Removal of Russian trade privileges – what you need to know – POLITICO

The EU and a host of other like-minded countries are expected to advance Russia’s commercial interests at the World Trade Organization in Geneva, as part of a larger international push to increase economic pressure. towards Moscow after the invasion of Ukraine.

EU trade director Valdis Dombrovskis told POLITICO earlier this week when speaking about the sanctions, and he insisted that the EU wants to remove Russia’s trade privileges at the WTO. This would “allow us to then impose tariffs on both Russian and Belarusian imports,” he said.

What exactly are these WTO privileges?

The 164 member countries of the WTO all benefit from essentially the same tax rates when their companies trade in goods and services. This concept of equality is called “most favored nation” – aka MFN – treatment.

There are exceptions to the treatment: WTO countries can reduce tariffs for parties to bilateral or multilateral trade agreements. They can also reduce tariffs unilaterally to encourage developing countries to trade, and countries are allowed to impose new tariffs if they need to protect their companies against unfair trade.

Is it legal for home countries to only treat most favored nation?

WTO members are allowed to suspend a provision against a particular member if they appeal the particular provision exemption related to the “essential security interest”, which is contained in the founding treaty of the WTO.

Russia has threatened to sue countries that decide to suspend Russia’s MFN status at the WTO through the courts of the trade body, arguing that the trade restrictions violate WTO rules.

But if it did, all defendants would have tried-and-true defenses in war cases, courtesy of Russia. In an ironic twist of history, the WTO assesses rule in a case that Ukraine sued Russia for violating the most-favoured-nation principle in 2014 that Moscow could legitimately use “security interests” to justify suspending Ukraine’s trade preferences in the WTO. .

What are the practical consequences of suspending Russia’s commercial privileges?

The removal of Russia’s most-favored nation status without any accompanying measures would be purely symbolic for most WTO members.

That’s because very few WTO countries – like Canada – apply the tariffs they apply to their trading relationships with non-WTO members.

In the case of Canada, which made the move last week, all trade with Russia is now subject to a whopping 35 percent tariffs.

But for the EU and many other countries like the US, such alternative tariffs do not exist, meaning that suspending the MFN is primarily a political move as countries prepare to impose more sanctions. punish.

Philippe De Baere, a partner at law firm Van Bael & Bellis, said: “The formal step of suspending the MFN for Russia is completely unnecessary, it would be purely symbolic, and from a legal point of view. senseless, meaningless. That’s because “you can take exactly the same measures as sanctions, and sanctions are justifiable under Article 21 of the GATT. [General Agreement on Tariffs and Trade]”for the sake of security.

What happens next?

The next step was for the anti-Russian coalition to actually announce the suspension of Russia’s trade privileges at the WTO. Last Friday, the European Commission was given the political green light by EU countries to announce the freezing of Russia’s trade privileges. But since then, there has been no white smoke in Geneva.

On Friday, US President Joe Biden is expected to move towards ending Russia’s most-favored nation status at the WTO along with the G7 nations, a person familiar with the decision told POLITICO.

The question remains as to how many WTO countries will make the move and whether the coalition of nations will impose coordinated sanctions to turn the symbolic MFN suspension into a concrete blow against Russian trade or not.

The European Commission is expected to propose new trade sanctions options such as imposing tariffs, continuing import bans or controlling exports. But as of Friday morning, EU diplomats had not received a concrete proposal from the Commission.

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