The EU welcomes this second Trade Policy Review of the Russian Federation, almost a decade since its accession to the WTO. We welcome the delegation of Russia, led by Ms. Ekaterina Mayorova (Director of the Department of trade negotiations, Ministry of Economic Development) and thank the Discussant, Ambassador of Switzerland H.E. Didier Chambovey, for his remarks.
The EU is the main trade partner of the Russian Federation, both for goods and for services, and its main source of foreign direct investment, with some 75% of total inward FDI. Bilateral trade in 2020 represented some 4.8% of EU foreign trade in goods, down from 6% at the time of the previous TPR.
Back in 2016, at its first Trade Policy Review, the EU had emphasized that Russia’s WTO accession represented an opportunity for its modernisation. A chance to diversify its economy and reduce its reliance on raw materials and commodities, but equally to adjust its judicial and legal framework to bring in a more dynamic and responsive market. The European Union continues to hold that belief.
Over the last few years, Russia’s efforts to play a constructive role in various areas in the WTO have not gone unnoticed - be it in its involvement in the Joint Statement Initiatives, or in its general support to achieve a meaningful MC12 including through its openness towards WTO reform in order for the organization to remain strong and credible. The EU looks forward in making progress in the different Joint Statement Initiatives, and in particular concluding the Domestic Regulation JSI in the margins of MC12. We hope that Russia will be in the position to submit their schedule of specific commitments as soon as possible, noting that the schedules of all participants are an essential component for a successful conclusion of this negotiation.
However, the Russian Federation needs to redouble its commitment to the WTO. Today, we regret to note that since its accession the Russian authorities have expanded, rather than reduced, the scope of its import substitution policy - without any realistic furthering their pretended aim of localisation. This not only has a negative effect on trade with the EU but is done in most cases to the direct detriment of Russian consumers.
In addition, the arguments used by the Russian authorities to justify protectionist policies - namely that they are a direct consequence of the sanctions of individual economies on the Russian Federation – are questionable in our view. These Russian policies started immediately after Russia’s WTO accession and predate the political tensions that Russia highlights.
Some of the specific questions tabled by the EU better explain the underlying concerns that we have. Allow me to highlight some:
Several questions target the contradiction between the aspiration of the Russian Federation to become a member of the Government Procurement Agreement, and the reality of its practice. The ability of foreign bidders to participate in government procurement has been obstructed or effectively denied through a growing body of regulations granting advantages to domestic products via price preferences, quotas, or exclusion of foreign goods and services.
A large part of the Russian state’s presence in the economy – up to 20% of Russian GDP - corresponds to state-owned enterprises providing products and services in a commercial context. Despite the applicable WTO rules in this area, the Russian Federation has introduced such a growing body of restrictions as to make the participation of foreign bidders in tenders uneconomic, or a practical impossibility.
As to export restrictions - under the rationale of preventing illegal logging and supporting domestic forest-based industries - the Russian Federation has announced a ban on the export of unprocessed wood from 2022. It remains unclear how the Russian Federation intends to reconcile these measures with the schedule of its concessions, which include export tariff-rate quotas in some of the categories of wood covered by the announced ban.
One primary mission of the WTO is to facilitate transparency. For this, a reliable notification practice is imperative. The Russian Federation’s performance in this area leaves much to be desired.
For example, Russian Federation notifications in the area of technical barriers to trade have concerned only Eurasian Economic Union-level measures. A number of Russian Federation national measures falling within the scope of the TBT Agreement entered into force without any notification whatsoever to the WTO, including those regarding the wines and spirits sector. Not a single measure adopted at the national level has been notified to the WTO.
The same can be said about the exclusive rights in the area of foreign trade granted to certain entities in the Russian Federation including, for example, for the export of natural gas. The Russian Federation has failed, since its accession, to notify a single state-trading enterprise to the WTO. At the same time, around 50% of the EU’s imports from the Russian Federation are sold by a single export monopoly of natural gas. Let me also remark that, beyond its non-notification, this fact sits uneasily with the overall principles of the WTO, and in our view also with the long-term interests of Russia.
To conclude, the EU welcomes the Russian Federation’s commitment in its report to an open, non-discriminatory and transparent multilateral trading system, and for a reform aimed at preserving the WTO’s role in maintaining and developing new trade rules. We commend this as a good foundation for the necessary efforts that Russia should undertake to abide by the spirit and the letter of its WTO commitments, and to build a more open, transparent and non-discriminatory business environment.