Page 9 - UKRRptMay19

affect the US trade regime as well.
After spending some 17 years trying to get into the WTO, following its accession in August 2012 there was a brief window when the Kremlin began to open its markets up under WTO rules, only to slam that window shut again in 2014 following the annexation of Crimea. Russia has de facto ignored the WTO rules ever since.
Ukraine complained against a 2014 trade rule Russia adopted after it enacted import bans on food products originating from Western countries: goods banned in Russia but destined to other members of the Eurasian Economic Union (EEU) would need to be brought to one single check-point at the Belarus-Russian border. Kyiv also complained against a 2016 rule that required all transit to Kyrgyzstan and Kazakhstan from Ukraine to go through Belarus.
Balanced ruling – or nobody happy
“Had the measures been taken in normal times, i.e. had they not been taken in time of an “emergency in international relations” (...), Ukraine would have a prima facie case” that they would be inconsistent with WTO rules establishing freedom of transit, the WTO’s panellists stated on Friday.
But in the panel’s view, there was no denying that Russia was acting in such an emergency situation, and was hence allowed to invoke Article XXI of the General Agreement on Tariffs and Trade, which allows WTO members to introduce non-compliant trade restrictions on to look after their “essential security interests”.
The GATT’s famous Article XXI allows members to take any measure they see fit on national security grounds, but does introduce some caveats, such as the requirement that there be an emergency situation, the need to enforce UN resolutions, or the measure be meant to prevent arms trade or trade in “fissionable” – i.e. nuclear - materials.
The ruling is making nobody happy.
The Ukrainian side believes that the panel didn’t act even-handedly, letting Russia getting away with insufficient evidence that its security interests were at stake – as well as with a WTO-illegal measure. Ukraine had argued that Russia was basically reacting to Ukraine’s signing on to a Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU, but there was no objective security reason to impose those transit bans.
Russia – supported by the US which had intervened as third party in the case – had argued that the WTO panel had no jurisdiction whatsoever in the case. Moscow argued that Article XXI of the GATT leaves total discretion to WTO members to decide on their course of action. Paragraph b) of this article says that the GATT’s rules are not in any way construed “to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests”. Moscow sees the “which it considers necessary” language as meaning that no WTO panel may look at the issue altogether. In support of Moscow, the US wrote to the panellists arguing that invoking national security was “self-judging” and “non-justiciable”.
The three panellists flatly rejected the claim. “There is no basis for treating the invocation of Article XXI [...] as an incantation that shields a challenged measure from all scrutiny”, the report reads.
“It is a balanced decision”, reckons Stéphanie Noël, a trade lawyer in Geneva. “WTO Members are accorded a rather high level of deference in deciding what their essential security interest are, and how to defend them. At the same time, the obligation of good faith applies to both the definition of those interests, and to their connection with the measure at issue. Both must be found “plausible”.
9 UKRAINE Country Report May 2019 www.intellinews.com