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5 May 2022

WTO reaction to Russian-Ukrainian war

Source: ULF

The Russian invasion of Ukraine on 24 February 2022 ruined the lives of millions of Ukrainians. The terrible war has already killed and injured thousands of people[1], destroyed their homes, forced millions of Ukrainians to leave their hometowns or even flee the country[2].

Nevertheless, the effects of this Russian aggression are not only limited to the territory of Ukraine, as it significantly affects the global economy in general. The World Trade Organisation (the “WTO”) has referred to the implications of the Russian-Ukrainian war on the global trade flows several times. Besides mentioning trade in agriculture and food products, the rise in energy prices[3], and the agricultural negotiations[4], the in-depth analysis of this issue was conducted in the assessment note “The Crisis in Ukraine. Implications of the war for global trade and development” prepared by WTO Secretariat staff[5]. In this article, we aim to analyse which measures have been adopted by the WTO against Russia in response to the aggression of the latter.

Official statements

Nevertheless, the discretion of the Member States is not limited to calls for peace and analysis of the trade applications of the war. Several WTO Members, including Albania, Australia, Canada, European Union, Iceland, Japan, the Republic of Korea, the Republic of Moldova, Montenegro, New Zealand, North Macedonia, Norway, the United Kingdom, and the United States, issued two joint statements regarding the aggression of Russia against Ukraine. In a joint statement dated 14 March 2022 (the “14 March Joint Statement”)[6], the Member State did not just condemn the Russian aggression as a manifestation of “an egregious violation of international law, the UN Charter, and fundamental principles of international peace and security”, but also announced their actions to suspend concessions or other obligations with respect to Russia, including the suspension of the most-favoured-nation (the “MFN”) treatment regime, would be introduced.

The MFN principle is called a “cornerstone” of the WTO system. In a nutshell, it forbids a Member State to treat another Member State worse than it treats any other country. The suspension of the MFN treatment to products and services of Russia means that the Member States can adopt numerous acts restricting access of Russian goods and services to their markets. Such acts may amount to high import duties, a full embargo on certain products, or additional procedures with regard to Russian services.

Sanctions on Russia

Member States needed to adopt respective acts on the national (or the EU) level to implement the above intentions. The EU has already adopted five sanction packages and is currently negotiating the sixth one. The United Kingdom adopted the Russia (Sanctions) (EU Exit) Regulations 2022 and is regularly amending it by introducing further restrictions. As to the United States, certain measures were introduced by the Executive Orders, but the general provision on suspending the permanent normal trade relations with Russia was adopted by the law H.R. 7108, the Suspending Normal Trade Relations with Russia and Belarus Act, etc.

Hence, what were the exact measures adopted? First of all, additional 35 per cent import duties on Russian goods were introduced by plenty of states. For instance, according to the latest regulation under the Russia Sanctions Amendment Regulations (No 2) 2022, New Zealand[7] introduced additional 35 per cent import duties on all goods of Russian origin applicable from 25 April 2022[8]. The same measures were introduced by Australia.[9] Although the United Kingdom did not introduce additional duties to all the Russian goods, the list of goods covered by additional 35 per cent duties from 25 March 2022 is still significant[10] and includes wood, iron and steel, copper, aluminium, machinery, fertilisers etc. Such a list is still updating[11]. Canada has also applied a 35 per cent import duty to all imports from Russia and Belarus[12].

Another way of dealing with Russia is a full prohibition of export or import of certain goods. The list of such export prohibited goods was adopted by New Zealand[13], Australia[14], the United Kingdom[15], the European Union[16], and the United States[17]. Such lists usually include military or double use items, luxury and hi-tech goods, products used to construct weapons etc.

The prohibition of import from Russia is primarily aimed at fossil fuels since they are a Russian budget contributor of significant importance. Nevertheless, this issue created many debates within certain Member States since some of them, such as the EU states, are highly dependent on Russian oil and gas. While the United States have already adopted the prohibition to import into the territory of the United States Russian oil, liquefied natural gas, and coal[18], the EU has only adopted the prohibition to purchase, import or transfer coal and other solid fossil fuels originating from the Russian Federation into the EU[19]. Import ban on Russian oil and gas is, however, discussed within the sixth sanctions package to be adopted.[20]

Besides the above trade-related sanctions, which demonstrate a certain level of consistency among the WTO Member States, there are some additional measures that are more autonomous in their nature. For instance, the EU has imposed certain restrictions on the participation of Russian entities in the public procurement processes[21].

Sanctions on Belarus

While discussing sanctions introduced due to the Russian aggression against Ukraine, one must not leave Belarus out of the picture. In the 14 March Joint Statement, the WTO Members concerned admitted Belarus’ material support to the actions of Russia and the joint statement dated 22 March 2022 (the “22 March Joint Statement”) confirmed that the military aggression against Ukraine is enabled by Belarus[22].

Because of the above situation, many sanctions target not only Russia but also Belarus. For example, Australia, Canada, and the United Kingdom introduced 35% import duties on the Belarusian goods, the USA added Belarus to its export ban list, some of the EU sanction packages address Belarus, etc.

However, although some of the sanctions against Russia covered Belarus, the situation with Belarus is a bit different since it has never been a Member State of the WTO, unlike Russia. But it does not mean that nothing can be done within the WTO to affect the Russian supporter. Belarus submitted an application for accession to the WTO in 1993 and has the observer status. In the late 10s, Belarus intensified its efforts to access the WTO[23] and was expected to become a Member State by the end of 2020.

In the 14 March Joint Statement, the WTO Member States stated that due to Belarus’ material contribution to Russian actions, they considered Belarus’ accession process suspended and would not participate in any accession-related work. The 22 March Joint Statement went even further, claiming Belarus to be “unfit for WTO membership”. The authors of the joint statements refused to further consider its application for accession.

Such statements mean a deadlock in Belarus’ accession process since decision-making by consensus is still of great importance for the WTO. Although the two-third majority voting is envisaged by the Marrakesh Agreement, in many cases, Members take decisions by consensus.

The compatibility of sanctions against Russia with the WTO rules

The WTO Agreements provides a range of grounds for justification for certain violation of the WTO rules. The most common one is General exemptions provided under article XX of the GATT, which address such issues as public moral, human, animal or plant life or health, conservation of exhaustible natural resources etc. However, in the present case, article XXI of the GATT is of greater interest since it deals with the Security exceptions allowing the Member States to take measures “in time of war or other emergency in international relations”. The EU officials confirmed that the sanctions against the Russian Federation were introduced in light of the security exceptions[24].

Nevertheless, the whole necessity to justify sanctions against the Russian Federation is questionable since it has not lately demonstrated a lot of willingness to continue cooperation within the organisation. On the contrary, on 21 March 2022, the Draft law on Russia’s withdrawal from the WTO was registered with the parliament[25].

 

[1] According to the data of the Office of UN High Commissioner for Human Rights (the “OHCHR”), as of 31 March 2022, 3,167 civilian casualties were recorded in the country: 1,232 killed and 1,935 injured. See more via the link: https://www.ohchr.org/en/news/2022/03/ukraine-civilian-casualty-update-31-march-2022
[2] According to the OHCHR, around 5.5 million Ukrainians have fled Ukraine as of 29 April 2022. See more via the link: https://data2.unhcr.org/en/situations/ukraine
[3] https://www.wto.org/english/news_e/spno_e/spno23_e.htm
[4] https://www.wto.org/english/news_e/news22_e/agng_21mar22_e.htm
[5] Available via the link: https://www.wto.org/english/res_e/booksp_e/imparctukraine422_e.pdf
[6]  https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/GC/244.pdf
[7] https://www.legislation.govt.nz/regulation/public/2022/0114/latest/LMS673320.html
[8] https://www.customs.govt.nz/about-us/news/important-notices/russia-sanctions-updated-regulations/ 
[9] https://www.foreignminister.gov.au/minister/marise-payne/media-release/australia-impose-tariff-increases-all-imports-russia
[10] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_
data/file/1070080/25-march-2022-additional-duties-product-list-russia-belorus.odt
[11] https://www.gov.uk/government/news/uk-announces-further-import-sanctions-against-russia?utm_medium=email&utm_campaign=govuk-notifications-topic&utm_source=c7895b38-02ff-4495-9183-eb9196464657&utm_content=daily
[12] https://www.canada.ca/en/department-finance/news/2022/03/canada-cuts-russia-and-belarus-from-most-favoured-nation-tariff-treatment.html
[13] https://www.legislation.govt.nz/regulation/public/2022/0114/latest/LMS673320.html
[14] https://www.legislation.gov.au/Details/F2022L00343
[15] https://www.gov.uk/government/news/uk-announces-further-import-sanctions-against-russia?utm_medium=email&utm_campaign=govuk-notifications-topic&utm_source=c7895b38-02ff-4495-9183-eb9196464657&utm_content=daily
[16] https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014R0833
[17] https://public-inspection.federalregister.gov/2022-05604.pdf?utm_source=federalregister.gov&utm_medium=email&utm_campaign=pi+subscription+mailing+list
[18] https://home.treasury.gov/system/files/126/eo_prohibitions_imports_investments.pdf
[19] https://www.consilium.europa.eu/en/press/press-releases/2022/04/08/eu-adopts-fifth-round-of-sanctions-against-russia-over-its-military-aggression-against-ukraine/?utm_source=dsms-auto&utm_medium=email&utm_campaign=EU+adopts+fifth+round+of+sanctions+against+Russia+over+
its+military+aggression+against+Ukraine
[20] https://www.ft.com/content/c8eedb92-9512-4648-8146-d1450fcbd7e9
[21] https://www.consilium.europa.eu/en/press/press-releases/2022/04/08/eu-adopts-fifth-round-of-sanctions-against-russia-over-its-military-aggression-against-ukraine/?utm_source=dsms-auto&utm_medium=email&utm_campaign=EU+adopts+fifth+round+of+sanctions+
against+Russia+over+its+military+aggression+against+Ukraine
[22] https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/GC/246.pdf&Open=True
[23] https://geneva.mfa.gov.by/ru/interorg/BLR_WTO/
[24] https://ec.europa.eu/commission/commissioners/2019-2024/dombrovskis/announcements/statement-executive-vice-president-dombrovskis-eu-decision-0_en
[25] https://agenceurope.eu/en/bulletin/article/12916/10

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