This blog post was written as collaboration between members of the Dialogue Initiative EU-Ukraine Working Group.

One of the most interesting things to consider regarding Ukraine’s European Union accession journey is Ukraine’s potential integration into the far-reaching EU Common Agricultural Policy (CAP), one of the European Union’s longest-standing, costliest, and most significant policies… but what does the CAP do? This influential platform allocates EU funds to farmers across Europe, stabilises export prices both within and beyond the EU, and establishes agricultural strategy throughout the entire bloc. 

The policy functions in the form of subsidies or income support, ensuring that the price of certain foods stay within the same consistent range, fostering a more stable market on average. Subsidies are released based on the size of farms, meaning the larger the farm, the more financial support you receive. Over half of EU farmers’ incomes rely on these subsidies, while CAP spending comprises roughly a third of the entire EU budget. 

At the same time, agriculture remains a crucial sector of the Ukrainian economy, both in terms of its contribution to the Gross National Product (GNP) and its role in total employment. Agriculture holds a central position in Ukraine’s negotiations to join the EU, since Ukraine is a major global supplier of grains, sunflower, oilseeds, and has growing meat, dairy and soya producing industries. 

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With approximately 30 million hectares of highly fertile soil, Ukraine has the biggest agricultural acreage in the European zone. Given this significant agricultural presence and the enduring importance of agriculture within the Ukrainian economy, agricultural policy in the EU and Ukraine are expected significantly to impact any endeavours aimed at advancing Ukraine’s European integration.

What is the potential problem?

You might not consider agriculture as a central issue in Ukraine’s accession to the EU, but actually it has already led to some challenges. To consider the impact, it could have in the future you can think of the grain import bans already imposed by European countries or the protests of European farmers. 

After the start of the Russian full-scale invasion, the EU suspended import duties, quotas and trade defence measures for imports from Ukraine to support its economy. However, cheap Ukrainian grain exports have recently sparked protests by governments, farmers and truckers in neighbouring countries such as Poland and Hungary. 

More importantly, when Ukraine joins the EU, the challenges might be amplified because of the large scale of the CAP programme – its envelope for the current seven-year programme (2021-27) is €378.5 billion.

If Ukraine joins the EU, it would become the bloc’s largest recipient of CAP funding due to its geographic size and the scale of its agricultural industry, and it is estimated that Ukraine could be eligible for €96.5 billion of CAP funds, leading to cuts of about 20% in farm subsidies to current EU member states. This means that in this current situation, farmers in existing member states may have to accept lower payments to accommodate Ukraine, which could be met with further protests. 

Moreover, the vast majority of CAP funding (76.8 per cent) involves direct payments to farmers and agricultural market measures – all of which are based on the size of the farm. Long story short, the bigger the farm, the more financial support it can receive, favouring larger farms over smaller ones. This structure could prove to be another potential challenge because of the differences in scale of Ukrainian and European farms. Arable land of Ukrainian farm enterprises are on average significantly bigger (485 hectares) than in other existing member states; for example, in France the average is around 30 hectares per enterprise compared to 8 hectares in Poland. 

Now you may be wondering why the size difference is so big. In the member states, smaller family farms dominate the share of arable lands, while agriculture in Ukraine is centred around large agricultural enterprises and agroholdings. 

So to sum up, the main problem could be the allocation of funds so that all parties are satisfied, which can be a big challenge because of the scale of the agricultural sector in Ukraine and many differences between the country and the member states. 

Possible solutions

If Ukraine joins the EU, reforming the Common Agricultural Policy will be needed to address the challenges previously mentioned.  

The CAP budget could be reallocated favouring smaller enterprises to balance out the huge Ukrainian farm complexes. Additionally, external convergence of payment could be adopted to ensure a more equal distribution of direct support, a policy that can be used aligning payments among member states. How would it work? So each state’s average payment per hectare would be determined not only by farm size but also relative to the EU average payment per hectare. This approach theoretically would reduce disparities between member states and facilitate a smoother accession process for Ukraine.

With a quarter of Europe’s farmland — and some of the most fertile soil in the world — Ukraine in the EU has the potential to immensely impact the CAP, under which subsidies are linked to farm size. Thus the enlargement process will require a complex reassessment of the Common Agricultural Policy and its structure. 

Further reading to learn more on the topic!

1. https://www.euractiv.com/section/agriculture-food/news/ukraines-eu-membership-will-trigger-a-rewriting-of-cap-says-kyiv-official/
2. https://en.euractiv.eu/wp-content/uploads/sites/2/special-report/How-the-Ukraine-war-is-reshaping-the-CAP-1.pdf
3. https://agriculture.ec.europa.eu/common-agricultural-policy/cap-overview/cap-glance_en
4. https://www.ponarseurasia.org/ukraines-eu-membership-prospects-taking-on-europes-budgetary-and-institutional-hurdles/
5. https://www.politico.eu/article/eu-farm-reform-risk-cap-common-agricultural-policy-dacian-ciolos-ukraine-accession/
6. https://www.thedailyscoop.com/news/retail-industry/ukraine-russia-tensions-what-it-could-mean-agriculture