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Draft government decree on grain quotas introduction contravenes WTO commitments

Kyiv. October 13, 2010

“The Cabinet of Ministers of Ukraine’s draft decree on grain export quotas, under which the quotas have to be introduced totaling 2.7million tons before December 31, 2010, does not comply with commitment Ukraine has undertaken while accessing to the World Trade Organization (WTO),” considers an Associate of Volkov and Partners Irina Polovets.
It was her comment to the Interfax-Ukraine Agency on the draft decree, developed by the Ministry of Economy of Ukraine and recently published at the department’s web-site.
“The only possible reason to introduce quotas may be for critical want of foodstuff in the exporting country, but the draft decree does not identify such critical deficiency prevention as the purpose for its adoption,” said Ms. Polovets.
The Associate explained that Article XI:1 of the General Agreement on Tariffs and Trade prohibit WTO members from export restrictions by quotas imposition, export certificates or any other measures, save for duties, taxes and other charges.
Besides, the lawyer says “considering that Ukraine’s export quotation poses a threat to price inflation in the countries importing grain originated in Ukraine, we do not rule out complaints to be filed against Ukraine with the WTO”.
“Moreover, Ukraine’s trade partners could turn to similar measures in response to Ukraine’s actions,” summed up Ms. Iryna Polovets.
Reportedly, the government’s draft Decree on grain export quotation released at the Ministry of Economy’s web-site contemplates the wheat quota of 0.5 mln tons, barley quota of 0.2 mln tons and corn quota of 2 mln tons.
The draft Decree determines the procedure of quotas’ allocation and imposes a de facto prohibitive quota in the amount of 1 000 tons for rye and buckwheat exports.
The allocation of quotas will be based on the conclusions by the Ministry of Agriculture with due consideration of the quantities declared by a company for export.
The explanatory note to the deed says that the actual amounts of grain supply before MY-end are about 9 mln. tons. Out of them wheat accounts for 4.7 mln. tons, including milling wheat of 3.1 mln. tons, barley approximates 0.2 mln. tons, corn totals 4 mln. tons and other crops post 0.15 mln tons. As such, pursuant to the budgeted balance sheet for grain, in the current marketing year monthly average export rates are expected at around 1 mln. tons, while the actual ones are 1.25 mln. tons.
In their turn, the government members and the head of the Agricultural Parliamentary Committee  stated last week that at the meeting held on Oct 4 the Cabinet of Ministers had already decided to impose restrictions on grain exports until 2010-end in form of quotations. The deed has not been published yet and the information on its details varies. According to First Vice-Premier Mr. Andrii Kliuiev, corn quota is set at 2 mln. tons, wheat and barley quotas will be 0.5 mln. tons each. At the same time, Minister of Finance Mr. Fedor Yaroshenko said that corn export quota was 3 mln. tons, wheat – 0.5 mln. tons. As the market players estimate, 0.2 mln. tons of barley were permitted for export before the current year end.
Vice-Premier Mr. Borys Kolesnikov also reported that in case the decision on grain export restrictions is made for Ukraine’s food security purposes Ukraine will sell export quotas at the auctions. "Let’s say, a lot of 1 mln tons are auctioned. Export quota is $30 per a ton. You buy, so you may export", he explained.
The draft Law on legalization of quotas sale at the auctions has already been registered with the Parliament.

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