Water Diplomacy

WTO Review: EU calls on Russia to abandon import substitution measures

Moscow, 28/09/2016 - 15:16, UNIQUE ID: 160928_11
Press releases

On 28 and 30 September the World Trade Organization (WTO) holds its 1st Trade Policy Review (TPR) of the Russian Federation since it joined the WTO in August 2012.

This is the first opportunity to comprehensively assess Russia's trade and trade related policies against the commitments it undertook when entering the WTO. Today, the EU presented its assessment of the situation.

Russia's accession had raised high expectations, not only in Russia but also in the EU and among most other WTO members given its economic and political potential.

Consequently, the EU did not hide its disappointment today when it recalled that instead of using the full benefit of its membership to open up and diversify its economy, Russia had quickly opted for an inward looking strategy based on import substitution.

This has concretely translated into the subsidization of many sectors of economic activity including the automotive sector, into local content requirements for producers in many areas and into restrictions for foreign operators in public procurement. A number of poorly justified and disproportionate sanitary and phytosanitary restrictions have also been introduced. These policies, which were reported on in detail by the WTO Secretariat, have not brought more trade or growth to Russia. Neither have they increase product quality or lowered prices to Russian consumers. Far from it, they have introduced an economic and trade environment distant from the principles and spirit underpinning the WTO and global economic cooperation.

The EU also expressed its strong criticism of a number of other measures taken by Russia including unilateral restrictions introduced in 2016 on road and railway transit from Ukraine to Kazakhstan and later also to Kyrgyzstan. Compliance of these measures with WTO rules and principles is also questionable and EU operators and cargo are also affected.

The EU also highlighted problems with the overall business environment as operators are currently facing an uninterrupted flood of often non-transparent, complex and ever changing legislation, frequently implemented within extremely short deadlines and without proper public consultation conducted sufficiently in advance.

Russia has been involved in a high number of formal disputes in the WTO since its accession.

Today, Russia is in recession due to a mix of factors such as low oil prices, devaluation of the rouble and inflation. Russia's trade policy and in particular its import substitution policy has not helped in tackling these challenges. Russia's trade with its most important partners, such as the EU, US, Japan or China, has fallen dramatically since 2012, in some cases by more than 30%. While this is an effect of lower oil prices it is also directly the result of measures adopted early after WTO accession aiming at hindering foreign operators' access to the Russian market, via restrictions on imports, public purchases or investments in so called strategic sectors.

According to the EU's assessment, Russia's influence in world trade and on the global economy brought with it increased responsibilities towards the WTO and its members.  The EU therefore called on Russia to change its track record regarding the implementation of its WTO commitments and to focus on restructuring and liberalizing its economy.

Background

Russia is the 4th most important trade partner for the EU. For some EU Member States, Russia is in fact the first trading partner outside the EU.  In 2015, total mutual trade reached EUR 210 billion representing 6% of the total EU trade excluding intra EU trade. The share of the Russian Federation on EU exports and imports was 4% and 8% respectively, in 2015. In terms of foreign direct investments the EU is still the most important partner for Russia in terms of EU stocks accumulated in the country.

More information:

EU Statement at the 1st Trade Policy Review of the Russian Federation - 28 September 2016:

https://eeas.europa.eu/delegations/world-trade-organization-wto/10696/eu-statement-at-the-1st-trade-policy-review-of-the-russian-federation---28-september-2016_en 

 

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