russia in the wto challenges and opportunities for businesses

7/30/2019 Russia in the WTO Challenges and Opportunities for Businesses

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PRACTICAL

TRADE & CUSTOMS STRATEGIESWTE

TRADE & CUSTOMS STRATEGIES

In ThIs Issue

October 31, 201Volume 1, Number

Mid-Yar Import Trad DataThe U.S. Customs and BorderProtection released its mid-yearreport, showcasing import tradehighlights for the first half of thescal year. Import values, so far, showpositive signs of growth compared tothe same time last year. Page 1

effct of RiaMmbrip i WTOThough the particular effects ofRussias recent entry into the WorldTrade Organization will unravel overtime, the regulatory framework withinwhich Russian businesses operate inexport markets will certainly change,presenting both opportunities andchallenges for Russian and non-Russian businesses. Page 1

eu, u.s. to Tal FTA nxtsprigR u m o r s c o n f i r m e d , o f f i c i a l shave publically announced thatthe European Union and UnitedStates will launch negotiations for atransatlantic trade agreement startingearly next year, a deal aimed to boostmuch-needed economic growth inboth regions. Page 12

WTO Approv LaoMmbripWith a nal approval to join the WTO,Laos is on its way to become a fullmember of the international tradeorganization. While membershipwould open the land-lacked countryaccess to more markets, Laos may alsoface potential challenges in meetingits trade ambitions and making themost of its role in the WTO. Page 11

Import Trade Report ShowsPositive Mid-Year Growth

By Linda Zhang (Thomson Reuters)

Data from the U.S. Customs and Border Protection (CBP) on import tradetrends reveal positive signs of growth in the rst six months of this scal year.By the end of the rst half of the scal year, which spanned from October 1,2011 to March 31, 2012, import values reached nearly $1.2 trillion, up by 10

percent over levels at the same point twelve months ago and higher than inthe same period two years prior. If the trend continues, total import values bythe end of the scal year could exceed the $2.27 trillion total of the year prior,said the report.

Other highlights indicate cause for expected improved import performanceby the end of the scal year as well. Total revenue collected reached approxi-mately $19.1 billion by mid-year of 2012, which is about $1.5 billion higher thanvalues at the previous mid-year, suggesting that revenue collections are on theirway to exceeding totals in the scal year 2011. Majority of the revenue collectedeach year are from duties; taxes and other fees make up other revenue streams.Specically, the total amount of duties collected in the rst half of the 2012 scalyear, landed at about $15.3 billion, which, according to the report, is also setto surpass last years levels by the end of the year. In total, the rise in import

Russia in the WTO: Challengesand Opportunities for Businesses

By Renato Antonini and Eva Monard (Jones Day)1

On August 22, 2012, the Russian Federation (Russia) became the 156th

member of the World Trade Organization, after 19 years of negotiations. Thisevent marks the accession of the last major world economy to the internationaltrading regime.

A lot has been written and said about Russias accession, by Russian andnon-Russian persons, by proponents and opponents, by academics and bybusinessmen. There have been several studies, opinions, assessments andprojections about the consequences of accession on Russias economy and onthe economy of other WTO members, in the short term and in the long term.Some have questioned the immediate impact of membership on Russia andother WTO members while others state that it cannot be overestimated. Many


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have claimed it will work to the benet of someRussian industry sectors and to the disadvantageof others.

Probably, only time will tell what the exactconsequences of the entry into the WTO will befor the Russian economy. However, one thing isfor sure. The regulatory framework within whichRussian businesses operate in export marketsas well as the regulatory framework governingcompetition from foreign industries on the Rus-sian domestic market will change tremendously.The impact of Russias accession to the WorldTrade Organization will largely depend on howcompanies, Russian and non-Russian, will takeadvantage of this regulatory framework. Indeed,

this new reality will at the same time provide busi-nesses with great opportunities and confront themwith great challenges. Whether and how Russiancompanies will reap the benets of accessing themultilateral trading system will depend to a largeextent on whether or not they choose to take andseize these opportunities and whether or not theyare willing to face and overcome these challenges.The decisions Russian rms will make in thisrespect might strongly affect their competitiveposition vis--vis their domestic and internationalcompetitors. The impact of Russias accession onother economies will obviously depend on the

approach taken by Russian companies, but willalso depend on the way in which non-Russianbusinesses face competition from Russian rmsin their home markets and on the extent to whichthese non-Russian business will take advantage ofthe increased access to the Russian market.

The New Regulatory FrameworkBy joining the WTO, Russia has committed

to abiding to the WTO rules and principles inaccordance with its Protocol of Accession and its

specic Schedules of Commitments. Obviously,these WTO rules apply on a reciprocal basis andother WTO members would also have to observethese basic rules and principles in their relationswith Russia. Moreover, the WTO Dispute Settle-ment Body will allow Russia to hold its WTO part-ners accountable for adhering to these WTO rules.Also, other WTO members will use this systemto ensure Russias adherence to these principlesin conducting their trade relations. The disputesettlement mechanism enforces the obligationsagreed upon within the WTO and aims to giveall WTO members condence that the agreementsnegotiated and agreed will be respected.

These basic rules and principles of the mul-

tilateral trading regime include a strong prefer-ence for tariff measures, rather than for non-tariffmeasures. The rules provide for a prohibition touse so-called quantitative restrictions (with someexceptions). Trade protection through importtariffs is certainly allowed, but WTO memberscommit not to raise these tariffs above the levelagreed upon at the time of their accession and tolowering them further to the WTO negotiations.

Furthermore, a WTO member may not dis-criminate between its trading partners who arealso WTO members, giving them equally most-favoured-nation or MFN status. This principle

thus provides for nondiscriminatory treatment ofimports of goods and services. This also impliesthat the same tariffs are in principle to be appliedwith all other WTO members. Furthermore, WTOmembers may not discriminate between theirown and foreign products, services or nationals,giving them national treatment. Consequently,imported and locally-produced goods should betreated equally, at least after the foreign goodshave entered the market. This principle also ap-plies to taxation.

Ria Trad

of service industry companies in Washington lastmonth. We also know ... where the obstacles areand how to resolve them.

But both sides appear likely to leave much ofthe highly sensitive agricultural sector out of theagreement altogether, diplomats say. Washington

maintains a 15-year-old ban on EU beef importsimposed because of American concerns aboutmad-cow disease. The European Union says the

ban breaks World Trade Organisation rules. TheUnited States, in turn, faces prohibitively hightariffs for its beef and pork products, runninginto Europes complex denitions of high-qual-ity meat.

Genetically engineered foods are also conten-

tious, with the United States in favor of developingthe industry but with the European Union against.They will not be part of the deal, said one EUdiplomat in Brussels. o

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Russia, from page 13

In addition, the WTO imposes rules governingthe imposition of anti-dumping, anti-subsidy andsafeguard measures, or so-called trade defencemeasures, that can temporarily increase theduties in force on imports of particular productsfrom particular countries. Also, the use of health

and sanitary measures and technical standards issubject to strict rules.The WTO rules go beyond mere trading rules

and will affect customs procedures, licensing andcertication rules and procedures, the protectionof intellectual property, and the area of govern-ment procurement.

Challenges and Opportunities for RussianBusinesses Focused on the RussianDomestic Market and Non-Russian

Export-oriented BusinessesRussian businesses are likely to be confronted

with stronger competition from non-Russiancompanies on their domestic market. RussiasWTO accession will result in increased access tothe Russian market for international companies.This relates, inter alia, to the reduction of tariffsand the binding of the tariff levels. WTO accessionwill require Russia to lower its import tariffs andto rationalize its tariff system.

The exact changes will differ signicantlydepending on the sector concerned. For somesectors, the most important change might not bethe reduction in tariffs as such, but rather the factthat the tariff rates will be xed whereas in the

past, tariff changes were often used as a meansof shielding the Russian domestic industry fromunwanted competition.

In addition, some of the most important ad-vantages for companies who import goods intoRussia will probably derive from the greater levelof transparency which will be achieved throughWTO accession. WTO accession of Russia willimprove the Russian business climate which hasso far often not been transparent and instead,unpredictable. The accession is likely to resultin more openness and stability. The accession ofRussia signicantly expands the geographicalcoverage of WTO rules. After Russias accession,all major economies are governed by these rules,which will enhance stability and transparency ofthe international trading system overall.

The market access to the Russian economy is,however, not unlimited. There are still legitimateways to protect certain sectors and industriesand there are still WTO-compliant ways for theRussian government to support its domestic busi-nesses. For some of these possibilities, the initia-tive lies with the Russian companies themselves.

An anti-dumping or anti-subsidy investigationthat can lead to the imposition of important importduties, for instance, will in principle be initiatedfurther to a request by the domestic industry.

In addition, the Russian government is likelyto maintain certain sector-based protection mecha-

nisms. These might be challenged by other WTOmembers, further to the request of their exportingcompanies. Exporters will thus have an importantrole in scrutinizing Russian compliance with itsWTO obligations. Russian companies, in turn,have an interest in supporting their governmentin demonstrating the WTO-compliance of suchmechanisms. Sometimes, certain changes to theexact wording of the mechanism or to the imple-mentation thereof might be sufcient to makethese WTO compliant.

The challenging environment on the domesticmarket will in a way also create opportunities for

Russian rms. Those rms that analyze the newregulatory framework and the consequences ontheir business will more easily adapt to the realityand will have an important advantage as com-pared to their domestic competitors.

Challenges and Opportunities forNon-Russian Businesses Focused on their

Domestic Market and for RussianExport-oriented Businesses

Russias WTO accession provides Russiancompanies with increased market access on ex-port markets. Tariffs applied by WTO members

on imports from Russia have to be lowered andexisting trade restrictions (including quotas) onseveral products will disappear. WTO member-ship ensures Russia with non-discriminatorytreatment of its exporters in the markets of otherWTO members. Russian exporters that are beingtreated differently from other exporters or fromdomestic companies can, under certain circum-stances, call upon their rights under the WTOAgreements. Since Russian exporters already hadaccess to most of the tariff benets through Rus-sias bilateral trade relations with WTO members,the reduction and/or elimination of nontariff bar-riers is likely to account for most of the benetsof liberalization for the Russian economy, ratherthan the decrease in tariffs.

Companies operating in industry sectors ofeconomies of other WTO members that wereshielded from their Russian competitors by non-trade barriers will thus face increasing competitionfrom Russian companies. The WTO framework,however, still provides for certain mechanismswhich allow some sort of protection against

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I Ti I

In This Issue

Ria Trad

Russia in the WTO: Challenges and Opportunities for BusinessesBy Renato Antonini and Eva Monard (Jones Day).............................................................................................page 1

Trad Rport

Import Trade Report Shows Positive Mid-Year GrowthBy Linda Zhang (Thomson Reuters)....................................................................................................................page 1

WTO Year-End Trade and Tariff Data Show Overall Growth in Exports By Linda Zhang (Thomson Reuters)...................................................................................................................page 8

Caada Trad

Yogurt Wars: Chobani Enters Canadian Market By Peter Hayden (McDonald & Hayden LLP)....................................................................................................page 3

Trad DalColombia and China Agree to Explore Possibility of Negotiating a Bilateral FTA

By Justin S. Miller (White & Case LLP)............................................................................................................page 3

EU Opens Door to Japan Trade Talks, New Era of Deals By Robin Emmott and Francesco Guarascio (Reuters).......................................................................................page 7

EU, U.S. to Negotiate Free-Trade Deal in Spring 2013By Robin Emmott and Doug Palmer (Reuters).................................................................................................page 12

sactio

Implementation of US Sanctions Against Iran Marks Signicant Extraterritorial Expansion By Ronald I. Meltzer, David J. Ross, David M. Horn (WilmerHale LLP)..........................................................page 4

Exclusive: Shell Seeks Iran Sanctions Workaround Via Cargill Grain Barter By Richard Mably (Reuters)................................................................................................................................page 6Trad Dipt

WTO Hands Obama Victory in U.S.-China Steel Case By Tom Miles and Rachelle Younglai (Reuters)..................................................................................................page 9

Mexico Files WTO Dispute over Chinese Textile Subsidies By Reuters...........................................................................................................................................................page 11

TariffBrazil Raises Tariffs, Cites Global Economy ByAmerican Association of Exporters and Importers......................................................................................page 10

WTO MmbripLaos Set to Join World Trade Organization by 2013

By Linda Zhang (Thomson Reuters)..................................................................................................................page 11


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Russia, from page 14

imports under certain circumstances, for instance tradedefence measures. Such measures were already appliedagainst Russian exports in the past. However, in view of theobligation to remove many other protective mechanisms,the use of trade defence measures against Russian products

is likely to increase. The domestic industry in certain sectorsmight have a strong interest in monitoring imports fromRussia closely. The entry into the WTO provides Russian ex-porters with equal status with other WTO members in suchanti-dumping, anti-subsidy and/or safeguard procedures.This element might also result in the possibly of existingdiscriminatory trade defence measures against Russianexporters. Russian exporters that are being confrontedwith such trade defence measures might have an interestin asking for a review, to be conducted in accordance withthe rules of the WTO.

1 The views adopted in the present article represent the personal

opinions of the authors and not the position of Jones Day.

Renato Antonini ([email protected]) is a Partner and

Eva Monard ([email protected]) is an Associate in theBrussels ofce of Jones Day. Mr. Antonini focuses on EU tradeand WTO laws relatingto trade protection measures and disputesettlements. He has extensive experience in EU and Italiancustoms and export control law, including tariff classication,customs valuation, dual-use goods, and sanctions. Ms. Monards

practice focuses on WTO law and EU trade, export controls,and customs law. She has assisted clients in EU trade defenseinvestigations involving antidumping, anti-subsidy, safeguard,and anti-circumvention issues as well as in a full range of othertrade matters.

russia in the wto challenges and opportunities for businesses

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