Pressure Builds to Challenge Russian Ag Ban, But WTO Dispute Could be Unlikely
The top Polish agricultural official recently urged Prime Minister Janusz Piechocinski to pressure the European Union to challenge Russian agricultural sanctions at the World Trade Organization (here), but U.S. industry representatives and trade analysts say such a response is unlikely and may also jeopardize the credibility of the WTO as an apolitical institution. Russia authorized on Aug. 6 an import ban on a broad range of agricultural products from the U.S., EU, Canada, Australia and Norway, all countries that levied sanctions against Russia related to the destabilization of Ukraine since early 2014 (see 14081216).
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Russian President Vladimir Putin’s decree puts the ban into effect for one year, which almost certainly is not enough time for a dispute to process through WTO channels, said the trade analysts. “The one year limit makes the measure look unlikely, if not immune, to a challenge at the WTO. It could be an attempt to dissuade a challenge, while Russia still gets a political benefit,” said Bill Watson, a trade policy analyst with the libertarian Cato Institute. “Once the measure is revoked, that’s the remedy and the dispute at the WTO is done. The WTO is meant to get the respondent to remove the measure only.” The WTO does not authorize retaliatory measures to compensate for past violations that are resolved, Watson said. WTO dispute proceedings often take multiple years.
The Russian ban extends to all cattle and pork meat, fish and other aquatic invertebrates, certain poultry and dairy products, vegetables and other crops, sausages and similar meat products and certain prepared products including cheeses and curd that are made with vegetable oils from the specified countries. European Union agricultural communities are nearly guaranteed to be more gravely affected by the ban than U.S. industry, considering trade volumes, said the trade analysts. U.S agricultural product exports to Russia have spiked in recent years to $31.7 billion in 2010, according to the Office of the U.S. Trade Representative (USTR), but that figure pales in comparison to EU exports. Nonetheless, the U.S. would potentially be a co-complainant in a case, said the analysts. USTR did not respond for comment.
Russia threatened to challenge sanctions imposed by the U.S. and its allies at the WTO in the months before Putin announced the agricultural ban (here). Whether either side of the conflict launches a formal WTO dispute will likely depend on what the other side does, said Gary Litman, vice president for international strategic initiatives at the U.S. Chamber of Commerce. But the antagonists are more importantly threatening to abuse the WTO as an objective, strictly trade-related body, said Litman. “There is the possibility that both sides will go tit for tat at the WTO for what are essentially inappropriate disputes,” said Litman. “The technical and legal issues may not even surface.” Putin justified the ban as a necessary means to preserve Russian food security in light of the economic threats posed by Western sanctions (here). The U.S. and its partners have imposed a series on sanctions, including sectoral measures, on Russia over recent months (see 14073013).
The aim to address these political concerns and tensions through the WTO risks further damaging a body some consider to be weakening in strength and clout, said Litman. “It’s in nobody’s interests to take this conflict to Geneva,” he said. “It’s not in the interests of the institution itself, which is still reeling from the Bali agreement collapse and is very fragile. If you start bringing border disputes and other political conflicts to Geneva, the institution will blow up.”
However, filing a WTO dispute could make it less likely that Russia extends the ban. The ban is realistically in effect for an unspecified amount of time, despite the one year limit in the decree, said Jeffrey Schott, senior fellow at the Peterson Institute for International Economics. “The ban could go on for a few weeks or years. A WTO dispute would be a deterrent against current and future actions,” said Schott, referring to the fact that Russian could renew or prolong the ban. “The U.S. and EU and the other countries need to decide what is the best method for combating these Russian outrages. Dispute settlement in one tool in the tool box, but it may not be the primary tool.” The parties can also consult through a variety of different diplomatic channels, in Geneva and elsewhere, to try to resolve the conflict, said all those interviewed.
There is a potential scenario that involves political settlement in Ukraine with a continued Russian agricultural ban, at which point the prohibition would become a strictly trade-related measure, said Litman. Should Russia keep the ban in effect, it may create a strengthened domestic industry that would apply pressure to maintain the ban, he added. “Sanctions create their own vested interests and once Russian restricts importation of products, it creates a vested interest among local producers that enter that market,” said Litman. “So even if the Ukraine crisis is resolved, they’ve created a lobby that will fight to preserve their monopoly.” -- Brian Dabbs