Ongoing disputes at the WTO · Western World

Three Little Pigs: EU and Russia face off

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In recent news, the Russia ban on pork imports from the EU has arrived on the WTO’s doorstep.[1] Last January, Russian officials had imposed the ban after EU found swine fever in four wild boars in Lithuania and Poland. The move had massive trade repercussions especially because Russia is biggest importer of pork from the 28-member bloc. (Last year’s total trade amounted to about 1.4 Billion Euros ($1.9 Bil.) In fact, it is the largest importer in the world, after Japan.

While the move displays the worsening situation over the Ukraine crises, it is nothing but a manifestation of political hues in international trade. Let’s not forget, as public interest shifts to other issues like this EU-Russia dispute,  pro-Russian rebels are attempting to establish their influence in places like Donetsk in Eastern Ukraine.

 Ukrainians had wanted closer economic ties with the European Union and North America and it seems like Russia would just not have it that way. [How all this is related to Germany’s oil woes, can be found here: http://www.dw.de/germany-has-no-alternative-to-russian-gas/a-17574004]

With respect to the ban in question, the EU was initially willing to compromise. It suggested a trade measure which would restrict imports only from affected areas. Citing “biological security”, Moscow politely declined and went full steam ahead. [ How this is inevitably connected to President Vladimir Putin ‘s pro-nationalistic stand is explained brilliantly here]

This was met by considerable opposition and recently the EU Trade commissioner called the ban “totally disproportionate”.

Pursuant to Article 4 of the Dispute Settlement Understanding (DSU)[2], a 60 day consultation period has been requested by the EU. This extended period for consultations is a reminiscent from the pre-WTO days where the GATT framework stressed on the need to come to mutually agreeable solutions without resorting to litigation. However, if they do result in failure, the EU would have the right to request the establishment of a panel.[3]

In the (likely) event that this happens, it would be beneficial to look at the specific grounds which that are available to the EU. Here’s a look at the two issues are absolutely out in the open:

1)      The MFN violation

What the rule is:
The Most Favoured Nation obligation is said to be one of the central pillars of the WTO trading system and yet, the in terms of terminology and principle, it is a misnomer. One would think that it allows a WTO member (also called a Contracting Party/CP) to provide favourable trading terms to another member, thereby according it a “Most Favoured Nation” status. However, in reality it disallows all CPs to enact a trade measure which would give any other nation a trading edge over the other. In other words, if India decides to reduce import limits on chairs from the US, it would have to reduce (to an equal amount) the import limit it has set with respect to other nations.

What Russia did:
While the ban restricts imports of pork products from EU, the same rule does not apply against Ukraine and Belarus even though similar situations prevail. It is interesting to note that Article III of the GATT, which is the habitat of the MFN principle, mentions only “advantage, favour, privilege or immunity”, thus it is debatable whether such a ban should also be applied on a MFN basis.

2) National Treatment

What the rule is: In short this mandates that a country must provide equal trading opportunities to foreign and domestic competition.

What Russia did: The ban did not affect the domestic pork producing manufacturing industries which were also affected by cases of swine outbreak in Russia.

[Photo source]

[1]See:http://www.bloomberg.com/news/2014-04-08/eu-pig-farmers-miss-out-on-boom-as-russian-ban-spurs-wto-case.html; http://www.wto.org/english/news_e/news14_e/ds475rfc_08apr14_e.htm

[2] A set of procedural rules that regulate how disputes are to be handled by the WTO.

[3]The Panel is an ad-hoc body comprising of (usually) 3 impartial trade experts/academics who take into account the facts of the case and apply them to the legal interpretations of the WTO, in order to come to a finding. This is the first step in the two-tier WTO judiciary system. Step 2 is the Appellate Body.

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