Espreso. Global

Situation is critical: European Business Association representative on new border blockade

8 February, 2024 Thursday

Due to the problems with blocking the borders, it is increasingly difficult for Ukrainian businesses to prove that they are able to fulfill contracts on time, and companies pay fines for missed deliveries

On February 9, the Solidarity Union of Polish Farmers announced a new blockade of the border with Ukraine. They promise to block all checkpoints and highways in certain regions. The farmers were not satisfied with the European Commission's decision to extend preferences for Ukraine for another year, so they decided to block the border for a month, until March 10.

How the problems with the closed borders affect Ukrainian business, whether there are ways to negotiate with the protesters, and why Polish customs officers are in no hurry to process cargo from Ukraine - Mariana Lutsyshyn, head of the Western Ukrainian Office of the European Business Association (organization of international business in Ukraine - ed.), told Espreso in an interview.

On February 9, Polish farmers are going to block the border with Ukraine again. Their Hungarian counterparts have also announced a protest on February 9. Is there any information on the strike in Poland yet: will any cargo be allowed to pass through?

Unfortunately, any announcement of possible strikes has a negative impact on all Ukrainian businesses, not just those engaged in agriculture. It affects exports and imports in general. As for the specific information about the February 9 strike, there is not much information available. We hope that they will allow at least partial passage of cargo, because a complete blockade of the border will cause huge losses.

Do you have any approximate figures on how much damage Ukrainian companies have suffered due to the blockade of the Polish border, which lasted from November 6 last year?

We carried out a quick survey of EBA member companies. They reported that one day of delays costs a company about UAH 1 million in losses. These are only direct losses from the blockade. But there are also indirect ones - transportation costs have increased, the prime cost and price competitiveness have changed. Everyone is looking for new routes, but this increases the delivery time and cost.

At the same time, the blockade affects not only business in Ukraine but also European business. Ukraine supplies products there, and the blockade disrupts the delivery process, which has a chain reaction on everyone. In other words, both importers and exporters are equally affected, as 49% of companies import products to Ukraine. At the same time, 25% of goods go to Poland, 15% to Germany, as well as to other Baltic countries, Western Europe, the United States, Canada, Asia, and Africa.

In addition to the direct blockade of the borders by protesters, carriers often complain that Polish checkpoints deliberately delay the processing of goods, which causes queues. How quickly have Polish customs officers been processing goods since mid-January, when the borders were unblocked?

It is difficult for me to say whether the work at the checkpoints is being slowed down right now.

It should be understood that today the Polish side is also in a difficult situation, as most of the trade flow from Ukraine passes through the Polish border. More cargo transportation means more people are needed to check it. After all, Poland is now the guardian of EU security. And of course, with the increase in workload, employees want decent pay.

As an option, we can discuss joint control at checkpoints. My Polish colleagues and I already had such an experience during Euro 2012. Back then, the Polish and Ukrainian sides conducted joint control for three months. It was a good idea. Of course, there are issues with legislation and technical resources, but we can talk about it. We used to talk about the electronic queue at the border as something incredible and fantastic, and now it works. And by the way, thanks to the electronic queue, you can see the dynamics of how people work on both sides.

What we propose. First, to ensure that the customs and border guard authorities of both countries fulfill the memorandums on the capacity of Ukrainian-Polish border crossing points. Second, to focus on the development of existing and construction of new joint checkpoints on the Ukrainian-Polish border, using available instruments of intergovernmental cooperation and mechanisms of multilateral diplomacy. Thirdly, to promote the convergence of customs procedures at Polish-Ukrainian checkpoints and to develop appropriate recommendations for changes in customs legislation and practices of the customs departments of both countries. And fourth, to sign the Agreement on the Common Border between Ukraine and the Republic of Poland.

Unfortunately, border blockades are already becoming commonplace.  Could this lead to foreign companies considering relocating production from Ukraine?

Unfortunately, yes, the strikes also have a negative impact on the number of orders for companies represented in Ukraine. Most companies operating in Ukraine are part of global supply chains. Therefore, the failure to fulfill contracts due to the blockades leads to huge fines and reputational losses. 

The directors of Ukrainian companies are making titanic efforts to keep their business in Ukraine despite all the risks. And of course, when unpredictable logistics are added to these risks, the situation looks quite complicated.

Our task is to demonstrate the reliability of Ukrainian business and find alternative logistics solutions.

Do you think there is any way to reach an agreement with the strikers?

As far as I know, the strikers are expressing their complaints against their own government.

We are trying to establish communication between all parties. For example, we gathered several public business organizations and invited Polish representatives to understand the strikers' demands. The meeting resulted in proposals for possible solutions to these problems within our competence, which we sent to all government officials.

We should realize that we need to continue to work together, and to do so, we need to build healthy communications. We propose to sit down at the negotiating table and find ways of interaction where both sides can make positive changes.

Are there many Polish companies among the EBA members and how do they react to such strikes, since they have interests on both sides of the border?

There are almost no Polish companies in our Western Ukrainian office. Among the Polish companies I communicate with, there are very different points of view on this situation.

On February 14, 2024, we will host the Global Outlook: A Winning Vision event and one of the discussion panels will be devoted to the relationship between Ukraine and Poland. The goal is to discuss the interests of both sides, see the prospects and find ways to resolve obstacles to building healthy business relations.

Speaking of the future, in particular, the preparation of Ukraine's accession to the EU amid protests at the borders. Isn't it possible that a few dozen farmers, carriers, or other dissatisfied people could offset intergovernmental agreements by simply blocking the borders or highways?

I try not to consider such negative scenarios in this context. But the more intensively we work now to solve the problems at the borders, looking for solutions, the easier it will be in the future in the process of integration into the EU.

Unfortunately, such a threat exists. We can see from the current situation that even a small number of people can effectively block the state border and cause significant damage to the economies of both countries. That is why it is so important to establish a constructive dialog now to avoid similar situations in the future within the framework of a single European space.

For me, for example, the main message for our partners abroad is that we are not a threat - we are an opportunity.  And we are worthy partners in the European Union.

What role should our diplomatic missions play in the correct positioning of Ukrainian goods and Ukrainian manufacturers abroad?

I think this is a joint effort of diplomats, business and civil society. Embassies should continue to organize events to promote Ukrainian culture and business. Business, in turn, should position itself correctly in the international market, and Ukrainians abroad, of whom there are now millions, can unite in unions and defend the country's interests. After all, every Ukrainian abroad is a representative of Ukraine and should bear this responsibility with dignity.

In general, the situation with the border blockade is very difficult for both the Ukrainian economy and European integration aspirations. The key is to establish a constructive dialogue between all parties - the government, business, and civil society organizations on both sides of the border. Only comprehensive and coordinated steps will help minimize the negative impact of the protests and avoid similar situations in the future.

  • The Polish farmers' union Solidarity announced a general strike across the country on February 9. At the time, it was noted that it would begin with a blockade of all checkpoints on the border with Ukraine, as well as blocking roads and highways in certain regions.
  • On February 7, Polish farmers sent an official notice to resume strikes on the border with Ukraine. The blocking of the Dorohusk-Yahodyn checkpoint is scheduled to begin on Friday, February 9, at 11:00 a.m. The protest was approved by local authorities until March 9.
  • On February 8, the Ministry of Agriculture of Poland held talks with representatives of farmers' associations who are preparing another major protest for Friday, including against the extension of preferential EU trade with Ukraine.
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