Ten days ago, the EU Council approved the framework for accession talks with Ukraine and Moldova. On June 25, formal accession talks between Ukraine and the European Union started with an intergovernmental conference in Luxembourg. In an interview, Deputy Prime Minister for European Integration Olha Stefanishyna discusses Ukraine’s progress on reforms outlined by the European Commission, current challenges regarding trade liberalisation with the EU, and how Ukraine plans to address the “Hungarian question” on its path to Europe.
The conversation was shortened and edited for better understanding.
Trade with the EU
You refuted reports that the EU plans to impose tariffs on Ukrainian sugar and eggs from June 28. However, when could this actually occur and how would it impact Ukrainian producers and exporters?
Yes, on a number of items, we are approaching the export limit, which allows for certain protective measures. This is a very narrow list. Currently, trade liberalisation applies to the entire range of Ukrainian agricultural products.
Since the launch of the Black Sea Grain Corridor, pressure on countries bordering Ukraine has eased. However, agricultural exports remain a significant component of Ukraine’s overall exports. This includes poultry, corn, flour and pellets, barley groats, meal, and honey. These products are subject to monitoring under trade liberalisation agreements and may require licensing and control measures once the upper export limit established for the period from the second half of 2021 to 2023 is approaching.
The trade liberalisation decision is not about new restrictions. The Ukrainian market is familiar with this mechanism, was prepared for its potential adoption, and even advocated for incorporating such protective measures into trade liberalisation. This fosters predictability, facilitates business operations, and minimizes potential border tensions with neighbouring countries.
Despite the export limit, it enables Ukrainian companies to plan their activities consistently and avoid disruptions at the border.
The EU has already imposed tariffs on oats. Which products could be next? For which categories are we approaching the export limit, potentially facing restrictions under liberalisation?
Currently, eggs and sugar are being monitored, but there are no restrictions on other product groups.
The latter half of this year and early 2025 will focus on shaping the future of trade liberalisation, as the current decision is in effect for one year. Our goal is to propose and adopt a joint decision on trade liberalisation with the European Commission by June 2025, which would be effective until the decision on Ukraine’s EU membership.
What are the estimated timelines for sugar and eggs? When could we reach the export limit for these products?
There will be a meeting in the European Commission among the departments responsible for trade and agricultural products. We may see the application of such an emergency braking mechanism.
This, however, is done within the framework of general trade liberalisation and is an absolutely rational trade practice. This decision was agreed upon with Ukrainian producers.
For its part, Ukraine categorically defended the position that these conditions are in effect as long as the Black Sea Corridor is functioning, and the security situation is as it is. If the situation changes significantly, for example, for the worse, we will review the conditions related to the possibilities of exporting products through the EU.
The EU’s Autonomous Trade Measures (ATMs) stipulate that anti-dumping measures will not be applied to metallurgical products. Can you elaborate on the implications of this for Ukraine, given the war’s significant impact on the industry and the destruction or proximity to the frontlines of many enterprises? Is this provision currently relevant for Ukraine’s economy?
As the war significantly impacted the market, all restrictions, anti-dumping duties, and barriers under other trade instruments and investigations for metallurgical products were suspended.
Before the full-scale invasion, Ukraine’s metallurgical complex was highly competitive. Due to low prices and large export volumes, it created a degree of imbalance in the EU market.
With the onset of the full-scale war, a decision was made to implement trade liberalisation and remove trade restrictions specifically for the metallurgical complex to eliminate any barriers to trade. These were virtually the only restrictions affecting Ukrainian products.
After the war concludes and within the framework of negotiations for Ukraine’s EU membership, we must determine our role and place in the EU market across all sectors. However, this is a matter for membership negotiations, not trade restrictions or liberalization.
After the war concludes and within the framework of negotiations for Ukraine’s EU membership, we must determine our role and place in the EU market across all sectors. However, this is a matter for membership negotiations, not trade restrictions or liberalization.
One weakness of the European Commission’s unilateral trade liberalisation approach was the lack of tools for swift control or accountability when a country violated the regulation’s requirements.
We have recourse to arbitration and dispute settlement mechanisms within the World Trade Organization (WTO). The European Commission also has its own legal procedures, but these can take years.
Naturally, a country at war, which should not face any export restrictions, does not see the need to utilize these lengthy procedures, even though we have initiated all necessary legal steps. They simply do not have the quick effect.
Therefore, in addition to legal procedures, we implemented several measures.
What measures were taken specifically?
First, we invoked the emergency brake mechanism within the trade liberalisation regulation, along with the liability mechanism for EU countries violating the regulation’s requirements.
Second, Ukraine introduced export controls and licensing for certain product groups, routing them only in transit through neighbouring countries.
Most importantly, Ukraine ensured the restoration of the Black Sea Grain Corridor, significantly easing pressure on neighbouring markets.
There is no universal solution. Legal procedures exist and must be initiated by Ukraine. As for quick responses, we have implemented internal measures and established clearer mechanisms in the trade liberalization regulation.
Excise Duty and Reforms
Ukraine has committed to increasing excise duties to align with European levels in the coming years. In the context of European integration, are there discussions about a similar increase in the environmental tax? What rates are being considered?
Yes, excise duty rates and fee rates must be harmonized with European regulations and directives. This is our obligation, and these indicators are explicitly defined in European regulations.
The only point of discussion is the timeline: when and over what period these measures will be implemented.
Regarding the carbon tax, the Ministry of Ecology is currently addressing this issue. It will not be a straightforward tax, as a monthly deduction from the income of legal entities or individuals, but a more complex formula linked to the emissions trading system and other environmental policy elements.
By autumn, the government will be able to present its position on how we will implement these future obligations of Ukraine.
European partners will closely scrutinize the reforms of the anti-corruption block. This month, we adopted the law on the Bureau of Economic Security (BEB). Which institutions might be reformed next (ARMA, State Property Fund, State Tax Service, Customs Service)?
A year ago, President Zelenskyy approved a decree outlining the concept for reforming law enforcement agencies in Ukraine. Based on this concept, a government action plan has been developed and will be approved shortly.
Secondly, Ukraine has already launched institutions critical for the state’s existence, restarted the judicial branch, and established a functioning Constitutional Court. Additionally, all anti-corruption and law enforcement agencies are operational, and the Bureau of Economic Security (BEB) will be relaunched.
The European Commission has acknowledged that we have met all the necessary political criteria. By the end of the year, we must present a roadmap to ensure these institutions function effectively.
This means that it is not enough to establish and launch these institutions; we must ensure their sustainability, quality, and effectiveness. This is a more challenging task, which required political consensus and extensive discussion.
As part of the broader negotiation process, numerous institutions need to be reformed, not only in the areas of rule of law and anti-corruption. This includes customs and tax policy, as well as the system of independent regulators in sectors such as transport, energy, television, and radio broadcasting.
Everything is underway. There will be significant transformations across all sectors. The negotiation process will be transparent and, hopefully, swift.
Will these transformations occur this year, or extend into 2025?
They will take place over the next two years.
EU Accession
At the press conference in Luxembourg, you emphasized that Ukraine’s membership in the EU does not automatically grant full and immediate access to the single market. Certain transition periods can be agreed upon. Which sectors will this affect? What transition periods will we request, and which ones have we included in our negotiating position?
A major component of the negotiation process is environmental policy, specifically environmental protection and climate policy. Ukraine has declared its commitment to the Green Deal goals, our obligations under the Paris Agreement, and decarbonization efforts.
However, the transition to European regulations will be lengthy, as EU countries currently operate under the fourth generation of climate regulation, while we are implementing only the first and second generations of these policies. Therefore, we have already stated that while assuming all necessary obligations, we will request specific transition periods.
Similarly, we will not rush to implement obligations in agricultural policy, except for those concerning standardisation, requirements, and certification. Since the EU itself has declared a reform of agricultural policy, this will be a subject of discussion.
Is there a similar discussion regarding energy?
Regarding energy policy, there are significant concerns related to the destruction of Ukraine’s energy infrastructure and the need for rebuilding it. We acknowledge that rebuilding this infrastructure and ensuring electricity access for Ukrainians is a priority. These priorities will guide us in the negotiation process while recognizing the importance of our obligations.
However, it’s important to note that Ukraine is already well-integrated into the European Union in terms of the digital economy. We acknowledge that Ukraine benefits from trade and transport liberalization. We have customs simplification agreements with the EU, and enjoy visa-free travel, which has facilitated the free movement of people since 2017.
Therefore, while there will be transition periods and some exceptions, we are not newcomers to this market and have already achieved a high level of integration.
Will there be transition periods for the free movement of capital, especially considering our current currency restrictions?
Financial stability is a priority. It’s difficult to say definitively about transition periods at this stage. However, I can confirm that the National Bank has made Ukraine’s European integration and ensuring the free movement of capital priorities. I am confident we will find a balance.
Deputy Governor of the NBU, Serhiy Nikolaychuk, is the chief negotiator on this matter. We expect a clearer position to emerge in the next six months, following bilateral consultations within the negotiating framework.
At the intergovernmental conference between Ukraine and the EU, your opening statement mentioned that Ukraine would fulfil 11 demands from Hungary concerning the Hungarian minority in Zakarpattia. These demands are not public, but Ukrainian media reports suggest we may have to recognize all of Zakarpattia as “historically Hungarian.” What are these conditions, and what risks do you perceive?
I plan to provide more extensive communication on this issue. The Ukrainian side’s statement indicated that Ukraine would agree to and ensure the implementation of 11 points presented by Hungary. Therefore, before addressing the 11 points, our position was to agree on the necessary steps.
We have engaged in bilateral dialogue with Hungary on this matter for nearly five months and have made good progress. Currently, I don’t feel pressured for time, as negotiations are underway, and a certain position has been established.
I am confident that our Hungarian and Ukrainian colleagues have nearly reached a consensus on each of these points.