Hidden Preferences of the New TRQ

Country allocations were finally published before the new TRQ system came into effect. The delay in publication until the very last day created extraordinary risks for imports. This is the worst possible scenario for any exporter. Therefore, the publication itself is a positive development.

In the text of the law and this regulation, we see references to a preferential approach for Ukraine – indeed, this was even one of the criteria for determining the FTA part of the quotas. I also see experts on social media pointing out, in the context of the new TRQs, the preferences that Ukraine has received. Preferences do exist for certain product categories, but their impact is immaterial.

In fact, Ukraine is one of the countries hardest hit by the new TRQ. The quota volumes for Ukraine are 60% lower than 2025 exports, which is worse than the 46% reduction for overall imports. The results of the preferences obtained by Ukraine raise questions of proportionality and consistency with the EU’s own political commitments. Below I explain why.

How Ukraine’s Interests Could Have Been Taken into Account

Ukraine received country allocations for 9 product categories, which account for virtually 100% of its 2025 exports. In other categories, Ukraine can supply under the «FTA other countries» quotas, but this is unlikely given the limited product range it can produce after losing part of its production capacity due to the war.

Country allocations are split roughly equally between the MFN part and the FTA part, for which different principles were applied. For the MFN part – it is based on the historical principle, using each country’s share of imports in 2022-2024. For the FTA part, the approach is more complex. It must take into account the effects of safeguard measures already in place, the need to ensure diversification of supply, and, crucially, the provision regarding Ukraine – «EU candidate country facing an exceptional and immediate security situation.»

Using 2022-2024 as the baseline for calculating quotas for Ukraine would be discriminatory, because during that period Ukrainian steel exports were artificially suppressed due to the shock of the first years of the war, associated logistical problems, electricity shortages, and so on.

If not for the war, exports from Ukraine to the EU would have been significantly higher. For example, Ukraine’s share of EU imports in 2021 was 8.3%. But in 2022-2024, import volumes fell by an average of 45%, and Ukraine’s import share dropped to 5.2%. This inequity should have been corrected in the FTA portion. But it is barely noticeable.

Weak Preferences

Having analyzed historical import shares and quota shares, we identified that Ukraine’s FTA part shares for key product categories correspond to historical import shares or are only marginally higher:

• For Category 1A (hot-rolled coil): The historical import share exactly matches the quota share – 9.3%, as is the case for most other countries. In other words, the standard approach was applied to Ukraine here. Category 1A is a key item of Ukrainian steel exports, accounting for 50% of the total. In this category, Ukraine received no preferences and lost 825kt of exports.
• For Category 2 (cold-rolled coil): Ukraine’s FTA share is 2.8% higher than its historical share, but similar increases exist for other countries such as Turkiye, South Korea, and India. This allowed Ukraine’s annual quota to increase by 22kt. However, with an overall quota reduction for Category 2 of 40% compared to 2025 imports, Ukraine’s quota is cut by 48%. Export volumes here will be 200kt less than in 2025.
• For Category 13 (rebar): Ukraine’s FTA share is 4.5% higher than its historical MFN share. This adds 21kt to Ukraine’s quota. Yet compared to 2025, Ukraine appears as one of the losers, with a quota reduction of 73%. Here Ukraine could lose 185kt of exports.
• For Category 16 (wire rod): Ukraine’s FTA quota share turned out to be 3.0% higher than historical shares. But this only increases Ukraine’s total quota volume by 25kt per year, while the quota is cut by 50% relative to 2025 imports. In other words, Ukraine lost 190kt of exports here.

To summarize, these four categories are key for Ukrainian exports, accounting for 82% of all steel products shipped to the EU. In these four categories, 2025 imports amounted to 2.1Mt, while the preferences total only 68kt. Naturally, this cannot mitigate the quota reductions.

Detrimental Impact

Finding a balance between the need to protect the EU steel market and political support for Ukraine appeared to be a task with a win-win solution. Ukraine’s share of the EU market in 2025 was only 1.7%, which corresponds to the historical share in 2013–2021.

At one sectoral event, a representative of the European Commission in Ukraine gave a speech reassuring everyone that the EU could effectively find a compromise, as it is very good at doing so. In reality, we saw a decision to cut by 60% a share of 1.7%. This is an excessively harsh decision that will have detrimental consequences for Ukraine’s steel industry.

Below I explain the results of this decision. As a result of the measures adopted, exports of finished steel products from Ukraine to the EU will be reduced by 50–60%, or by 1.3–1.6 million tons. For flat products, this means a risk of a 37% reduction in output. Just imagine that. Is there any other country in the world that could lose nearly half of its flat steel production due to TRQ measures? For long products, about a quarter of production volumes are at risk.

Yes, Ukraine receives significant amounts of financial aid from the EU, which helps in sustaining the war effort for five years now. But the steel industry cannot be compensated through financial aid alone. You cannot write a check that immediately creates another business model substituting the steel business and the supply chain around it. The EU understands this principle perfectly well – it chose to protect its own steel industry through TRQs rather than financial subsidies to create new jobs in the service sector or elsewhere. That logic applies with even greater force to Ukraine, which is simultaneously managing wartime production constraints and trying to maintain the economic foundation for eventual reconstruction.

This regulation is in force only until the end of 2026. On the one hand, this means sufficient space for continued dialogue and for amending the regulation to support the shared interests of Ukraine and the EU. On the other hand, the next six months will be a test for Ukraine’s steel industry, which has been left without a significant portion of its output.