How WTO sees Russia: First review of trade policy

Author : Anzhela Makhinova

WTO assessed Russian economy, its commercial activities, and regulation of international trade at the legislative level
10:25, 16 January 2017

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Does Russia follow the trade policies of WTO? This question is very important, especially in the context of our trade disputes with Russia.

Part of the answer is to be found in a review of trade policy, prepared by the WTO Secretariat. Recall that Russia has joined the WTO in 2012, and this is the first review of its trade policy. The periodic review of trade policy is mandatory for all members of the WTO and should promote compliance with the obligations undertaken when joining the Organization, and also allows other WTO members to put the most sensitive questions and get answers to them.

Related: Ukraine to sue Russia in WTO in early 2017

That is why the most interesting part of the review is its discussion between the member countries of the WTO. It shows how the world is interested in the trade policy of Russia. Because the number of Russia (not largest economy in the world) was compared to the number of the questions concerning China.

However, while this review was formally presented another 29 September last year, the results (questions and answers) were just now published on the WTO website. Despite the delay, the document continues to be important. That is why it is necessary to analyze it in detail.

From trade agreements to sanctions

Materials contain general information on the development of the Russian economy, its commercial activities and regulation of international trade at the legislative level. And the material indicates the dominant role of the state in determining the direction and implementation of trade. Experts stressed that trade and balance of payments are positive. However, its economic growth and development are adversely impacted by the sanctions of the EU, US, and Japan, appropriate countermeasures introduced by Russia as well as decrease in world oil prices.

Related: “Belgorod cheese party”: Russia destroys Ukrainian sanctions products

Related: Russia did not let over 13 tons of Ukrainian cheese to enter Crimea

Moreover, according to experts, sanctions led to losing 0.5% of GDP in 2015, while the drop in oil prices leaded to the loss of 3%. Russia signed ten regional trade agreements with the Eastern European countries, including Ukraine, as well as some Asian countries and Serbia. In particular, the Eurasian Economic Union (EEU) between Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan anticipated unification of policies of member countries on a number of trade issues (import tariffs, non-tariff measures, such as tariff quotas and licensing, customs regulations, etc.).

Thus, EEU Member States approved product list, export / import of which may be subject to prohibition / restriction on the territory of the Union (including the possibility of introducing such a ban only unilaterally on the territory of the Member State). The Materials also analyzed, how to relate to the powers of EEU and national authorities in various fields, such as technical regulation, application of sanitary and phyto-sanitary measures.

Related: WTO will consider Russia’s trade sanctions on Ukraine

Russia has committed itself to comply with 35 technical regulations within EEU (including the tobacco products) and brought its technical standards in accordance with international ones at 49% (at end 2015). However, about 81 % standards in the field of electrical engineering, 53.7% in the field of oil refining and gas, and only 16% in the steel sector are brought in compliance with the international norms.

In the period from 2012 to 2016, Russia has sent 176 messages to the WTO about its application of sanitary and phytosanitary measures. Compliance of these measures with international standards and WTO principles were inspected by expert groups in ten different cases, including ban on imports of pork from the EU in connection with African plague (pig disease).

Related: Ukraine asks for Canada’s support in WTO in trade conflict with Russia, - Jaresko

Taking into consideration the WTO dispute, the activities of Russia was declared unlawful. However, Russia has appealed to the relevant decision of the panel.

It is also worth mentioning that Russia often resorts to anti-dumping and safeguard measures. As of May 2016, it introduced two protective measures (import of Ukrainian caramel products) and sixteen definitive anti-dumping measures on imports from China, Germany, India, Turkey, Italy, and Ukraine. Unfortunately, the largest trade investigations are carried out against Ukrainian products.

The Materials also give quite a detailed explanation of how the privatization of the country restrictions are applied in various areas of services that support programs for different national sectors used in the country, how the customs authorities work, and why the Russian customs authorities require EU export declaration for customs clearance.

Related: Russia must respect its commitments in the WTO, - EU Delegation in Ukraine

The question with no answer

One of the main issues on which most WTO members emphasize, is the lack of clarity of the legislation and its constant and unpredictable change, making trade non-transparent and unpredictable.

Russia said that the legal system in the country is relatively new and that it will gradually improve. Representatives of the Russian Federation explained in response to questions of Member States that it continues the process of harmonizing its legislation with international standards. However, harmonization occurs in the form of amendments to the national legislation, and by agreeing common standards at EEU.

Related: Kazakhstan de jure becomes full-fledged WTO member, - Nazarbayev

Russia was asked many questions concerning policy of import substitution in a variety of fields. Russia justified its need to develop national production and improve its competitiveness in times of economic instability (including through sanctions imposed by other states).

In this context, the EU was interested in state subsidies for the national automobile industry and compliance of the measure of the principle of non-discrimination between Member States. Responding accusation referred to the fact that its legislation in law does not discriminate against producers from other countries compared to the national producers.

Russia was asked to provide an exhaustive list of activities that used for import, which was not done.

Related: "DPR" limited import of products for citizens from Ukrainian side, - OSCE

Compliance with WTO rules on limiting the purchase of foreign goods, services and works , used by Russia, was also discussed. As for the compatibility of these measures with the WTO Agreement, Russia recalled that it is not a member of the Agreement and these issues will be further discussed in the framework of negotiations on accession to this Agreement.

The EU and Ukraine have not avoided the issue of food embargo applied by Russia. In August 2014, Russia banned exports of certain agricultural products (meat, dairy products, fruits, etc.) from Australia, Canada, EU, USA, and Norway. Subsequently, the ban extended the list of products from other countries, including Ukraine. The validity of such bans is now extended until 31 December 2017.

Related: Egypt starts anti-dumping investigation on steel rebar import from Ukraine

Ukraine put many questions concerning ban imports of goods from Ukraine, actively used by Russia since 2013 (cheeses, pastries, juices, beer, and alcoholic drinks, wallpaper, salt, etc.).

Russia shed little light on the matter, citing three main reasons for the application of restrictions: 1) non-compliance of imported products with technical regulations, 2) the need to prevent practices of misleading the consumers, and 3) the need to protect the health and safety of the population.

Russia states about non-compliance of Ukrainian products with technical regulations of EEU in terms of labeling.

Russia has confirmed that it had applied a regulation on technical measures for Ukrainian goods, not sanitary and phyto-sanitary measures, stressing the fact that they were used in strict accordance with the WTO Agreement on Technical Barriers to Trade. In addition, WTO members discussed lively restrictions on transit cargo from Ukraine to the third countries through the territory of Russia, Kazakhstan, Kyrgyzstan, which was introduced in January 2016.

Related: Ukraine imposed restrictions on the import of poultry from Austria and two German regions

Question of Ukraine on the legitimacy of anti-dumping measures against the import of rods from Ukraine in EEU remains without proper answer. In particular, Ukraine stressed that the measures were applied on imports of bars in all EEU Member States, Kyrgyzstan and Armenia in particular. However, Russia has not properly investigated fact of harm to these countries. In addition, it is not clear why the investigation lasted 28 months instead of maximum possible 18 months.

In response to these questions Russia has recommended Ukraine to apply to the Department of protection of the domestic market of the Eurasian Economic Commission, which should comment and answer any questions...

Additionally, Ukraine raised the question about Russia’s substantial reduction of trade between Ukraine and Russia.

Related: Round wood export ban is only reason why EU blocks financial aid for Ukraine

Among these factors, Russia called (a) various trade restrictions applied to goods, services, and companies; (B) the conclusion and implementation process of the Free Trade Agreement between Ukraine and the EU; (C) the parallel suspension of Ukraine's obligations in trade between Ukraine and Russia; (D) negative economic situation in both countries. At the same time, Russia said that it hopes to restore bilateral trade relations between the two countries...

Instead of conclusion

The Materials contain many other questions concerning WTO members.

Unfortunately, it should be noted that Russia was not very verbose in the most challenging issues, and sometimes it simply referred to the fact that allegedly enforced WTO rules, applying a particular restrictions or limitations applied to protect national interests.

Along with this, the materials can be useful at least to understand that events / restriction applied by Russia. Maybe Ukraine can defend its interests and other issues that still remain out of sight...

Related: 7 arguments against export of Ukrainian roundwood

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