Page 6 - RusRPTMay19

2.0 Politics
2.1 Washington backs Russia in WTO trade dispute with Ukraine
Russia and the United States rarely agree on anything in global politics. But Washington was the only World Trade Organization (WTO) member that supported Moscow in a highly politicised legal dispute at the organisation’s dispute settlement body that many have a systemic impact on the whole international trading system.
The WTO’s panellists were asked to judge on restrictions Russia imposed on transit of goods on their way to Kazakhstan and Kyrgyzstan following the 2014 Ukrainian crisis. The case has become a proxy for a larger-than-life trade dispute that is making its way through the machinery in Geneva: there are similar cases brought by thirteen countries against US steel tariffs introduced last year on national security grounds. The Russian decision may directly 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 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
6 RUSSIA Country Report May 2019 www.intellinews.com