EurActiv | 15 February 2011
Ukraine and EU clash in ’candy row’
Ukraine, a country negotiating ’association’ status with the EU, has an oversize confectionery industry that employs over 300,000 people. But businesses there are now under threat because the EU wants to introduce a 50% tax on such products, EurActiv has learned.
The EU wants to impose heavy taxes on key Ukrainian industries, a senior Ukrainian diplomat complained, speaking to a small audience in Brussels on Monday (14 February).
Referring to the need to respect confidentiality while negotiations are still ongoing, the diplomat refused to name all the sectors concerned, but cited the candy industry as an example of what his country had to lose.
Apparently, Ukraine has developed a strong and competitive confectionery sector. Its four major manufacturers have imported state-of-the-art machinery from Western countries and have been successfully exporting to Russia.
According to reports by the specialised press, sales by Ukrainain confectionery giant Roshen grew by 32% in 2010, surpassing the $1 billion threshold, while the production volume reached 410,000 tonnes in 2009.
But with exports to Ukraine’s largest neighbour suffering a setback over trade barriers imposed by Russia, the country instead pinned its hopes on exporting to the EU instead.
Under pressure, industry bosses have already relocated two major factories to Russia. However, analysts think such moves will not resolve the issue, as outsourcing cannot solve social problems.
The Ukrainian diplomat said that negotiating a free trade agreement with the EU was a challenge, as Brussels was trying to impose on Kyiv the obligations of an EU member state, while making no commitments and offering little incentive to act.
During the ’candy row,’ he said that Ukraine’s negotiators had tried, without success, to convince their EU counterparts that the country’s production could in no way be considered a threat to producers like Belgium’s Leonidas. The Belgian company, he said, enjoyed greater prestige and its customers were used to high prices.
Asked to respond, a Commission spokesperson said it was "standard policy" for the EU executive not to comment on elements of the negotiations, as this is simply was "not helpful" for the process.