Explanatory Memorandum to COM(2023)106 - Temporary trade liberalisation supplementing trade concessions applicable to Ukrainian products under the Association Agreement with Ukraine - Main contents
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| dossier | COM(2023)106 - Temporary trade liberalisation supplementing trade concessions applicable to Ukrainian products under the Association ... |
|---|---|
| source | COM(2023)106  |
| date | 23-02-2023 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
Russia’s unprovoked and unjustified military aggression against Ukraine since 24 February 2022 has had a profound negative impact on Ukraine’s ability to trade with the rest of the world, because of the toll imposed on human lives, the need to focus on the defence of the territory, vast populations being displaced, the destruction of production capacity and the unavailability of a significant share of transport means due to the restriction of the access to the Black Sea. In this difficult context, in its conclusions of 21 October 2022 and 9 February 2023, the European Council underlined that it will continue to provide strong political and economic support to Ukraine. Furthermore, Ukraine has asked the Union to facilitate as much as possible the conditions to enable the country to maintain its trade position with the rest of the world and further deepen its trade relations with the Union. Measures to this end include facilitating overland logistics through the Agreement between the Union and Ukraine on the carriage of freight by road 1 and the EU-Ukraine Solidarity Lanes and increasing the degree of market liberalisation through Regulation (EU) 2022/870 of the European Parliament and of the Council of 30 May 2022 on temporary trade-liberalisation measures supplementing trade concessions applicable to Ukrainian products under the Association Agreement. This Regulation entered into force on 4 June 2022 and will be in force until 5 June 2023. These measures have proven to add flexibility and certainty for Ukrainian producers.
In view of Russia’s continuing military agression against Ukraine, the resulting need to continue to support Ukraine economically, and considering that Ukraine was granted EU candidate status in June 2022, the Commission is proposing a Regulation of the European Parliament and of the Council renewing these trade-liberalisation measures, which should apply for a period of one year as of the date the current measures expire (i.e. as of 6 June 2023):
–Temporary suspension of all outstanding customs duties under Title IV of the Association Agreement between the EU and Ukraine (hereinafter referred to as ‘the Association Agreement’) 2 establishing a deep and comprehensive free trade area (DCFTA). This concerns two categories of products:
·fruits and vegetables subject to the entry-price system;
·agricultural products and processed agricultural products subject to tariff-rate quotas.
–Temporary non-collection of anti-dumping duties on imports originating in Ukraine as of the date of entry into force of this Regulation; and
–Temporary suspension of the application of the common rules for imports (safeguards) 3 with respect of imports originating in Ukraine.
Regulation (EU) 2022/870 also includes a temporary suspension of the outstanding tariffs on industrial products subject to duty phase out by the end of 2022 in accordance with Annex I-A to the Association Agreement. This proposal for a renewal of these measures does not include these products since they in any case are subject to zero duties since 1 January 2023.
These temporary and exceptional measures will contribute to continously supporting and fostering the existing trade flows from Ukraine to the Union. This is in line with one of the main objectives of the Association Agreement, which is to establish conditions for enhanced economic and trade relations leading towards Ukraine's gradual integration in the EU Internal Market.
The trade-liberalising measures provided for under the present proposal for a Regulation are taken in observance of the commitment in Article 2 of the Association Agreement which enshrines as an essential element of the Agreement the promotion of respect for the principles of sovereignty and territorial integrity, inviolability of borders and independence. In the same vein, the trade-liberalising measures themselves would be conditional upon respect for the same basic principles set out in Article 2, including those providing that the respect for democratic principles, human rights and fundamental freedoms and respect for the principle of the rule of law constitute essential elements of that Agreement.
Furthermore, the trade-liberalising measures contained in this proposal aim at ensuring, in accordance with Article 207(1) TFEU, that the Union’s common commercial policy is conducted in the context of the principles and objectives of the Union’s external action set out in Article 21 TEU.
According to the proposal, expedited safeguard procedures will apply on the basis of regular monitoring allowing for potential reintroduction of customs duties.
• Consistency with existing policy provisions in the policy area
These trade-liberalising measures would be consistent with the implementation of the Association Agreement and in particular with the Title IV establishing a DCFTA, which provides that Parties shall progressively establish a free trade area over a transitional period of a maximum of 10 years starting from the entry into force of that Agreement.
In addition, Regulation (EU) 2022/870 has demonstrated the EU’s strong committment to economically support Ukraine by means of international trade in the context of Russia’s agression against Ukraine. The renewal of the trade-liberalisation measures is a logical extension of this policy as the military agression as well as Ukraine’s economic difficulties continue.
Finally, Ukraine has requested in 2021 the activation of the review under Article 29 i of the Association Agreement with the purpose of considering accelerating and broadening the scope of the elimination of customs duties between Ukraine and the Union. Negotiations are currently paused.
Nevertheless, the EU-Ukraine summit held on 3 February 2023 endorsed the revised Priority Action Plan for enhanced implementation of the DCFTA for 2023-2024. This includes for example the commitment of Ukraine to put in place, during the first quarter of 2023, the legislation on hygiene and quality of poultry meat, which will allow for the introduction of agreed amendments to the export certificate for certain poultry meat from the EU to Ukraine.
• Consistency with other Union policies
The European Union has strongly condemned Russia’s aggression against Ukraine and has undertaken unprecedented steps to support Ukraine in this exceptional context, ranging from financial assistance, including macro-financial assistance for emergency measures and reconstruction, over the delivery of military equipment and the adoption of extensive sanctions against Russia and Belarus, to the intensification of cooperation under the Association Agreement. In addition, Ukraine was granted EU candidate status in June 2022. The proposed Regulation would therefore comply with and follow from the Union’s obligation under Article 21(3) TEU to ensure consistency between the different areas of its external action, as well as with Article 207(1) TFEU which provides that the common commercial policy is to be conducted in the context of the principles and objectives of the Union’s external actions.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
The legal basis for the proposal is Article 207(2) of the Treaty on the Functioning of the European Union.
• Subsidiarity (for non-exclusive competence)
The common commercial policy, in accordance with Article 3(1)(e) of the TFEU, is defined as an exclusive Union competence. Therefore, the subsidiarity principle does not apply.
• Proportionality
This proposal is necessary in order to implement the common commercial policy and to achieve the objective of supporting Ukraine in its current difficulties economically, also in the area of trade with the Union.
• Choice of the instrument
This proposal is in accordance with Article 207(2) TFEU, which envisages common commercial policy measures.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Ex-post evaluations/fitness checks of existing legislation
Not applicable.
• Stakeholder consultations
Not applicable.
• Collection and use of expertise
Not applicable.
• Impact assessment
In order to ensure a continuation of the trade-liberalisation measures for Ukraine after the expiry of Regulation (EU) 2022/870 on 5 June 2023, it is important for the Regulation to enter into force on 6 June 2023. Given this necessity and the resulting urgency of this proposal, no impact assessment was carried out. However, the trade and trade-related provisions of the Association Agreement have been subject to a sustainability impact assessment commissioned by DG Trade in 2007 which fed into the DCFTA negotiation process. That study confirmed that implementation of trade and trade-related provisions would have a positive economic impact for the EU as well as for Ukraine.
In addition, import flows under the Regulation (EU) 2022/870 are regularly being monitored and reported. Based on the results of this monitoring, it is proposed to make the safeguard provisions more operational, if the imports cause adverse effects on the EU market.
• Regulatory fitness and simplification
The measure does not increase the regulatory burden of companies.
• Fundamental rights
These measures respect the same basic principles as those enshrined in the Association Agreement between the EU and Ukraine. In particular, Article 2 of the Association Agreement with Ukraine provides that the respect for democratic principles, human rights and fundamental freedoms and respect for the principle of the rule of law, constitute essential elements of that Agreement.
The trade-liberalising measures would also be in accordance with the European Charter on Fundamental Rights.
4. BUDGETARY IMPLICATIONS
Based on an estimation according to the level of import volumes of products covered by the proposed Regulation in excess of the annual duty-free quota from Ukraine in 2021, the European Union would see a loss of EUR 33.4 million of customs revenue annually. In addition, following the termination of the anti-dumping measures on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in Ukraine [include footnote when published], the sole trade defence measure left with regard to Ukraine is an anti-dumping duty on imports of certain seamless pipes and tubes of iron or steel, which have not been collected pursuant to Article 1(2) of Regulation (EU) 2022/870. This duty will expire on 3 October 2023 if the Commission does not receive a request containing sufficient evidence that the expiry of the measures would likely result in a continuation or recurrence of dumping and injury. In case the measures on certain seamless pipes and tubes of iron or steel are extended after this date, based on the level of imports from Ukraine in 2020 and 2021 the estimated maximum loss of anti-dumping duties would be less than EUR 15 million annually. The total estimated amount is thus EUR 48.4 million 4 and therefore the impact on the EU’s own resources will be very limited.
5. OTHER ELEMENTS
• Implementation plans and monitoring, evaluation and reporting arrangements
On-line reporting on the evolution of bilateral EU-Ukraine trade is available via dedicated websites of the European Commission. Regular monitoring of the impact of the Regulation, taking into account the information on exports, imports, prices on the Union market and Union production of the products subject to the trade-liberalisation measures shall be made on a bimonthly basis.
• Explanatory documents (for directives)
Not applicable.
• Detailed explanation of the specific provisions of the proposal
In view of the emergency situation in Ukraine, the measure aims at increasing the trade flows concerning all imports from Ukraine by suspending all outstanding tariffs and import duties applied to Ukrainian products. The trade-liberalising measures would be granted in the form of full suspension of import duties on all products.