The article discusses the decision by Poland and Hungarian governments to ban grain imports from Ukraine, pointing out that the imports are affecting their domestic farmers. The article informs that some of the grains and foods banned by Poland include meat, sugar, vegetables, fruits, and eggs. The action that the Polishes government has taken is a protectionism policy that aims to protect domestic agricultural producers from unfair completion from foreign gains from Ukraine. The protectionist policy will affect the interdependence between Ukraine and Poland. This commentary will focus on interdependence as the main economic concept being discussed in this article. The decision that the Polish government has taken will affect trade relations between Ukraine and Poland, and various stakeholders will be affected by the decision. A ban on Ukraine grains will reduce the supply of grains and foods in the polish economy, and consumers will be forced to pay higher costs. On the other hand, domestic producers will benefit from the ban on imports because they will gain producer surplus in return.
Figure 1: Poland market for grains
Figure 1 illustrates the problem that the Poland Government is seeking to solve using the protectionist policy. Without the ban on Ukraine grains, the supply of grain and other foods in the economy would be higher, and the prices for these products are high. The article reveals that since the start of Ukraine- Russian war, Ukraine grains have not been getting into the European market, and hence they have been pilling in the Polish and Hungary markets. The high supply of grains and foods caused by Ukraine imports pushed prices as low as P1. The supply of grains in the Polish market was high in Q4. The high levels of imports are a negative incentive for the domestic farmers because they can only supply Q1. The Polish and Hungary consumers of grains, meat, sugar, and the products imported from Ukraine benefit because they gain consumer surplus worth areas A+B+C+D. However, the imports are harmful to the domestic producers, and the decision to ban Ukraine imports will favor the domestic producers.
Ban on Ukraine grains will have various advantages and disadvantages, which will affect stakeholders such as consumers, domestic producers, and foreign producers. The policy will also be affected, where the trade independence between Poland and Ukraine will be affected. This policy will have a positive impact on domestic farmers because they will gain 100% access to the market as the ban will limit imports. The domestic farmers will have access to a market equivalent to Q1 to Q4. With Ukraine’s imports, the domestic farmers could only produce Q1, but now they will gain a producer surplus equal to area A. The article informs that Poland farmers have been suffering due to the imports from Ukraine. However, the policy will have negative impacts on Ukraine farmers because they will have no market for their produce. The article affirms that the Ukrainian Agrarian ministry said that it regrets the decision because its farmers are also suffering even more due to the effects of war.
On the flip side, the policy will have negative effects on Polish and Hungary consumers of grain. The negative effects will originate from the low supply of grains after the ban. The gap filled by imports (Q2-Q4) cannot be filled by the domestic farmers, and hence prices will rise from P1 to P2. Consumers of grains in Poland and Hungary will be negatively affected by the new policy because the deadweight loss will be developed. Businesses that depend on imported grains, sugar, and meat from Ukraine will be affected, and there will be unemployment in Poland and Hungary.
The government will be affected because import duties that the government collects from Ukraine grain import will not be available. According to the article, the Poland government is ready to protect the interests of domestic farmers by preventing foreign producers from supplying grains in the market. However, the trade relations between Ukraine, Poland, and Hungary will be affected. Ukraine may be forced to impose retaliatory tariffs on Poland and Hungary products sold in its market. This will create more trade wars between the two countries, and a solution needs to be reached. The article reveals that both parties are ready to negotiate the terms and come to a conclusion that would stabilize the situation. The two countries need to solidify their interdependence, and this can be done by reviewing the decision to ban Ukraine imports.
Overall, the policy to ban Ukraine’s grain and food imports will negatively impact the trade interdependence between Ukraine, Poland, and Hungary. The policy may lead to an increased cost of living in Poland and also lead to increase levels of unemployment in Ukraine. The policy should be reviewed, and the countries need to come up with a solution that does not hurt the economies.
References
Euractive. “Poland, Hungary Ban Ukraine Grain to Protect Local Farms.” Www.euractiv.com, 16 Apr. 2023, www.euractiv.com/section/europe-s-east/news/poland-hungary-ban-ukraine-grain-to-protect-local-farms/. Accessed 18 Apr. 2023.
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