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TWN Info Service on WTO and Trade Issues
4 March 2022
Third World Network
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Ukraine seeks Russia’s suspension from WTO due to Moscow’s invasion
Published in SUNS #9527 dated 4 March 2022

Geneva, 3 Mar (D. Ravi Kanth) – Ukraine has urged the members of the World Trade Organization to “consider further steps with the view of suspending the Russian Federation’s participation in the WTO for its violation of the purpose and principles of this organization”, in what appears to be a call that was earlier echoed by two representatives of the US Congress, said people familiar with the development.

In its letter to the Chair of the WTO’s General Council, Ambassador Didier Chambovey from Switzerland, on 2 March, the Ukrainian trade envoy to the WTO, Ambassador Yevheniia Filipenko, wrote that “following Russia’s invasion, the government of Ukraine severed its diplomatic relations with the aggressor state, decided to impose a complete embargo and no longer apply the WTO agreements in its relations with the Russian Federation.”

Ukraine said it considers that “these steps are consistent with its national security rights under, inter alia, Article XXI of the GATT 1994, Article XIVbis (of the ) GATS, and Article 73 of the TRIPS Agreement.”

It urged the General Council (GC) chair to communicate Ukraine’s decision to the Council for Trade in Goods, the Council for Trade in Services, the TRIPS Council, as well as to all WTO members.

Last week, US Congress members Earl Blumenauer and Lloyd Doggett urged in their bill to kick Russia out of the WTO.

The United States seems determined to ratchet-up its trade and economic war against Russia and China on different fronts, while transforming the World Trade Organization into a negotiating pulpit for pursuing sectoral trade agreements on a non-MFN basis, said people familiar with the development.

A slew of legislation currently under consideration in the US Congress portends that Washington and its allies could transform the WTO into a plurilateral trade organization.

In response to Russia’s launch of its “special military operation” against Ukraine a week ago, the US appears to have intensified its economic and trade war against Russia in particular, and China in general, according to the latest Congressional bills that are being considered.

The range of financial sanctions including denying the benefits of the SWIFT (the Society for Worldwide Interbank Financial Telecommunication) system as well as freezing hundreds of billions of dollars of Russian funds held in the US and other countries appears like an economic and trade war as juxtaposed to the Russian military actions in Ukraine at this juncture.

The WTO Director-General Ms Ngozi Okonjo-Iweala said on 2 March that “at the WTO, we have watched this tragedy in Ukraine unfold with disbelief and the hope that it would have been peacefully resolved.”

The WTO is concerned “about the trade implications of the conflict, especially trade in agriculture and food products and the rise in energy prices and their effects on the impacted populations,” she said.

As reported in SUNS #9526 dated 3 March 2022, the chair of the Senate Finance Committee Ron Wyden has introduced the “No Most Favored Nation Trading with Russia Act” in response to Russian President Vladimir Putin’s continued, unprovoked invasion of Ukraine.

According to a press release issued by Mr Wyden on 2 March, “the bill revokes Russia’s Permanent Normal Trade Relations (PNTR) status and provides the president the power to raise tariffs on a host of products.”

The press release says that “the US has provided the PNTR status to Russia since 2012, just after that nation joined the World Trade Organization,” suggesting, “that status allows Russian goods to be sold in the United States with much lower tariffs than goods from nations without PNTR status.”

Mr Wyden said that the bill is similar to legislation introduced by House representatives Mr Earl Blumenauer and Mr Lloyd Doggett last week.

Interestingly, the bill introduced by Congress members Blumenauer and Doggett seeks to remove from the WTO countries that invade other sovereign countries.

The process “would start with a presidential determination that a government “has committed an act of aggression in violation of international law, that the President does not consider to be a legitimate act of self-defense, against a WTO member”,” says Mr Simon Lester, a former WTO official, in a post on his International Economic Law and Policy (IELP) blog.

REVOKING TRADE PRIVILEGES

Another bipartisan legislation introduced by the former US Trade Representative Ambassador Rob Portman and Senator Ben Cardin seeks to “revoke free trade privileges from Russia and other countries that invade sovereign nations.”

The two senators explained on 2 March that “the No Trading with Invaders Act would automatically revoke Permanent Normal Trade Relations (PNTR) for any Communist, or formerly Communist, country that commits an act of aggression against another member of the World Trade Organization.”

According to this bipartisan legislation, the US President shall consider an act of aggression in violation of international law by a subject country or territory against a WTO member to include (1) an invasion of the territory of the WTO member by the armed forces or proxy forces of the subject country or territory; (2) the occupation of the territory of the WTO member by the armed forces or proxy forces of the subject country or territory; and (3) any other armed attack by the armed forces or proxy forces of the subject country or territory on the WTO member.

TARGETING CHINA THROUGH SECTION 301

In addition to the above legislation, the Biden administration is considering intensifying its unfinished trade war with China apparently over its industrial subsidies.

The US measures against China in the coming months include “a new investigation into Beijing’s support for sectors it considers strategic, using Section 301 of the Trade Act,” according to a report in the Wall Street Journal on 3 March.

Apparently, the US is seeking to target China’s alleged subsidy programs for semiconductors, artificial intelligence, 5G (fifth generation technology standard for broadband cellular networks), and electric vehicles.

The US reckons that it could target certain practices of a trading partner and take punitive actions once it determines that the practices deployed by the trading partner violate trade law.

A World Trade Organization dispute panel upheld the WTO-consistency of Section 301 of the Trade Act of 1974 in a dispute raised by the European Union in January 2000.

MOVES TO NEGOTIATE SECTOR-SPECIFIC AGREEMENTS

Aside from the likely punitive measures against Russia and China highlighted above, the US Senate wants the US administration to pursue sectorial agreements at the WTO, according to legislation introduced by Senate Finance Committee members Rob Portman (R-Ohio) and Chris Coons (D-Del).

The legislation would authorize the US administration to negotiate sector-specific agreements within the World Trade Organization, according to a report in Washington Trade Daily on 28 February.

The agreements – in areas like environmental goods, services and digital trade – would not be subject to the most- favored nation (MFN) requirements.

That means that WTO members not part of the agreement would not be able to receive the benefits.

The lack of MFN status could create an incentive for more countries to participate in the negotiations and join the agreements, the senators said, according to the WTD report.

The Trading System Preservation Act would direct the US Trade Representative to negotiate sectoral agreements within the WTO with like-minded countries.

The proposed act intends to reinvigorate the WTO’s negotiating function, which the senators said has been hamstrung by a small group of countries blocking negotiations.

“The World Trade Organization has a lot of value to the United States, but it’s disappointing that at the WTO, the United States has lost its ability to negotiate,” commented Sen. Portman, who served as USTR during the George W Bush administration.

The bill would allow the USTR to negotiate new agreements, “and by limiting those agreements to a subset of WTO members, it means we can actually make progress on the development of new rules to combat non-market practices, and open new markets to US exporters, without being stymied by a veto from countries which do not share the same interest in upholding a rules-based trading system.”

Non-market economies like China have prevented WTO members from reaching agreement on new, high-standard trade rules that would discipline their anti-competitive practices, according to the senators.

In short, the proposed US actions could deny any role for developing countries to pursue their “bread-and-butter” issues at the WTO, which may negotiate only sectoral agreements of interest to the US industry.

The developed countries have always talked about the rules-based system but apparently, this is meant only for the developing countries, while the developed countries themselves, particularly the US, can make or break rules to suit their own interests.

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