can be in place by June."

The annual value of this support measure will be nearly €500 million in tariff reductions, of which almost €400m accrue to the agricultural sector.

The EU's unilateral trade opening requires Ukraine to fully co-operate with the EU in its implementation and ensure that Ukraine does not change in any way its tariffs towards the EU during this period. In addition, a number of safeguard controls will be put in place to prevent market-distorting surges impacting adversely on European companies and industry including the agricultural sector.

The proposal in detail:

Industrial Products: Existing EU tariffs for industrial goods exported from Ukraine will be removed immediately for 94.7% of products. For the remaining handful of products (some chemical products, etc.) the tariffs will be reduced.

Agricultural Products: For agricultural goods, the EU has taken important but more limited action to open up its market to Ukrainian agriculture. This will ensure the European agricultural sector is not harmed by this unilateral trade action.

In concrete terms, the EU will grant immediate and unlimited preferences to 82.2% of Ukraine's exports. For the other products (cereals, pork, beef, poultry and a handful of additional products) a partial liberalisation is achieved by the granting of duty-free tariff rate quotas (TRQs), which limit the amount of certain goods able to benefit from the trade preference.

Processed food products: The EU will grant immediate preferences to 83.4 % of Ukraine's exports. The remaining 15.9% will be partially liberalised through TRQs.

Safeguard systems: In order to prevent any risk of fraud, the entitlement to benefit from autonomous trade preferences is conditional on the compliance by Ukraine with the relevant procedures linked to the 'rules of origin' of products as well as involvement in effective administrative cooperation with the EU. Moreover, Ukraine must abstain from introducing new duties or charges having equivalent effect or new quantitative restrictions or measures having equivalent effect or from increasing existing levels of duties or charges or from introducing any other restrictions.

Safeguards are available and the reintroduction of normal customs duties is possible where products cause, or threaten to cause, serious difficulties to Union producers of like or directly competing products. This system is based on statistical data collected from national customs officials throughout the EU. In case the data demonstrates a sharp or swift increase of imports (meaning that, for example, products originating from another country (not Ukraine) end up flooding the EU market through false Ukrainian certificates of origin and benefit unduly of the DCFTA), the EU may re-establish the tariffs on a said product.

Background

Ukraine is a priority partner country within the European Neighbourhood Policy (ENP) and the Eastern Partnership. The European Union has been seeking an increasingly close relationship with Ukraine going beyond mere bilateral cooperation, encompassing gradual progress towards political association and economic integration. This was the logic behind the Association Agreement, including a DCFTA, negotiated between the European Union and Ukraine from 2007-2011 and initialed by both parties in 2012. Under the provisions of the DCFTA, the European Union and Ukraine are to establish a free trade area over a transitional period of a maximum of 10 years starting from the entry into force of the Association Agreement.

On 21 November 2013, Ukraine announced the suspension of the preparations for the signature of the Association Agreement, including the DCFTA, with the EU. The signature was initially scheduled to take place at the Eastern Partnership Summit, held in Vilnius, on 28-29 November 2013.

Following the recent unprecedented events in the country and the security, political and economic challenges faced by Ukraine, the European Council stated its intention to support the economic stabilization of the country by means of a package of measures, including the granting of autonomous trade preferences.

For more information

Statement of Commissioner De Gucht, 11 March 2014, Statement/14/63

Press Release (IP/14/219): The European Commission's support package for Ukraine, 5 March 2014

Statement of the Heads of State or Government on Ukraine, 6 March 2014:

http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/141372.pdf

Guide to the EU-Ukraine Deep and Comprehensive Free Trade Area (DCFTA):

http://trade.ec.europa.eu/doclib/docs/2013/april/tradoc_150981.pdf

EU-Ukraine Association Agreement – the complete texts

http://www.eeas.europa.eu/ukraine/assoagreement/assoagreement-2013_en.htm

Trade relations between the EU and Ukraine

http://ec.europa.eu/trade/policy/countries-and-regions/countries/ukraine/