Russia and the WTO: first review

The first Trade Policy Review of Russia as a WTO member was held on 28 and 30 September 2016. The review was based on the reports of the WTO Secretariat and the Russian Government. The review is one of the most important functions of the WTO. It allows WTO member states to be assessed by the WTO Trade Policy Review Body and to receive comments from other member states. The overall assessment is that Russia has held an active position within the WTO since joining it in 2012. However, a number of issues have remained, such as the compliance of its import substitution policy with WTO rules, a lack of transparency in the functioning of the Eurasian Economic Union, subsidising of the energy sector and the dominant role of the state-owned companies in the country.

In addition, after only four years of Russia’s WTO membership, the WTO Dispute Settlement Body has ruled that Russia has violated a number of its accession commitments.

First ruling

On 12 August 2016, a WTO Panel ruled that Russia violated its tariff obligations relating to the import duties on paper, refrigerators and palm oil. The EU initiated consultations with Russia on 31 October 2014. It considered that Russia had established import duties that were inconsistent with the General Agreement on Tariffs and Trade (GATT) 1994 and Articles I to VII of the Agreement on Customs Valuation. On 26 February 2015, the consultations failed to yield positive results and the EU asked the WTO Dispute Settlement Body to set up a panel of arbitrators to adjudicate on the dispute. The panel was established on 25 March 2015.

The EU denounced 12 Russian import duties. In particular, the EU stated that Russia had applied import duties ranging from 10% to 15% on paper, while it had agreed upon WTO accession on an import duty of 5%. Regarding refrigerators and palm oil, Russia had undertaken to apply a rate of 3%, but not less than EUR 0.09 per kilogramme, and 16.7%, but not less than EUR 0.13 per litre, respectively. In practice, however, higher import duties were imposed on these products.

The WTO Panel found in favour of the EU and held that 11 of the 12 contested measures did not conform to Russia’s obligations. This case is significant in that it is the first time a WTO Panel has ruled against Russia.

Second ruling

On 19 August 2016, the WTO issued a second panel report against Russia and declared its ban on the import of live pigs and pork from the EU illegal. A Panel of Arbitrators at the WTO ruled that the ban imposed by Rosselkhoznadzor in January 2014 due to an outbreak of African swine fever in Estonia, Latvia, Lithuania and Poland violated one of the WTO agreements, namely the Agreement on the Application of Sanitary and Phytosanitary Measures.

In April 2014, the EU initiated consultations with Russia on the above ban. In June 2014, the EU asked the WTO to establish a Panel of Arbitrators to settle the dispute. The arbitrators, after considering the case, concluded that banning pork shipments from all EU countries, without conducting a risk assessment and adapting the ban to the affected areas of the EU, contravened the standards of the World Organisation for Animal Health. The ban, therefore violated Russia’s obligations to “base its sanitary or phytosanitary measures on international standards”, as stipulated in Article 3 of the Agreement on the Application of Sanitary and Phytosanitary Measures.

Despite the above ruling, deliveries of pork from the EU to Russia remain banned due to the food embargo declared by Russia in August 2014 in response to the EU sanctions. This, in turn, may obviously be subject to new complaints against Russia within the WTO.

Comments

Under the WTO ruling enforcement mechanism, Russia has 60 days from the date of the circulation of the relevant panel report to inform the WTO Dispute Settlement Body of its intentions regarding implementation of the rulings. Russia then has a reasonable period of time (not exceeding 15 months from the date of the adoption of the relevant panel report) to implement the panel recommendations. If the recommendations and rulings are not implemented within this period, the EU has a right to claim compensation and if no agreement is reached on the compensation, request a temporary suspension of Russia’s concessions. On 23 September 2016, however, Russia filed an appeal against the WTO ruling in the dispute “Russian Federation – Measures on the Importation of Live Pigs, Pork and Other Pig Products from the European Union” (WT/DS/475).

One may anticipate more WTO rulings against Russia. Several actions initiated against Russia are currently pending before the WTO. These include dispute DS462 on the Russian recycling fee on motor vehicles (initiated in 2013) and dispute DS479 on anti-dumping duties on light commercial vehicles from Germany and Italy (initiated in 2014). Furthermore, more complaints have been made against Russia, the most recent of which was filed on 14 September 2016 by Ukraine against the measures allegedly imposed by Russia on traffic in transit from its territory through Russia.

Action

Private individuals and companies do not participate in WTO disputes. Such disputes arise at government level between WTO member states. However if your business activities are restricted by a state, and these restrictions go against current WTO free trade rules, then you should seek protection from the country where your business is established so that it initiates a dispute review procedure before the WTO with a view to lifting such restrictions.