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Info Service on WTO and Trade Issues (Mar22/16) Geneva, 17 Mar (D. Ravi Kanth) – Russia has severely criticized the group of developed countries led by the United States at the World Trade Organization over their “recent aggressive and politically motivated trade restrictive actions”, when WTO members are currently confronting the “dangers” looming over the multilateral trading system. In a two-page statement (WT/GC/245) circulated on 16 March, Russia complained that “instead of encouraging gradual normalization of trade as part of the post-pandemic economic recovery, those members have been progressively applying unilateral trade measures aimed at undermining the economies of Russia and its neighbors.” A day before Russia issued its statement, the United States and the European Union along with their allies had issued a strong statement on 15 March (WT/GC/244) threatening that they “will take any actions, as WTO Members, that we each consider necessary to protect our essential security interests”, following Russia’s violation of the sovereignty and territorial integrity of Ukraine. STATEMENT BY THE G-7 AND ALLIES The signatories to the US-led statement include Albania, Australia, Canada, the European Union, Iceland, Japan, Korea, Moldova, Montenegro, New Zealand, North Macedonia, Norway, the United Kingdom and the United States. Surprisingly, Switzerland, which had condemned Russia’s military action against Ukraine, seemed to have abstained from endorsing the statement. The 14 members said that their proposed actions “may include actions in support of Ukraine, or actions to suspend concessions or other obligations with respect to the Russian Federation, such as the suspension of most-favoured- nation treatment to products and services of the Russian Federation.” The signatories said that “in light of Belarus’ material support to the actions of the Russian Federation, we consider that its accession process is suspended and will not participate in any accession-related work.” The signatories considered that the Russian Federation’s actions “are an unprovoked, premeditated attack against a sovereign democratic state, and an egregious violation of international law, the UN Charter, and fundamental principles of international peace and security. These actions call into serious question the respect of the Russian Federation for all international institutions, disciplines, and norms.” They urged Russia to urgently stop “the military aggression and immediately withdraw its troops. We are firmly convinced that the Russian Federation must be held accountable and stop undermining democracy, global stability and international law.” In a separate development on 16 March, the EU’s trade commissioner Mr Valdis Dombrovskis said that the 14 members are ready to remove the MFN (most-favored-nation) status granted to Moscow, according to a Reuters news report. RUSSIA’S RESPONSE Without naming the 14 members, Russia warned in its statement issued on 16 March that “the scale of reckless “economic war” launched by these Members has increased to the breaking point leading to collateral damage across the globe.” It argued that the pressure exerted by these members will have an adverse impact on global supply chains, and will jeopardize global food security. Consequently, due to the trade and economic sanctions, there is a spike in the “prices for basic energy resources, minerals, and foodstuff,” Russia pointed out. Arguing that these “ramifications” could have been avoided “if the mentioned countries had not breached the basic WTO rules”, Russia said that their measures are inconsistent with the relevant provisions of the GATT (General Agreement on Tariffs and Trade) and the GATS (General Agreement on Trade in Services). The measures cited by Russia in its statement are as follows: * implementation of import tariffs above MFN rates; * import ban on Russian oil and oil refining products, as well as intentions to curb imports of other energy resources, such as natural gas and coal; * restrictions on export to Russia of various goods, including oil refining equipment and technologies, foodstuff and industrial consumer goods; * blocking of Russian financial institutions, including freezing a substantial part of its currency reserves, and transportation services companies; * prohibition of new investment in the Russian Federation, including in the energy sector; * extreme export controls or total prohibition of trade in other goods and technologies critical for economic development. Russia said it is deeply concerned by the “relevant developments in the WTO, which pave the way to a complete dismantling of the rules-based multilateral trading system.” Moscow chastised the proposed actions by the G-7 countries and their allies, saying that “there are voices proposing to “expel” Russia from the WTO or to suspend its membership rights against the rules of the WTO which do not provide for such actions.” Russia maintained that “unilateral unjustified withdrawal of MFN treatment for Russian goods and services or even public discussion about revocation of this treatment severely defies the fundamental WTO principle of non-discrimination.” Referring to the denial of Permanent Normal Trade Relations (PNTR) status to Russia by some of the G-7 countries, Russia said “the actions of Canada and some other countries have already resulted in their de facto abandonment of WTO legal system due to purely political concerns.” “Eventually,” Russia warned, “all Members will be affected if we get into a vicious circle of introducing mutual retaliatory measures, thereby making the application of WTO agreements largely sporadic and, therefore, deficient.” Russia further warned that “attempts to isolate Russia from the negotiating and regular WTO activities would lead to paralysis of the basic functions of the WTO, namely providing the forum for trade negotiations and administering trade agreements.” “Such attempt to block the negotiation process for political reasons looks more like an excuse to hide their inability or unwillingness to seek compromises on substantive issues on the negotiating table,” Russia said. According to Russia, “the recent statements by representatives of some Members demonstrate clear intention to introduce the issue of territoriality into the framework of the WTO.” Russia said that “since its creation in 1947 (the GATT was actually established in 1948), the GATT/WTO system has been successfully avoiding any links of that issue with trade, notwithstanding the existence of a number of territorial conflicts and disputes across the globe, including among Members.” It added that “now some Members have radically changed their stance, thus creating another systemic risk for the organization.” Russia drew attention to the Marrakesh Agreement, suggesting that “the WTO, as the centerpiece of the multilateral trading system, was created to raise standards of living and stimulate economic development.” More importantly, Russia said “the WTO has proved to be an organization that is primarily guided by economic considerations and solid legal standards”. Russia said that “an ever-increasing pressure for its politicization has already brought numerous inefficiencies and now threatens the existence and effectiveness of the organization and the multilateral trading system.” Russia said it is convinced that the only way of dealing with the current crisis is to talk economics, not politics, and prevent “the violations of multilaterally agreed trade rules through unilateral means.” “Otherwise, world markets and economies of many Members will continue to suffer,” it said. RUSSIA’S INVASION RAISES COSTS, SAYS USTR According to a Reuters news report on 16 March, the United States Trade Representative (USTR), Ambassador Katherine Tai, said that Western sanctions and other actions to punish Russia over its invasion of Ukraine will impose costs on the United States and its allies. She said policymakers need to consider how to mitigate those impacts. Given the adverse effects on the US industry and the revoking of Russia’s Permanent Normal Trade Relations status – a move that would allow higher tariffs on imports from Russia – the USTR said “those consequences are intended to have a cost on Russia. But they also will require us to bear some costs.” “What we need to do – and this is really a key to policy making – is to figure out how to take action that maximizes the consequences for Russia while we figure out how to mitigate the impacts on our economic interests,” Ambassador Tai said. The USTR said that Russia’s actions had undermined a longstanding system of global economic integration, with consequences for the global economy. “The president [has been] very clear that first we have a responsibility to democracy and the rule of law in the world. We also have a responsibility to thinking through and doing the best that is strategically possible,” Ambassador Tai said. FACILITATOR ON WTO RESPONSE TO PANDEMIC Meanwhile, in other developments at the WTO, in response to the calls from several developing countries, the chair of the WTO’s General Council (GC), Ambassador Didier Chambovey from Switzerland, has appointed his predecessor Ambassador Dacio Castillo from Honduras, as the new facilitator to oversee the discussions on the WTO’s response to the pandemic. The GC chair has apparently also been holding bilateral discussions to elicit members’ views on the various “deliverables” for MC12 (WTO’s 12th ministerial conference) in different baskets. Aside from the first basket of issues such as the WTO’s response to the pandemic including the crucial TRIPS component, fisheries subsidies, agriculture, and proposed WTO reforms, the GC chair has apparently posed different questions to different members on their stand on the moratorium on TRIPS non-violation and situation complaints, the moratorium on levying customs duties on electronic transmissions, the SPS (sanitary and phytosanitary measures) ministerial declaration, and the LDC TRIPS waiver and LDC graduation statement, said people familiar with the discussions.
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