White & Case
  Alerts
Trade Alert: Russia's WTO Membership and the Gains for Russian Exporters

November 2012
Hermann Schmitt, Irina Dmitrieva, Brendan McGivern, Saskia Seeger

Russia's recent accession to the WTO has the potential to bring numerous benefits to Russian exporters. Membership will result in improved access for Russian exports in foreign markets—including the EU, the United States and China—where Russian exporters will be entitled to the same non-discriminatory treatment as that accorded to exporters from other WTO Members in those markets.

Although the WTO is a treaty regime between sovereign states, the main beneficiaries are private companies. The legal agreements of the WTO—covering trade in goods and services, food safety measures, technical regulations, intellectual property rights and investment measures, among others—provide the legal ground rules for international trade and seek to ensure that governments apply their domestic regulatory systems within certain agreed-upon limits. Where other WTO Member governments fail to adhere to those limits and instead impose barriers to trade, the Russian government, on behalf of its exporters, can challenge those violations through the WTO dispute settlement process.

Non-discrimination
Russia's WTO membership entitles Russian exporters to "most favored nation" tariff treatment at the borders of foreign markets. This means that, with a few exceptions, including preferential treatment permitted under Customs Unions and Free Trade Areas, the tariffs applied to Russian goods cannot be higher than those imposed on similar goods imported from any other Member country.

WTO rules also require that Members' internal domestic regulations treat Russian goods similarly to goods of domestic origin. This is the so-called "national treatment" obligation. Russian exporters that believe their goods are being discriminated against in a foreign market can rely upon WTO rules to seek equal treatment. If necessary, the Russian government can invoke the highly effective dispute settlement procedures of the WTO to challenge any discriminatory measure.

Trade Remedy Investigations
An area in which Russian exporters should see significant improvements is that of trade remedy investigations by foreign authorities (anti-dumping, anti-subsidy and safeguard investigations). Globally, the chemical, steel and downstream petrochemical sectors are a common target in trade remedy investigations, and the duties imposed by foreign authorities can have a significant impact on the ability of a company to secure or maintain market access abroad. Any such investigations would almost certainly be initiated as a result of lobbying by the affected foreign domestic industry with a view to counteracting competition posed by Russian exports in the foreign market.

According to the Ministry of Economic Development, as of November of this year, 73 trade barriers are currently imposed against Russian goods in 18 foreign markets, five trade remedy investigations are currently taking place, and 11 anti-dumping duties are being reviewed.

For example:

  • Australia, the EU, the United States, and Ukraine impose anti-dumping duties on ammonium nitrate produced in Russia.
  • Russian polyvinylchloride is subject to anti-dumping duties imposed by India and China.
  • Mexico imposes anti-dumping duties ranging from 15 percent to 36.8 percent on various steel products (rolled carbon steel sheets, rolled steel sheets, cold-rolled steel sheets and hot-rolled steel sheets) from Russia.
  • China imposes anti-dumping measures ranging from 3 percent to 159 percent on six different products manufactured in Russia (polyvinylchloride, caoutchouc, trichloroethylene, chloropropylene oxide, polyamides in primary forms and transformer steel).
        

Russia's WTO Membership means that Russian exporters subject to such investigations in foreign markets are entitled to certain specified standards of treatment and procedural due process. WTO rules impose high evidentiary burdens on investigating authorities in importing countries in order to determine the existence of dumping and/or subsidization, as well as "injury" to the local industry, before any extra duties can be imposed. Furthermore, investigating authorities are subject to broad disclosure requirements which enable exporters to know the evidence on the record and defend their interests. If Russian companies believe that they have not been treated fairly or in accordance with due process by foreign investigating authorities, WTO rules could be invoked by the Russian government, on behalf of affected Russian companies, in order to challenge the other Member.

Binding Dispute Settlement and Possible Retaliation
If barriers to trade are maintained in foreign markets in a WTO-inconsistent manner, Russian exporters can lobby the Russian government to resort to the WTO's binding dispute settlement system in order to challenge such barriers. Although dispute settlement takes place between Member governments, private companies and their advisors are often heavily involved throughout the process so as to fully and accurately represent their interests in the proceedings. Any failure by foreign governments to bring their domestic measures into compliance with the rulings of the WTO could subject them to retaliatory trade sanctions by Russia.

Conclusion
Since businesses are the main beneficiaries of the WTO, they are often the main driving force within the organization. The gains from Russia's membership in the WTO for Russian exporters will largely depend on the knowledge and effective use of the WTO mechanisms mentioned above, and on the focused action of Russian exporters.


This Client Alert is provided for your convenience and does not constitute legal advice. It is prepared for the general information of our clients and other interested persons. This Alert should not be acted upon in any specific situation without appropriate legal advice, and it may include links to websites other than the White & Case website. White & Case LLP has no responsibility for any websites other than its own, and does not endorse the information, content, presentation or accuracy, or make any warranty, express or implied, regarding any other website.

This Client Alert is protected by copyright. Material appearing herein may be reproduced or translated with appropriate credit.

© 2012 White & Case LLP