"Free trade with the EU - a fairy tale for the poor." How an economic war has begun between Ukraine and Poland
By Alexander Sibirtsev , Lyudmila Ksenz December 21, 2021
Translated from - https://strana.best/articles/analysis/368103--kak-ukraina-i-polsha-rassorilis-iz-za-hruzoperevozok.html
A blast back to the past of late 2021, relevant now given the renewed tensions between Poland and Ukraine over the border crossing:
The situation with queues on the Ukrainian-Polish border is becoming critical and could turn into a disaster, says Deputy Minister of Infrastructure Mustafa Nayem.
In his opinion, the blame for this lies with the Polish side.
Truck drivers are forced to live on roadsides near the border for a week or more, Nayem said. And this week, a historical record was broken: the queue of trucks at the Yagodin checkpoint on the Polish border exceeded 45 kilometers.
He argues that the problem is not in the Ukrainian customs and border guards, but in the low efficiency of the Polish services that carry out phytosanitary and veterinary control. Therefore, the queues from the Ukrainian side reach from 10 to 45 kilometers, and from the Polish side - a maximum of 5 km.
"Our services are ready to check more and more trucks every day. But the flow of a thousand vehicles is stuck in a traffic jam on the Polish side," Nayem said on Facebook.
According to him, phytosanitary and veterinary control on the Polish border has slowed down several times since the Russian invasion.
As an example, he cites the situation at the Dorogusk checkpoint. Previously, the Polish phytosanitary and veterinary services received about 80 trucks per day. And in the last days of August, only 12-25 cars passed the control per day.
At the same time, according to Nayem, the situation could worsen even more, because Polish carriers threaten to block routes, demanding an extraordinary exit from Ukraine.
As a solution, he proposes to increase the number of employees of phytosanitary and veterinary services on the Polish side.
“Moreover, we proposed to provide Ukrainian experts who would help their Polish colleagues. Or, in general, to remove this control beyond the borders of checkpoints inland,” Nayem wrote.
The following article is also interesting because it shows the quite rational positions of the government official Kisilevsky, defending Ukrainian economic interests against the ‘fairy tale for the poor’ of EU-integration. I wrote about Kisilevsky in my older article about how the EU shut down Ukrainian attempts at industrial localization - he was among the biggest advocates for industrial localization. With cadres like this, perhaps the old fear among western atlanticist rags that Zelensky represented some kind of return of pro-Russian illiberalism had some merit.
A large-scale economic war has begun between Ukraine and Poland.
The other day, the Polish publication Rzeczpospolita wrote that Ukraine is blocking the transit of freight trains from China to Poland . The article notes that, allegedly, such a transit block is associated with Ukraine's demand to increase the number of permits for road transport given to Ukrainian companies, which Poland refuses to comply with.
There is indeed a problem with permits. The Federation of Employers of Ukraine says that the Polish quota for Ukrainian transporters in 2021 is 160,000, which is 40,000 less than in 2016, when the free trade area with the EU was launched. Due to low quotas, Ukrainian transport companies are losing cargo traffic, they are firing drivers. And they are getting jobs in neighboring Poland. That is, our transporters are losing both cargo traffic and personnel.
The Cabinet of Ministers has already appealed to the Polish authorities about increasing the quota for 2022. On December 17, Prime Minister Denys Shmyhal said that Ukraine was "carrying on a rather complicated and tense conversation" with Poland on the issue of quotas. And, if an amicable agreement does not work out, our authorities are going to apply to international arbitration.
But already, a large-scale confrontation has actually begun.
"Strana" figured out how Ukrainian and Polish cargo transporters have been quarrelling and what the consequences might be.
They slowed down the quotas
The story about all sorts of transport "misunderstandings" between Ukraine and Poland has actually been dragging on for several months.
In October of this year, the Association of International Road Carriers (AIRC) assembled a commission to redistribute the remaining Polish quotas. At that time there were only about 7.2 thousand of them, which was clearly not enough for everyone. Then AIRC even came up with a formula for the distribution of quotas, it took into account, in particular, the "efficiency in the use of travel permits", that is, how the carriers disposed of the rest of the permits issued to them for 2021.
“The Poles have long been trying to overcome the scheme, whereby transportation permits issued to Ukraine go through intermediaries, and they earn money by reselling them to transporters. That is, the distribution of quotas is not transparent, transport “deciders” work on our side,” says economist Oleksiy Kushch.
And at the same time, the Ukrainian side demands to increase the quota.
For this reason, Poland in 2019 sharply reduced the number of permits issued to Ukrainian carriers - from 260,000 to 160,000. And for next year, our carriers have asked to increase the quota to at least 200,000. But it is not a fact that the Poles will give even 160,000 permits. The quota may be further cut.
The Polish side makes the following arguments. Allegedly, the number of permits for transportation from the Ukrainian and Polish sides should be approximately the same. And Polish carriers did not fully use their permits for 2021.
Another argument from Poland is that an increase in the quota for Ukrainian carriers will allegedly create additional traffic jams at border crossing points.
The Deputy Minister of Infrastructure of Poland, Rafal Weber, noted that the quota could be increased, but subject to the improvement of the road infrastructure and the acceleration of border crossings.
Rzeczpospolita https://logistyka.rp.pl/szynowy/art19210861-ukraina-zablokowala-pociagi-z-chin quotes Weber as saying that "This task lies on both sides. We signed a Memorandum on the daily number of vehicles crossing four road border crossings. Unfortunately, we have not even reached 80% of the quotas"
Fight for money and drivers
The Export Committee of the Federation of Employers of Ukraine (FEU), which recently held a meeting on the issue of quotas in Lutsk, believes that the current need of domestic carriers is at least 200,000 permits.
"Due to the lack of transportation routes, Ukrainian truck drivers are quitting and going to work in Poland. Or Ukrainian companies are re-registering in Poland and paying taxes there. Road transport accounts for 44% of Ukrainian exports to the EU, now hundreds of companies and the state budget of Ukraine are suffering losses due to the actions of Poland. It seems that, despite the appeals of the Ukrainian government, the Poles are not going to increase the number of permits given next year. Poland accounts for about 30% of the EU truck fleet. It is in the interests of giving work to their drivers that the Poles are limiting the issuance of permits to Ukrainian companies," Dmitry Kisilevsky, deputy head of the parliamentary committee for economic development, wrote on Facebook.
"In Ukraine, as well as in Europe as a whole, there is now a huge shortage of truck drivers. We lack 20-30% of our staff. Many leave to work in Poland, as well as in Germany. There were even cases when our drivers get to the border in Ukrainian trucks, abandon them there, and then they go to get a job in Poland.
Why are truckers leaving Ukraine en masse? The main thing is working conditions. We are currently actively building roads, but for some reason there are few places to park trucks and for drivers to rest. Plus salaries. In Ukraine, drivers are paid 1-1.5 thousand euros, in Poland - 2.5 thousand, in Germany - 3 thousand, in the UK - 4 thousand.
The outflow of personnel is no less a serious problem than the lack of transport permits. You can have a fleet of cars and quotas, but if there are no drivers, the trucks will simply stand idle,” says Oleksiy Miroshnichenko, Executive Vice President of the Confederation of Employers of Ukraine.
The conclusions of the FEU Export Committee are as follows: reducing the quota for Ukrainian transporters is contrary to Article 136 of the EU Association Agreement, which allows Ukraine to start an arbitration procedure demanding an increase in the number of permits for our transporters. The Ukrainian authorities, according to the Federation of Employers, should defend our interests more aggressively. But efforts are also needed on the part of Ukraine – in particular, by expanding the capacity of automobile checkpoints to leave the country and reconstructing the narrow railway lines from Kovel towards the border. The FEU also noted that corruption in the distribution of permits is a direct consequence of the artificial deficit created by the Polish side. But in any case, it requires a separate response from law enforcement agencies.
But in general, as Kisilevsky writes, "the current problem with international transportation is another confirmation that the liberal market and free trade with the EU are a fairy tale for the poor, which has nothing to do with reality. Counting on the fact that the EU will voluntarily give Ukraine increased quotas, new transportation permits, abolition of non-tariff restrictions, is not necessary. The government must firmly defend the interests of Ukrainian companies, otherwise Ukrainians will continue to go abroad to work."
Oleksiy Kushch says that there is indeed an element of unfair competition from Poland. “The Poles traditionally have a large share in the freight transportation market in Europe. It is clear that it is beneficial for them to “slow down” Ukrainian carriers and thereby pick up our flows themselves,” the expert notes.
"The problem of a shortage of permits for road transport to Poland has been arising for more than a year, despite the steady growth in the volume of trade between our countries (according to expert estimates, in 2021 it might reach a record high of $11 billion). The problem is aggravated by the fact that through Poland rather large volumes of our exports transit to other European countries. In addition, given the increase in transport problems during the pandemic, it is logistics that is one of the bottlenecks for further increasing Ukrainian exports to the EU, so the question of permits does not only concern Poland, but also other neighboring European countries. This question is now particularly acute in our foreign economic policy," added Andrei Zablovsky, head of the secretariat of the Council of Entrepreneurs in the Cabinet of Ministers.
Railway "response"
But the topic of trucking quotas is only part of the transport scandal. There is another "story line" - the railway.
Since the end of November, Ukrzaliznytsia (the state railway company) began to slow down the trains towards Poland.
And from November 30, it banned the transit transportation of empty and loaded wagons through Ukraine to Poland from Russia, Azerbaijan, Armenia, Belarus, Georgia, China, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan, Moldova, Latvia, Lithuania and Estonia. The same applies to return transit from Poland to the listed countries. This is confirmed by Ukrzaliznytsia documents which the editors of Strana have at their disposal. The reasons for the transit ban, judging by the text of the official Ukrzaliznytsia telegram, are "technical".
The date of the lifting of the transit ban, according to the document, is unknown.
On December 1, Ukrzaliznytsia issued an official press release stating that rail transit is temporarily limited due to "active work to modernize the infrastructure." In particular, the company referred to the work on the electrification of the Kovel-Izov-State Border section and the repair and track work to modernize the Znamyanka-Zdolbunov section.
"In this regard, capacity in the direction of Poland has decreased to 350 wagons per day. These volumes are not enough to ensure transportation within the stipulated time. Therefore, it was decided to temporarily introduce a convention banning transit rail traffic through the territory of Ukraine. After the completion of infrastructure work, transportation will have been restored," Ukrzaliznytsia said, without naming specific deadlines for unblocking transit.
But specialists immediately started saying that the cessation of transit railway cargoes to Poland is a kind of "response" by Ukraine to the unwillingness of the Poles to increase our quotas for road transportation.
The Chinese factor
Recently, the Polish edition of Rzeczpospolita wrote that Ukraine is blocking the transit of freight trains from China to Poland. That is, obviously, stopping the flow of Chinese goods is now a very big problem for the Poles.
“If Ukraine really blocked Chinese transit to Poland due to problems with road quotas, then the “response”, frankly, is super strong. For the Poles, stopping deliveries from China is a much greater economic blow than for us Poland’s unwillingness to increase the number of permits for road transport. Nobody has stopped cargo transportation from Ukraine in the direction of Poland, it continues to go on,” notes Oleksiy Kushch.
For the Poles, the situation is further aggravated by tense relations with Minsk. Warsaw has already threatened to completely cut off railway communication with Belarus (including the transit of goods) due to problems with migrants. But given the actual stoppage of transit from Asia through Ukraine, this will be a shot in the foot for the Poles.
Obviously, Kyiv is pushing the Poles to solve the problem of issuing quotas.
But how Warsaw will respond to this is an open question.