The EU and a slew of other like-minded countries are expected to increase Russia’s trade advantages at the World Trade Organization in Geneva, as part of a wider international campaign to increase economic pressure on Moscow after its invasion of Ukraine.
“Nothing should be ruled out,” EU trade chief Valdis Dombrovskis told POLITICO earlier this week of sanctions, and he confirmed that the EU wants to remove Russia’s trade privileges in Israel. WTO. This “will then allow us to impose tariffs on Russian and Belarusian imports,” he said.
What exactly are these WTO trade privileges?
The 164 member countries of the WTO all benefit from each other the same basic rights when their companies exchange goods and services. This concept of equality is referred to as “most favored nation” treatment – aka MFN.
There are exceptions to the treatment: WTO countries can lower tariffs for signatories to bilateral or multilateral trade agreements. They can also unilaterally lower tariffs to encourage developing countries to trade, and countries are allowed to impose new tariffs if they need to defend their businesses against unfair trade.
Is it legal for countries to suspend most favored nation treatment?
WTO members are allowed to suspend the clause against a specific member if they invoke the special “essential security interests” exemption found in the WTO’s founding treaty.
Russia has threatened to sue countries that decide to suspend Russia’s MFN status at the WTO through the trade body tribunal because it argues that trade restrictions violate WTO rules .
But if he does, all defendants will have the war-tested defense, thanks to Russia. In an ironic twist of history, WTO judges ruled in a case Ukraine brought against Russia for violating the most-favoured-nation principle in 2014 that Moscow could legitimately use the “interests of security” to justify the suspension of Ukraine’s trade preferences at the WTO.
What are the concrete consequences of the suspension of Russia’s trade privileges?
Removing Russia’s most favored nation status without any accompanying measures would be purely symbolic for most WTO members.
This is because very few WTO countries — like Canada — have general tariffs that they fall back on for their trade relations with non-WTO members.
In the case of Canada, which took the plunge last week, all trade with Russia is now subject to a 35% tariff.
But for the EU and many other countries like the US, these alternative tariffs do not exist, which means that the suspension of MFN treatment is above all a political gesture while countries prepare to impose new sanctions. .
“The step of formally suspending MFN treatment vis-à-vis Russia is completely unnecessary, it would be purely symbolic, and from a legal point of view, meaningless,” said Philippe De Baere, partner of the Van Bael & Bellis law firm. Indeed, “you can take exactly the same measures in the form of sanctions, and sanctions are also justified under Article 21 of the GATT [General Agreement on Tariffs and Trade]” For safety reasons.
What happens next?
The next step would be for the anti-Russia coalition of countries to effectively announce the suspension of Russia’s trade privilege at the WTO. Last Friday, the European Commission obtained the political green light from EU countries to announce the freezing of Russia’s trade privileges. But since then, no more white smoke in Geneva.
On Friday, US President Joe Biden is expected to take steps to end Russia’s most favored nation status at the WTO with G7 countries, a person familiar with the decision told POLITICO.
It remains to be seen how many WTO countries will take the plunge and whether this coalition of states will impose coordinated sanctions to turn the symbolic suspension of MFN treatment into a concrete blow against Russian trade.
The European Commission is expected to propose new options for trade sanctions such as the imposition of customs duties, new import bans or export controls. But as of Friday morning, EU diplomats had yet to receive any concrete proposals from the Commission.
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