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Ukraine may lose a third of its GDP due to the blockade on the border with Poland

Ukrainian businesses continue to suffer financial and reputational losses due to the blockade of the border with Poland. Currently, activists have blocked three checkpoints: Dorohusk-Yahodyn, Hrebenne-Rava-Ruska, and Dovhobychiv-Uhryniv. The blockade was part of the protests that began in mid-February 2024 in response to the expansion of duty-free imports of agricultural products from Ukraine and the European Union's common agricultural policy.

The events of recent months raise important questions about the difficulties faced by countries seeking integration into European structures. The blockade of the border disrupts not only trade relations between Ukraine and Poland, but also emphasizes the need to find a balance between protecting the interests of national agricultural producers and respecting obligations to partners within the EU.

Polish farmers block traffic during a protest near the Polish-German border in Świecko, western Poland, 17 March 2024.
Photo: EPA/UPG
Polish farmers block traffic during a protest near the Polish-German border in Świecko, western Poland, 17 March 2024.

How it all started

It all started with a blockade by carriers in the fall of 2023. One of the associations of Polish carriers, far from being the most influential in Poland's transportation business - the fourth largest - managed to block the exports of the entire country. This step sent a signal to small groups of potential protesters in other countries, including Slovakia, Hungary, and Romania, who periodically began to organize similar actions. The example of the Polish carriers showed impunity, government inaction, and the ability to manipulate the information field.

Even when only the Poles actively block the border, the situation does not improve much. Ukrainians are trying to leave through other countries, which naturally causes traffic jams. It is important to take into account the capacity of the checkpoints with Poland: Yagodyn has about 30% of Ukraine's capacity, Krakovets has about 10%, and Rava and Shehyni together have about 16%. These four largest checkpoints account for more than half of Ukraine's exports by road. Therefore, in case of a blockade of these points, the rest of the border simply cannot cope with the flow.

The blockade began with the carriers, but was soon taken up by farmers and other dissatisfied socioeconomic groups, who saw it as a significant lever of pressure on any European governance structure, whether national or European. This action was simple and unpunished for the initiators.

What are the Poles fighting for?

All Europeans are facing rising prices on store shelves, and biased groups are trying to manipulate public opinion by blaming it on the war in Ukraine. However, there is no logic in this statement, and it is obvious that prices will fall after the border is opened to supply cheap Ukrainian raw materials and products. But this idea is not popular or discussed in European society. 

Polish protesters are not fighting for lofty ideals, but for specific financial interests and increased subsidies. However, the organizers of the protests are trying to give this struggle a social character, creating the impression that it is a fight for a just cause, similar to the spirit of the Ukrainian Maidan.

About the requirements

Closing access to cheap products from Ukraine limits the ability of Europeans to solve their economic and price problems. The demands are not addressed to Ukrainians, but to the EU, which, according to the activists, is not responding appropriately. The main demands of the protesters:

  • Closing the border for agricultural products from outside the EU. Poles demand to limit imports of agricultural products to protect their producers from competition with cheaper goods from Ukraine.
  • Disagreement with the Green Deal. They oppose the environmental regulations and requirements proposed by the EU, which could increase costs for local producers.
  • Demand for subsidies in livestock production. The Poles insist on receiving additional financial support for the development of the livestock industry, which will allow them to compete more successfully on the agricultural market.

Thus, the Ukrainians who are being blackmailed, whose business and reputation are suffering in the first place, cannot even respond to the blackmail terms, because two of the three points are outside our area of competence.

What are the implications for Europe?

The blockade of the border between Ukraine and Poland has a serious impact not only on the Ukrainian economy but also on the European market. The blockage of transit through Poland slows down the movement of all export categories, including transit goods that are to be delivered not only to Poland but also to other European countries.

Trucks transporting goods stand in line for 20 to 30 days, which leads to a loss of value of Ukrainian goods and makes it necessary for European partners to look for alternative supplies. This negatively affects the reputation of Ukrainian producers and makes it difficult for them to respond quickly and flexibly to market demands.

Moreover, the impact of the trade blockade is a threat to the whole of Europe, not just Poland. The consequences include:

Decrease in transit through Poland. The blockade of the border between Ukraine and Poland has already led to a decrease in the transit of goods through Poland, and this trend is growing. This may cause problems for companies specializing in transportation and logistics that depend on border crossing to operate efficiently.

Economic losses for businesses. Businesses in the EU that depend on trade relations with Ukraine may face economic losses due to reduced transit volumes and supply restrictions. This could lead to a decrease in profits and a deterioration in the financial condition of companies.

Negative consequences for European consumers. Restrictions on the supply of goods from Ukraine may lead to a shortage of certain goods on the European market. This may affect the prices and availability of certain goods to European consumers.

Prices may increase. Businesses in the EU that are dependent on goods from Ukraine may face price increases due to limited supply. This could affect final prices for consumers, which could affect their purchasing power and living standards.

Uncertainty for businesses and consumers. The imposition of a trade blockade creates uncertainty for businesses and consumers in the EU. The uncertainty of the future of trade relations may complicate planning and decision-making, which could negatively affect investment and economic stability in the region.

Consequences for Ukraine

The long-term consequences of the border blockade for Ukraine are extremely serious and go far beyond the current economic situation. One of the main negative aspects is the undermining of the export economy, which is already in a difficult situation due to various circumstances. The blockade of the border with Poland has become a serious challenge for Ukrainian exporters, who have faced significant problems and losses.

Export companies are already beginning to experience serious financial difficulties due to the blockade. Losses arise not only from delays and losses in the price of products, but also from the loss of customer confidence due to the inability to deliver goods on time. This may lead to long-term problems for Ukrainian exporters, as it may take considerable effort and time to restore customer confidence and reputation after such events.

The impact of the blockade on the Ukrainian economy is obvious: a decrease in exports and a loss of trust from international partners negatively affect the country's financial situation. Losses for exporters lead to lower tax revenues, which may make it more difficult to finance the army, social programs, and infrastructure development. In addition, deteriorating conditions for exports can lead to job losses and an aggravation of the socio-economic situation in the country.

Ukraine is a country where exports play a significant role in the economy. The share of exports in Ukraine's GDP is about 35%. This means that more than a third of the country's economy depends on the external market and international trade. The blockade has primarily affected exports of agricultural products, which account for more than two-thirds of all Ukrainian exports. What is very dangerous for the country is the ease with which small groups can undermine the economies of neighboring countries, and given who benefits from undermining the Ukrainian economy, it is safe to say that such groups will be further incentivized to do so.

The economic front of the war against Ukraine and the need for a counteroffensive

At present, the Ukrainian government and businessmen are practically unresponsive to the situation. There is no clear strategy or organized action. Instead, there is fragmented activity, which manifests itself in posting photos from negotiations on social media and other actions without benefit to the country.

To effectively overcome the consequences of the trade blockade with Poland, joint action by all stakeholders is needed. Business and the government should jointly make a strategic impact on the situation. Some elements of this strategy may include the following:

1. Raising rates. Pressure on Polish exporters due to the mirroring of the access of Polish goods to the Ukrainian market.

2. Prospects for compensation for losses. Following the legal logic, the actions of the protesters cause damage to third parties - hundreds of producers in Ukraine. The initiators of the blockades, who are individuals, rarely legal entities, receive permission for a peaceful strike, not for blocking the borders. Thus, there are two facts that may have judicial consequences. If hundreds of economically affected companies sue each organizer, they will have to hire a battalion of lawyers just to formally defend themselves in court, and if the hearings show prospects of winning these lawsuits, there will be fewer people willing to continue such actions.

3. Information warfare. If you ask an average European about the problems of inflation and the reason for the blockade of the Ukrainian border, they will not find a logical connection, but will answer with a cliché: prices are rising because of the war in Ukraine, and in Poland, farmers are protecting themselves from something. Thus, there is a complete lack of work with public opinion in the EU on the part of Ukraine, and we have seen how important this resource is even in a hot war. As long as the problems are in the focus of the masses, democratic states solve them.

4. Increase interest in the success of the Ukrainian economy. It is no secret that increasing production in Ukraine is a fantasy, but the facts are there, and they are not isolated! Where there is growth potential, investors immediately appear. An international investor is protection, including from the inaction of European officials. At a time when economic activity is hampered by military risks, the task of the Ukrainian state is to provide security guarantees for European investment in Ukrainian production projects. The tools for these guarantees are no longer fiction, but a set of clear mechanisms of interaction. And while hundreds of Polish businessmen will be very interested in the success of manufacturing companies in Ukraine, small associations in Poland will not be able to undermine the economy of the whole country without hindrance. 

Sergii RudkovskyiSergii Rudkovskyi, CEO of SEM Ecopack
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