EU increases tariffs on Russian grain to hamper its war effort – but it’s European consumers who could feel the pinch

Think about there was a meals tax that elevated your grocery payments by practically 20%. That’s basically what the Frequent Agricultural Coverage does to meals costs within the EU. Now image that tax going up much more, to 50%. That’s precisely what the EU’s latest resolution to slap hefty tariffs on Russian grain imports is all about.

The EU has a longstanding coverage of defending its personal farmers, even when they’re not essentially the most environment friendly. However farmers have been protesting throughout Europe as a result of they’re anxious about cuts to the direct help they obtain from the federal government. The EU desires to scale back subsidies, which account for 28% of farm revenues within the bloc, specifically for diesel gas.

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Some folks suppose the choice to impose greater tariffs is simply an excuse utilized by the EU to maintain defending its personal farmers. Excessive tariffs on Russian grains, coupled with restrictions on imports of Ukrainian grain — two vital producers in shut proximity to the EU — would allow European farmers to offset the influence of rising vitality and fertiliser costs by passing these prices on to EU customers.

The president of the European Fee, Ursula von der Leyen, has carried out little to persuade those that this isn’t the case. She mentioned: “We suggest the imposition of tariffs on these Russian imports to mitigate the rising danger to our markets and our farmers.”

Russian grain already faces import tariffs, identical to another non-EU product. So why make them even greater and what impact may it have?

The influence can be minimal

The elevated tariffs will apply to imports of cereals, oilseeds and derived merchandise from Russia and Belarus. Relying on the product, the tariffs will rise to both €95 (US$103) per tonne, or to an obligation of fifty%.

The European Fee declare that the proposal intends to cease Russian imports from destabilising the EU market. However the details inform the story. Imports from Russia aren’t practically sufficient to rock the boat of the EU grain market. Actually, they’re only a small fraction of what the EU produces and exports itself.

In 2023, Russia exported simply 1.5 million tonnes of grain to the EU from the nation’s complete export of 45 million tonnes. Whereas which may sound like lots, the EU exported 28.4 million tonnes of soppy wheat between 2022 and 2023. So, it is rather unlikely that imports from Russia may destabilise the EU market.

The European Fee has additionally mentioned that its resolution to boost tariffs is meant to restrict Russia’s skill to fund its warfare effort, and to make sure that it can’t promote grain “stolen” from occupied Ukrainian territories. Nonetheless, the imposition of upper tariffs won’t have a lot of an impact on the Russian warfare effort in any respect.

When Russia invaded Ukraine, its navy blockaded Ukrainian ports within the Black Sea and trapped 20 million of tonnes of grain meant for export. So in 2022, the EU waived import duties on numerous Ukrainian items, together with metal, fruits, greens and different agricultural merchandise, to help the nation’s struggling economic system.

Nonetheless, this goodwill didn’t final lengthy. Farmers in neighbouring European international locations started protesting, saying low-cost Ukrainian imports have been hurting their markets, and the EU reverted to its common protectionist stance by imposing a ban on Ukrainian grain imports in 2023. It has since tightened the screws on Ukraine even additional, and now it’s doing the identical for Russia.

Russia, like Ukraine, is a serious grain producer and exporter, and it’s a competitor to the EU. Nonetheless, Russia exports most of its grain to international locations like Turkey, China and India, and never a lot to the EU. So, imposing greater tariffs on Russian grain may not hit Russia as arduous as meant as they will simply promote to different markets. And, even then, grain accounts for a mere 1% of Russia’s exports.

Worsening the price of residing disaster

Who will get damage then? These tariffs may worsen the price of residing disaster by making meals costs even greater.

Within the late Nineteen Seventies and early Eighties, EU intervention within the dairy market led to notorious “butter mountains” and “milk lakes”. A assured minimal value for dairy merchandise precipitated manufacturing to surge, leading to a glut. Stockpiles of surplus produce have been pricey to take care of and contributed to rising costs.

The return of protectionism, whether or not towards Ukrainian or Russian grain, spells hassle for everybody. When the EU imposes tariffs on imports, costs can shoot up, particularly for merchandise we use each day like meals.

Enjoying the protectionism sport may also bitter relationships with different international locations and mess up any plans for working collectively on world points. In 2023, Russia withdrew from the grain deal amid discontent over perceived restrictions that restricted the total dispatch of its grain and fertiliser exports. The collapse of the grain deal, which allowed the export of Ukrainian grain throughout the Black Sea, led to an increase in meals costs, growing poverty and starvation in weak international locations.

The EU would possibly suppose it’s serving to its personal, nevertheless it may find yourself inflicting extra hurt than good.