Russian Federation

How severe is the food security challenge?

Terence P. Stewart · May 24, 2022 · food security · European Union, Russian Federation, Ukraine · No Comments

The lead story in the New York Times on May 24, 2022 had the following headline — Live Updates: World Leaders Call for Action to Free Trapped Ukrainian Food. https://www.nytimes.com/live/2022/05/24/world/russia-ukraine-war (“Russia’s blockade of seaports and attacks on grain warehouses have choked off one of the world’s breadbaskets. Western officials are accusing Russia of using food as a weapon.”). The article reviews presentations made at the World Economic Forum this week by European Commission President Ursula von der Leyen and UN World Food Programme Executive Director David Beasley.

EC President von der Leyen’s statement at Davos is copied in part below (section dealing with food security) and includes both the EU view on the challenges being faced as well as steps the EU is taking to try to reduce the severity of the food insecurity crisis. See European Commission, Special Address by President von der Leyen at the World Economic Forum, Davos, 24 May 2022, https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_22_3282.

“We are witnessing how Russia is weaponising its energy supplies. And indeed, this is having global repercussions. Unfortunately, we are seeing the same pattern emerging in food security. Ukraine is one of the world’s most fertile countries. Even its flag symbolises the most common Ukrainian landscape: a yellow field of grain under a blue sky. Now, those fields of grain have been scorched. In Russian-occupied Ukraine, the Kremlin’s army is confiscating grain stocks and machinery. For some, this brought back memories from a dark past – the times of the Soviet crop seizures and the devastating famine of the 1930s. Today, Russia’s artillery is bombarding grain warehouses in Ukraine – deliberately. And Russian warships in the Black Sea are blockading Ukrainian ships full of wheat and sunflower seeds. The consequences of these shameful acts are there for everyone to see. Global wheat prices are skyrocketing. And it is the fragile countries and vulnerable populations that suffer most. Bread prices in Lebanon have increased by 70%, and food shipments from Odessa could not reach Somalia. And on top of this, Russia is now hoarding its own food exports as a form of blackmail – holding back supplies to increase global prices, or trading wheat in exchange for political support. This is: using hunger and grain to wield power.

“And again, our answer is and must be to mobilise greater collaboration and support at the European and global level. First, Europe is working hard to get grain to global markets, out of Ukraine. You must know that there are currently 20 million tons of wheat stuck in Ukraine. The usual export was 5 million tons of wheat per month. Now, it is down to 200,000 to 1 million tons. By getting it out, we can provide Ukrainians with the needed revenues, and the World Food Programme with supplies it so badly needs. To do this, we are opening solidarity lanes, we are linking Ukraine’s borders to our ports, we are financing different modes of transportation so that Ukraine’s grain can reach the most vulnerable countries in the world. Second, we are stepping up our own production to ease pressure on global food markets. And we are working with the World Food Programme so that available stocks and additional products can reach vulnerable countries at affordable prices. Global cooperation is the antidote against Russia’s blackmail.

“Third, we are supporting Africa in becoming less dependent on food imports. Only 50 years ago, Africa produced all the food it needed. For centuries, countries like Egypt were the granaries of the world. Then climate change made water scarce, and the desert swallowed hundreds of kilometres of fertile land, year after year. Today, Africa is heavily dependent on food imports, and this makes it vulnerable. Therefore, an initiative to boost Africa’s own production capacity will be critical to strengthen the continent’s resilience. The challenge is to adapt farming to a warmer and drier age. Innovative technologies will be crucial to leapfrog. Companies around the world are already testing high-tech solutions for climate-smart agriculture. For example, precision irrigation operating on power from renewable; or vertical farming; or nanotechnologies, which can cut the use of fossil fuels when producing fertilisers.

“Ladies and Gentlemen,

“The signs of a growing food crisis are obvious. We have to act urgently. But there are also solutions, today and on the horizon.

“This is why – again, an example of cooperation – I am working with President El-Sisi to address the repercussions of the war with an event on food security and the solutions coming from Europe and the region. It is time to end the unhealthy dependencies. It is time to create new connections. It is time to replace the old chains with new bonds. Let us overcome these huge challenges in cooperation, and that is in the Davos spirit.”

The New York Times article provides excerpts from Mr. Beasley’s comments. “’It’s a perfect storm within a perfect storm,’ said David Beasley, the executive director of the World Food Program, a United Nations agency. ‘If we don’t get the port of Odesa open, it will compound our problems.’ Calling the situation ‘absolutely critical,’ he warned, ‘We will have famines around the world.’”

The UN World Food Programme has a press release on its webcite that addresses the food security crisis caused by the war in Ukraine. See UN World Food Programme, Failing to open Ukrainian ports means declaring war on global food security, WFP Chief warns UN Security Council, 19 May 2022, https://www.wfp.org/news/failing-open-ukrainian-ports-means-declaring-war-global-food-security-wfp-chief-warns-un. The release is copied below.

“NEW YORK – The UN World Food Programme (WFP) Executive Director, David Beasley, addressed the United Nations Security Council today on the impact of the war in Ukraine on global food security. Here are selected highlights from his remarks:

“’We truly are in an unprecedented crisis. Food pricing is our number one problem right now, as a result of all this perfect storm for 2022. But by 2023 it very well will be a food availability problem. When a country like Ukraine that grows enough food for 400 million people is out of the market, it creates market volatility, which we are now seeing.

“’In 2007 and 2008, we all witnessed what happened when pricing gets out of control. There were over 40 nations with political unrest, riots and protests. We’re already seeing riots and protesting taking place as we speak. Sri Lanka, Indonesia, Pakistan, Peru… We’ve seen destabilizing dynamics already in the Sahel from Burkina Faso, Mali, Chad… these are only signs of things to come. And we have enough historical experience to understand the consequences when we failed to act. When a nation that is the breadbasket of the world becomes a nation with the longest bread lines of the world, we know we have a problem.

“’As the Secretary General clearly spoke, we’re now reaching about 4 million people inside Ukraine. In fact, we’re scaling up to 900,000 on cash-based transfers as we speak. That will put liquidity back into the marketplace, but that does not solve the problem outside of Ukraine. That’s why we’ve got to get these ports running. We’ve got to empty the silos so that we can help stabilize the food crisis that we’re facing around the world.

“’Truly, failure to open those ports in Odesa region will be a declaration of war on global food security. And it will result in famine and destabilization and mass migration around the world.

“’Leaders of the world, it’s time that we do every possible thing that we can to bring the markets to stability because things will get worse, but I do have hope. We averted famine. We averted destabilization over the past many years because many of you in this room stepped up and we delivered. And we can do that again. But we’ve got things that have to happen. Getting the ports open, stabilizing the markets, increasing production around the world. We’ll get through this storm, but we must act and we must act with urgency.’”

See also, reliefweb, War in Ukraine: WFP renews call to open Black Sea ports amid fears for global hunger, originally posted on May 20, 2022, updated May 22, 2022, https://reliefweb.int/report/world/war-ukraine-wfp-renews-call-open-black-sea-ports-amid-fears-global-hunger#:~:text=The%20World%20Food%20Programme%20(WFP,of%20lives%20%E2%80%93%20around%20the%20world (“In impassioned pleas to the specially convened ‘call to action’ group on 18 May, attended by US Secretary of State Antony Blinken and the UN Secretary-General António Guterres, Beasley added: ‘The silos are full. Why are the silos full? Because the ports are not operating … It is absolutely essential that we allow these ports to open because this is not just about Ukraine, this is about the poorest of the poor around the world who are on the brink of starvation as we speak’”.).

As reviewed in earlier posts, there are production issues on grains in a number of other countries flowing from heat or draught or low inventories. Challenges in other countries are complicating the ability to substitute products from other countries for the large volumes not being shipped from Ukraine. See May 16, 2022: Wheat prices spike following Indian export ban, https://currentthoughtsontrade.com/2022/05/16/wheat-prices-spike-following-indian-export-ban/; May 15, 2022: India bans exports of wheat, complicating efforts to address global food security problems posed by Russia’s war in Ukraine, https://currentthoughtsontrade.com/2022/05/15/india-bans-exports-of-wheat-complicating-efforts-to-address-global-food-security-problems-posed-by-russias-war-in-ukraine/; April 19, 2022: Recent estimates of global effects from Russian invasion of Ukraine, https://currentthoughtsontrade.com/2022/04/19/recent-estimates-of-global-effects-from-russian-invasion-of-ukraine/; April 19, 2022: Recent estimates of global effects from Russian invasion of Ukraine, https://currentthoughtsontrade.com/2022/04/19/recent-estimates-of-global-effects-from-russian-invasion-of-ukraine/.

While many countries are expressing the desire to help out in the crisis and while the WTO and other multilateral organizations are taking or talking about some actions that are available to them, the crisis is likely to significantly worsen in the coming months as there is little likelihood that Russia will permit the reopening of the Black Sea ports to Ukrainian wheat and other products. The crisis will likely exceed the level of the challenges from the 2007-2008 period and will reduce global GDP growth, including forcing some areas into recession, will increase starvation and malnurishment and result in increased political instability in a number of countries around the world. Expect larger parts of the global community to view Russia as a pariah state. While trade is an important part of the answer, the war started by Russia is not controllable by global trade rules in fact. We are in for a challenging period with much of the harm born by those least able to handle the harm being inflicted.

Less than five weeks to the WTO’s 12th Ministerial Conference — what are likely deliverables?

Terence P. Stewart · May 11, 2022 · 12th Ministerial Conference · European Union, India, Russian Federation, South Africa, United Kingdom, United States · No Comments

On May 9-10, the WTO held a General Council meeting which followed an informal Trade Negotiations Committee (TNC) and Heads of Delegation meeting from May 4. The meetings resulted in a series of news releases from the WTO focusing on the Director-General’s views on areas for focus for the upcoming Ministerial as well as initial reactions from Members to the paper put forward following negotiations between the European Union, United States, India and South Africa on what, if any, modifications to TRIPS obligations were needed to help WTO Members address the COVID-19 pandemic. See WTO News Release, General Council, Members welcome Quad document as basis for text-based negotiations on pandemic IP response, 10 May, 2022, https://www.wto.org/english/news_e/news22_e/gc_10may22_e.htm; WTO News Release, General Council, DG Okonjo-Iweala urges WTO members to “meet the many challenges of our time”, 9 May 2022, https://www.wto.org/english/news_e/news22_e/gc_09may22_e.htm; WTO News Release, Trade Negotiations Committee, DG Okonjo-Iweala: Members can deliver results at MC12 despite challenging circumstances, 4 May 2022, https://www.wto.org/english/news_e/news22_e/tnc_04may22_e.htm.

The Director-General highlighted at the May 4 informal TNC and Heads of Delegation meeting a possible list of achievables by the 12th Ministerial Conference in the difficult political and economic environment that Members find themselves in.

“One potential MC12 deliverable is a WTO response to the current and future pandemics, including intellectual property issues, where members will discuss possible elements of a compromise at a time to be determined by the Chair of the TRIPS Council, the DG said. Other potential deliverables include concluding an agreement on fisheries subsidies, achieving outcomes on agriculture and making progress on reforming the WTO in addition to various initiatives members are taking forward, she added.

“The Director-General pointed to the threat of a global crisis in food security, with prices for food, fertilizer and energy rising sharply from already high levels. She suggested members could use MC12 as a platform to take actions on these issues separately from the ongoing agriculture negotiations.”

A WTO Response to the COVID-19 Pandemic

The WTO achieving a response to the COVID-19 pandemic became more likely with the release of the draft text from the EU, US, India and China. I reviewed the main changes from the earlier draft in a recent post. May 4, 2022: Access to vaccines – the public release of the text from the U.S., EU, India and South Africa to the full WTO Membership for consideration by the Council for Trade Related Aspects of Intellectual Property Rights, https://currentthoughtsontrade.com/2022/05/04/access-to-vaccines-the-public-release-of-the-text-from-the-u-s-eu-india-and-south-africa-to-the-full-wto-membership-for-consideration-by-the-council-for-trade-related-aspects-of-intellectual-prop/. While Members were not ready to sign off on the draft language and were awaiting instructions from capitals on positions to take, it is clear that the text will be the basis for negotiations. Moreover, as reflected in the WTO press release on the May 10 General Council session, China indicated it would not avail itself of the flexibilities on vaccines in the proposal. As reviewed in my May 4th post, China’s action will facilitate agreement on the text as it will permit adoption of language that makes the provisions available to all developing countries but encourages countries with strong export capabilities to not avail themselves of the provisions. China has self-identified itself as a developing country, but has been the largest manufacturer and exporter of COVID-19 vaccines, The U.S. and EU had drafted language that would have excluded China’s eligibility (as the only developing countries with exports of more than 10% of global totals in 2021). China’s position permits broader eligibility, hence avoiding what China would view as discriminatory language aimed at it. The implicit quid pro quo for using the broader language was China indicating it would not utilize the provisions.

However, there are remaining issues needing resolution in the draft text including whether diagnostics and therapeutics will be included in the provisions immediately versus subject to a separate determination to include within six months. And there is the broader set of issues including transparency, export restrictions, trade facilitation important to many countries as part of any WTO response to the pandemic. The European Union reviewed its views on the broader issues during the General Council meeting. See European Union interventions at the General Council, 09-10 May 2022, https://www.eeas.europa.eu/delegations/world-trade-organization-wto/european-union-interventions-general-council-09-10-may_en?s=69,

“Item 4. A. WTO RESPONSE TO THE PANDEMIC – REPORT BY THE CHAIR

“The European Union thanks the Facilitator for his report.

“The European Union has been a strong proponent of the WTO response to the pandemic from the onset of discussions that members had in this forum. We argued for a holistic approach, which would encompass all the necessary elements of the response, including intellectual property.

“Now that we have made a substantial step forward in the TRIPS Council, it is high time we had a fresh look at other elements of the pandemic, such as transparency, export restrictions, or trade facilitation. The “strategic pause” allowed us to reflect deeper on how to move the process forward and arrive at a multilateral outcome demonstrating that the WTO can meaningfully contribute to a response to the crisis and learn from it. In that regard, we also note the statement of Brazil in document WT/GC/W/845 on various aspects of the response to the pandemic.

“The European Union and the United States have invested great efforts into allowing progress towards a credible outcome. We have reached a common understanding on the minimum or the landing zone that could be the final outcome in a number of areas, acknowledging that other Members have additional issues of interest that they would like to see reflected in the text. Our new compromise paper presents the essentials of the Walker text, which we value the most, in a condensed format. We are encouraged by the positive feedback we have received so far and we will take account of the comments received.

“The new paper attempts to propose a balance that would be acceptable to all members. Even if slightly shorter on ambition than the Walker text, we believe that it still maintains the credibility of the WTO.

“As MC12 will start in a month time, we do not have the luxury of time. Our collective interest is to engage in a spirit of self-restraint and in a consensus-oriented mode.

“We are hopeful that all members will be able to engage constructively so that we could all resume and promptly finalize the negotiating process before Ministers arrive in Geneva.“

To get to a final agreement on a WTO response to the pandemic will require significant effort, but is looking hopeful at the moment.

Agriculture negotiations

While there has been a large agenda of items being discussed in agriculture, there are several possible deliverables besides a work program going forward. First, there has been agreement on tariff rate quota administration. See WTO News Release, General Council, General Council endorses final decision on Bali tariff rate quota underfill mechanism, 31 March 2022, https://www.wto.org/english/news_e/news22_e/gc_31mar22_e.htm; WTO Committee on Agriculture, REVIEW OF THE OPERATION OF THE BALI DECISION ON TRQ ADMINISTRATION REPORT BY THE CHAIRPERSON TO THE GENERAL COUNCIL, Addendum, G/AG/32/Add.1 (29 March 2022). G/AG/32/Add.1 is enclosed below.

32A1

It is unlikely that other aspects of the agriculture reform program will have concrete results by the 12th Ministerial with the possible exception of not blocking exports of agricultural goods to the UN World Food Programme. See WTO News Release, Agriculture Committee, MC12 outcome must help end hunger, improve food security, says chair, 27 April 2022, https://www.wto.org/english/news_e/news22_e/agng_02may22_e.htm; WTO, State of Play 13 December 2021, Agriculture negotiations, https://www.wto.org/english/thewto_e/minist_e/mc12_e/briefing_notes_e/bfagric_e.htm (topics include Public stockholding for food security purposes, Domestic support, Cotton, Market access, Special safeguard mechanism, Export prohibitions or restrictions, Export competition, Transparency).

Specifically, it is not clear that much progress has been made in 2022 on any of the topics being pursued. The last draft text from the Chair that has been released publicly dates from November 2021. COMMITTEE ON AGRICULTURE IN SPECIAL SESSION, REPORT BY THE CHAIRPERSON, H.E. MS GLORIA ABRAHAM PERALTA, TO THE TRADE NEGOTIATIONS COMMITTEE, TN/AG/50 (23 November 2021). The document is embedded below and basically lays out a work program on each topic going forward with an annex exempting food purchases by the UN World Food Programme from any export restrictions. Presumably some modified version of the November 2021 draft text will be presented to Ministers at the `2th Ministerial Conference.

Food security flowing from Russian invasion of Ukraine

As reviewed in prior posts and reflected in the various WTO news releases, there is a current food security crisis flowing from the Russian invasion of Ukraine. See, e.g., April 19, 2022: Recent estimates of global effects from Russian invasion of Ukraine, https://currentthoughtsontrade.com/2022/04/19/recent-estimates-of-global-effects-from-russian-invasion-of-ukraine/; March 30, 2022: Food security challenges posed by the Russian invasion of Ukraine, https://currentthoughtsontrade.com/2022/03/30/food-security-challenges-posed-by-the-russian-invasion-of-ukraine/; WTO News Release, Agriculture Committee, MC12 outcome must help end hunger, improve food security, says chair, 27 April 2022, https://www.wto.org/english/news_e/news22_e/agng_02may22_e.htm. Multilateral organizations have been calling for swift action to address the food security concerns. WTO News Release, WTO and other organizations, World Bank, IMF, WFP and WTO call for urgent coordinated action on food security, 13 April 2022, https://www.wto.org/english/news_e/news22_e/igo_13apr22_e.htm.

At this week’s General Council meeting there were two agenda items that addressed the food security issue. Item 8 and item 12. See WTO General Council, Proposed Agenda, WT/GC/W/846, 6 May 2022. Item 8 dealt with a document entitled “Joint Statement on Open and Predictable Trade in Agricultural and Food Products” and was presented by the United Kingdom. Signatories to the document included Albania; Australia; Canada; Chile; Costa Rica; European Union; Georgia; Iceland; Israel; Japan; Republic of Korea; Liechtenstein; Mexico; Republic of Moldova; Montenegro; New Zealand; North Macedonia; Norway; Paraguay; Singapore; Switzerland; The Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu; Ukraine; United Kingdom and United States (51 WTO Members). The document is embedded below.

248

A number of countries have imposed export restrictions which worsen the pricing spikes being experienced on key agricultural commodities where Ukraine is a major exporter. The action by the 51 WTO Members is an important step whether or not it will generate a consensus document by the 12th Ministerial Conference meeting or not.

The EU’s comments on item 8 are likely representative of those supporting maintaining open markets for agricultural products at the present time.

“Item 8 – JOINT STATEMENT ON OPEN AND PREDICTABLE TRADE IN AGRICULTURAL AND FOOD PRODUCTS – REQUEST FROM THE UNITED KINGDOM

“The European Union would like to thank the United Kingdom and other co-sponsors for their support in raising attention in the WTO to the global food security crisis that we see emerging.

“The crisis triggered by Russia’s unprovoked, illegal and unjustified aggression against Ukraine, is not only a dramatic humanitarian crisis for Ukraine. It has increased food insecurity in many developing countries around the world.

“We are witnessing a dramatic surge in food, fertilizer and energy prices, which exceed the levels reached during the last major food crisis in 2011, as well as risks to supply of staple commodities with immediate impacts on world food security and nutrition.

“Let me be clear that any negative impact on agricultural production in Ukraine, and therefore on global food security, prices or availability of commodities on the world market is a result of the destabilising effects of the Russian aggression and military activities on Ukrainian soil.

“The EU considers that the emerging food security challenges should be addressed as a priority at the 12th WTO Ministerial Conference.

“We hope this plurilateral statement may help in focussing attention on the crucial importance of responding to these challenges.

“The discussions in the recent food security seminar, including contributions from FAO, WFP and other organisations, were also useful.

“The plurilateral statement is also a response to the call of Director-General Okonjo-Iweala for coordinated actions in areas like export restrictions on food, and transparency, including transparency of stocks.

“We call for unanimous support for a decision exempting World Food Programme humanitarian purchases from export restrictions. This would facilitate sourcing supplies by the WFP in these critical times. The EU expects the WTO and its members to act at this critical moment in order to help ensure open trade, strong rules, resilient markets, and less trade distortions.

“The EU will remain engaged in negotiations towards MC12 for outcomes, which will provide a tangible response to the food security challenges.“

European Union interventions at the General Council, 09-10 May 2022, https://www.eeas.europa.eu/delegations/world-trade-organization-wto/european-union-interventions-general-council-09-10-may_en?s=69

Item 12 was a topic raised by the Russian Federation in its submission of 16 March 2022 (WT/GC/245) in which it alleges that the food security and other supply chain problems flow from sanctions imposed on Russia by various WTO members. See COMMUNICATION FROM THE RUSSIAN FEDERATION, WT/GC/245 (16 March 2022). The document is embedded below.

WTGC245

The countries imposing sanctions on Russia strongly disagree with Russia’s characterization of the causes for the food security challenge as the EU’s intervention at the General Council meeting makes clear.

“Item 12 – TRADE-DISRUPTIVE PRACTICES OF CERTAIN MEMBERS AND THEIR IMPLICATIONS FOR THE WTO – COMMUNICATION FROM THE RUSSIAN FEDERATION (WT/GC/245)

“Let us be clear from the outset: it is the Russian army that has invaded the Ukrainian territory. We strongly condemn the illegal, unprovoked, unjustifiable aggression of Ukraine by the Russian Federation, which has brought catastrophic loss of life and human suffering in Ukraine and poses a direct threat to the European and international security order.

“The Russian Federation’s hostile act is a blatant violation of international law and the rules-based international order, the consequences of which have already extended well beyond Ukraine’s borders.

“We are greatly concerned about the global trade consequences of the aggression; in particular as regards the supply of a number of commodities, including oil and gas, staple foods, and critical minerals.

“The European Union also strongly specifically condemns Russia’s actions targeting Ukraine’s food supply and production. Credible reports highlighted that Russian forces are attacking and plundering grain silos in Ukraine as well as damaging and removing Ukrainian farm equipment. Furthermore, the closure of the Black Sea by Russian armed forces effectively blocks the exports of grains via Ukrainian seaports.

“The food security situation is already dramatic for those directly involved in Ukraine. The impact of the Russian aggression is however not just restricted to Ukraine and its citizens but is seriously challenging food availability in some vulnerable net food-importing countries in particular. Russia’s war of aggression in Ukraine is thus jeopardizing the food supply to some of the most vulnerable parts of the world, particularly in developing countries, and pushing millions of people into food insecurity.

“The Russian Federation has now embarked on a further campaign of disinformation in the context of the WTO. In the face of this, the European Union, alongside our partners, deems it important to set the record straight for the benefit of the membership.

“In a transparent manner, the European Union have issued a Joint Statement together with partners in relation to the trade measures that the European Union and other members are adopting towards Russia, including measures that deny the Russian Federation the benefits which the WTO Agreement provides, such as the benefit of the most-favoured nation treatment. The measures include export restrictions and import restrictions targeting the Russian Federation.

“The European Union considers these actions necessary to protect its essential security interests within the meaning of the applicable security exceptions of the WTO Agreement. The purpose of these measures is to restore peace and security, in full respect of Ukraine’s territorial integrity, sovereignty and independence within its internationally recognised borders. Therefore, these measures are fully consistent with WTO rules.

“The European Union would like to underline that the EU’s sanctions do not target the agricultural sector of the Russian Federation. The sanctions are primarily directed at the Russian Government, the financial sector and the economic elites. They target the ability to finance the Russian aggression against Ukraine and its people.

“Therefore, the European Union, alongside our partners, strongly condemns Russia’s attempts at putting the blame on international sanctions for the global food security crisis that is directly caused by Russia’s aggression against Ukraine and its people.

“In this context, we are committed to helping Ukraine cope with the trade consequences of the aggression. We will seek to facilitate access and transit for imports from Ukraine to our markets and encourage Members to do likewise – including by eliminating tariffs and other restrictions to imports, facilitating the use of infrastructure and facilitating customs procedures in a manner commensurate with their capacity and consistently with WTO rules.

“The European Union will continue to provide humanitarian aid to alleviate the suffering of Ukrainian civilians by securing their access to basic goods and services, notably food. The European Union will also help Ukrainian farmers to continue planting and growing cereals and oilseeds, much needed for themselves and for the world, and to facilitate their exports.

“We call on the Russian Federation to immediately stop its military aggression in Ukraine, which is also the only way to stop the humanitarian and food security crisis.“

European Union interventions at the General Council, 09-10 May 2022, https://www.eeas.europa.eu/delegations/world-trade-organization-wto/european-union-interventions-general-council-09-10-may_en?s=69.

A number of WTO Members are providing temporary duty free treatment to goods from Ukraine besides the EU — Canada and U.K.. The U.S. has removed Section 232 tariffs on steel from Ukraine for the next year as well.

The EU is working to facilitate movement of Ukrainian agricultural products by land through EU member states. But the main challenges are the blockage of Black Sea ports by Russia and the reported theft of agricultural products and equipment from Ukrainian farms and depots. See, e.g., CNN, Russians steal vast amounts of Ukrainian grain and equipment, threatening this year’s harvest, May 5, 2022, https://www.cnn.com/2022/05/05/europe/russia-ukraine-grain-theft-cmd-intl/index.html; Voice of America, Russian Blockade of Ukrainian Sea Ports Sends Food Prices Soaring, May 7, 2022, https://www.voanews.com/a/russian-blockade-of-ukrainian-sea-ports-sends-food-prices-soaring/6561914.html; Politico, EU plans to help Ukraine’s food exports dodge Black Sea blockade, EU farm chief warns Russia wants to portray itself as feeding the poor, while it destroys Ukraine’s farmland. May 10, 2022, https://www.politico.eu/article/eu-plans-to-boost-ukraines-food-exports-black-sea-blockade/.

While many WTO Members will push for a WTO decision to bolster food security, it is unlikely that Russia and those engaging in export restraints will permit a consensus decision.

Fisheries Subsidies

While many Members and the WTO Director-General talk about delivering an agreement on fisheries subsidies, there has not been a lot of progress in recent months according to WTO news releases on meetings to review the issues. See, e.g., WTO News Release, Negotiations on Fisheries Subsidies, Chair of fisheries subsidies negotiations reports on consultations with members, 15 February 2022, https://www.wto.org/english/news_e/news22_e/fish_15feb22_e.htm.

After more than 21 years of negotiations, there is obviously a feeling that Members need to reach agreement. However, considering the entrenched positions of some and the current geopolitical situation, any agreement is likely to be modest in actual effect. I have reviewed developments in the negotiations in prior posts. See, e.g., https://www.wto.org/english/news_e/news22_e/fish_15feb22_e.htm.

WTO Reform

Much has been written on WTO reform in recent years. What is important to WTO Members varies although most support the need for reform. Changes to reinvigorate the negotiating function, improving transparency, agricultural reform, addressing dispute settlement concerns of the U.S. and others, addressing industrial subsidies (and subsidies more broadly), state-owned and state-invested enterprises, problems of global excess capacity in various industries, special and differential treatment, compatability of state-directed economies with WTO rules are just a handful of issues important to some Members. I have addressed some of these topics in prior posts. See, e.g., April 28, 2022: WTO Reform and the 12th Ministerial Conference — What Is likely on Dispute Settlement?, https://currentthoughtsontrade.com/2022/04/28/wto-reform-and-the-12th-ministerial-conference-what-is-likely-on-dispute-settlement/; April 23, 2022: The WTO’s upcoming 12th Ministerial Conference to be held in Geneva the week of June 13, 2022 — What can be expected in the current geopolitical environment?, https://currentthoughtsontrade.com/2022/04/23/the-wtos-upcoming-12th-ministerial-conference-to-be-held-in-geneva-the-week-of-june-13-2022-what-can-be-expected-in-the-current-geopolitical-environment/; February 14, 2022: Dispute Settlement Reform at the WTO — What Needs to Precede Negotiations?, https://currentthoughtsontrade.com/2022/02/14/dispute-settlement-reform-at-the-wto-what-needs-to-precede-negotiations/.

There will likely be a document identifying some areas for future negotiations with a timeline of the 13th Ministerial as the target date for completion of the analysis. The level of ambition agreed up is not likely to be high in the current environment. Certainly, there won’t be agreement on tackling core issues such as the need for convergence of economic systems. While I would expect dispute settlement to be included, there has been no real movement by Members to come to grips with underlying U.S. concerns. Without that happening, there will likely be little chance of an agreed reform package by the 13th Ministerial.

There could also be a decision on transparency at the 12th Ministerial. See, e.g., General Council agenda item 9 and JOB/GC/204/Rev.9 (document from 50 Members). The latest version of the proposed decision is embedded below. The key to movement is eliminating any “penalties” for noncompliance and addressing concerns of some developing countries and LDCs on the challenges they face (capacity building, assistance, etc.). Those seem to be addressed in the latest draft, so hopefully agreement can be reached in the coming weeks.

JobsGC204R9

Joint Statement Initiatives (JSIs)

As reviewed in prior posts, there has been good progress in a number of the JSIs which are essentially open plurilaterals. A few have results which will be presented at the 12th Ministerial. Others have ambitions to be concluded in the next year or so. See, e.g., April 23, 2022: The WTO’s upcoming 12th Ministerial Conference to be held in Geneva the week of June 13, 2022 — What can be expected in the current geopolitical environment?, https://currentthoughtsontrade.com/2022/04/23/the-wtos-upcoming-12th-ministerial-conference-to-be-held-in-geneva-the-week-of-june-13-2022-what-can-be-expected-in-the-current-geopolitical-environment/ (“There are a host of Joint Statement Initiatives that are at various stages of progress on a plurilateral basis, with India and South Africa raising objections to plurilateral agreements being part of the WTO without consensus agreement. See, e.g., April 14, 2022: Challenging China’s Trade Practices — What Role for the WTO?, https://currentthoughtsontrade.com/2022/04/14/challenging-chinas-trade-practices-what-role-for-the-wto/ (“Ongoing JSI include those on electronic commerce, investment facilitation for development, plastics pollution and environmentally sustainable plastics trade, services domestic regulation, informal working group on MSMEs, and trade and environmental sustainability. The WTO issues periodic press releases on developments in the talks. See, e.g., JOINT INITIATIVE ON E-COMMERCE, E-commerce negotiators seek to find common ground, revisit text proposals, 21 February 2022, https://www.wto.org/english/news_e/news22_e/jsec_23feb22_e.htm (hoping to have convergence on majority of issues by end of 2022)(86 WTO Members participating accounting for 90% of e-commerce trade including China, U.S. and most other major countries); INVESTMENT FACILITATION FOR DEVELOPMENT, Investment facilitation negotiators take steps to assess needs of developing countries, 15 February 2022, https://www.wto.org/english/news_e/news22_e/infac_23feb22_e.htm (looking to complete by end of 2022)(over 100 WTO Members participate including China and most developed countries, but not the U.S.); INFORMAL DIALOGUE ON PLASTICS POLLUTION AND ENVIRONMENTALLY SUSTAINABLE PLASTICS TRADE, Plastics dialogue emphasizes need for international collaboration, cooperation, 30 March 2022, https://www.wto.org/english/news_e/news22_e/ppesp_31mar22_e.htm (70 Members participate including China and most major developed countries but not the U.S.); Joint Initiative on Services Domestic Regulation, Negotiations on services domestic regulation conclude successfully in Geneva, https://www.wto.org/english/news_e/news21_e/jssdr_02dec21_e.htm (67 Members participated including China, the U.S. and other major developed countries); . MICRO, SMALL AND MEDIUM-SIZED ENTERPRISES (MSMES), Working group on small business welcomes three more members, 8 February 2022, https://www.wto.org/english/news_e/news22_e/msmes_08feb22_e.htm (94 participants including China and most major developed countries but not the U.S.).”).

India, Namibia and South Africa have raised issues with whether such plurilateral agreements can be made part of the WTO body of agreements without consensus. See THE LEGAL STATUS OF ‘JOINT STATEMENT INITIATIVES’ AND THEIR NEGOTIATED OUTCOMES, Revision, WT/GC/W/819/Rev.1 (30 April 2021). While that question will not likely be resolved at the 12th Ministerial Conference, important progress is being made on the JSIs.

Moratorium on Imposing Customs Duties on Electronic Transmissions

During prior Ministerial Conferences there was agreement both on Members holding off on non-violation nullification and impairment cases under the TRIPS Agreement and also agreement to extend the moratorium on imposing customs duties on electronic transmissions. WTO Members have already agreed to extend til the 13th Ministerial the ban on non-violation TRIPS cases. But a number of developing countries are seeking to end the moratorium on customs duties citing studies on loss of government revenue from the moratorium and the increased importance of electronic commerce.

Some Members have also expressed concern about the JSI on e-commerce in light of the ongoing work program on e-commerce within the WTO.

In the briefing note on e-commerce on the WTO webpage from January 11, 2022, the following is a discussion of activities in 2020 and 2021 on the topics.

“In summer 2020, WTO members put forward proposals on the implications of the moratorium, its scope, the definition of electronic transmissions and the implication of the moratorium on revenue loss for developing countries. This discussion is part of the broader developmental aspect of e-commerce: developing and least-developed countries face various challenges related to e-commerce, such as connectivity, infrastructure and capacity to implement policies related to e-commerce.

“The General Council continued to review progress in the Work Programme based on reports submitted by the chairs of the relevant WTO bodies. The General Council Chair convened a Structured Discussion under the Work Programme in July 2021. The discussion focused on three themes: electronic transmissions, imposition of internal non-discriminatory taxes on electronic transmissions, and e-commerce challenges and opportunities particularly in light of the COVID-19 pandemic.

“In a subsequent submission in November 2021, some members outlined that it is necessary to have more clarity on the definition of electronic transmissions, consensus on the scope of the moratorium and an understanding of the impact of the moratorium in order to enable the WTO members to take an informed decision at MC12 on whether or not to extend the moratorium on customs duties.

“In November 2021, a group of WTO members put forward a proposal that contains draft ministerial text for possible adoption by ministers at MC12 for the extension of the moratorium and continuing the reinvigoration of the work programme. Views of members vary and consultations led by the General Council chair continued ahead of the conference scheduled to start on 30 November.”

It is likely that the moratorium will be extended to the 13th Ministerial but it will likely be a late agreed topic and will be coupled with a “reinvigorated” WTO work program on e-commerce and a likely lack of agreement on the role of plurilaterals moving forward.

Conclusion

At a time of tremendous trade challenges globally, the WTO continues to struggle to demonstrate its relevance to addressing current issues. The large number of Members, the very different perspectives on what they look to the WTO to provide, the emergence of economically important Members with economic systems not really compatible with existing WTO rules, the consensus based system and many other factors make restoring relevance for many of the current challenges a daunting task. The geopolitical crisis flowing from Russia’s invasion of Ukraine has both expanded the challenges and made resolution through the WTO more difficult.

The WTO Director-General is urging Members to achieve results at the 12th Ministerial even if less ambitious than might have been possible in a different environment. As the above review suggests, a modest package is possible but not at all certain. There is very little time to close the gaps and get a meaningful package ready. Let’s hope that Members can rise to the occasion.

The WTO’s upcoming 12th Ministerial Conference to be held in Geneva the week of June 13, 2022 — What can be expected in the current geopolitical environment?

Terence P. Stewart · April 23, 2022 · 12th Ministerial Conference · European Union, Russian Federation, Ukraine, United States · No Comments

The COVID-19 pandemic has twice delayed the 12th Ministerial Conference from its original date in June 2020. Assuming the Ministerial Conference in fact takes place the week of June 13, 2022 (and isn’t delayed by a new surge in COVID-19 infrections or by other complications), there will have been a four and a half year delay from the 11th Ministerial Conference held in Buenos Aires in late 2017. Ministerial conferences are intended to be held every two years. Considering the challenges facing the World Trade Organization, many will be looking to see if this year’s Ministerial can help restore the WTO’s relevancy. The effort to get positive results at the 12th Ministerial Conference has been complicated by Russia’s invasion of Ukraine.

The list of challenging issues is long. Fisheries Subsidies is the only new multilateral agreement under discussion. While it is nearing the finish line, negotiations have been ongoing for more than twenty years, and it is unclear the level of ambition that will be agreed to if negotiations are concluded.

There are a range of agriculture issues that have been under discussion for years. The topics under discussion include public stockholding for food security purposes, domestic support (subsidies other than export subsidies), cotton, market access, special safeguard mechanism, export prohibitions or restrictions, export competition and transparency, See WTO Briefing Note, Agriculture Negotiations, State of Play 13 December 2021, https://www.wto.org/english/thewto_e/minist_e/mc12_e/briefing_notes_e/bfagric_e.htm. In the most recent WTO press notice on the agriculture negotiations is from March 23, 2022 and notes the challenges from the Russian invasion. See WTO, Agriculture negotiators chart path towards MC12, 23 March 2022, https://www.wto.org/english/news_e/news22_e/agng_21mar22_e.htm (“WTO agriculture negotiators met on 21 March to discuss the way forward ahead of the 12th Ministerial Conference (MC12), which is now scheduled to take place the week of 13 June. The chair of the agriculture negotiating group, Ambassador Gloria Abraham Peralta (Costa Rica), noted the impact of the conflict in Ukraine on global food markets and the agriculture negotiation environment. She asked members to prepare for intensive negotiations and use the remaining time wisely so as to achieve pragmatic, meaningful outcomes at MC12.”).

The WTO Members have also been seeking to reach agreement on a response package to the COVID-19 pandemic, including on whether some form of waiver or other action is needed on intellectual property rights during the COVID-19 pandemic. See, e.g., March 17, 2022: Possible Compromise on Access to Vaccines — draft understanding between EU, US, South Africa and India, https://currentthoughtsontrade.com/2022/03/17/possible-compromise-on-access-to-vaccines-draft-understanding-between-eu-us-south-africa-and-india/; February 21, 2022: The EU – AU Summit and the promise of a resolution to the WTO pandemic response package, https://currentthoughtsontrade.com/2022/02/21/the-eu-au-summit-and-the-promise-of-a-resolution-to-the-wto-pandemic-response-package/; February 16, 2022: Building Vaccine Capacity in Africa – Exciting News from BioNTech, https://currentthoughtsontrade.com/2022/02/16/building-vaccine-capacity-in-africa-exciting-news-from-biontech/.

There are a host of Joint Statement Initiatives that are at various stages of progress on a plurilateral basis, with India and South Africa raising objections to plurilateral agreements being part of the WTO without consensus agreement. See, e.g., April 14, 2022: Challenging China’s Trade Practices — What Role for the WTO?, https://currentthoughtsontrade.com/2022/04/14/challenging-chinas-trade-practices-what-role-for-the-wto/ (“Ongoing JSI include those on electronic commerce, investment facilitation for development, plastics pollution and environmentally sustainable plastics trade, services domestic regulation, informal working group on MSMEs, and trade and environmental sustainability. The WTO issues periodic press releases on developments in the talks. See, e.g., JOINT INITIATIVE ON E-COMMERCE, E-commerce negotiators seek to find common ground, revisit text proposals, 21 February 2022, https://www.wto.org/english/news_e/news22_e/jsec_23feb22_e.htm (hoping to have convergence on majority of issues by end of 2022)(86 WTO Members participating accounting for 90% of e-commerce trade including China, U.S. and most other major countries); INVESTMENT FACILITATION FOR DEVELOPMENT, Investment facilitation negotiators take steps to assess needs of developing countries, 15 February 2022, https://www.wto.org/english/news_e/news22_e/infac_23feb22_e.htm (looking to complete by end of 2022)(over 100 WTO Members participate including China and most developed countries, but not the U.S.); INFORMAL DIALOGUE ON PLASTICS POLLUTION AND ENVIRONMENTALLY SUSTAINABLE PLASTICS TRADE, Plastics dialogue emphasizes need for international collaboration, cooperation, 30 March 2022, https://www.wto.org/english/news_e/news22_e/ppesp_31mar22_e.htm (70 Members participate including China and most major developed countries but not the U.S.); Joint Initiative on Services Domestic Regulation, Negotiations on services domestic regulation conclude successfully in Geneva, https://www.wto.org/english/news_e/news21_e/jssdr_02dec21_e.htm (67 Members participated including China, the U.S. and other major developed countries); . MICRO, SMALL AND MEDIUM-SIZED ENTERPRISES (MSMES), Working group on small business welcomes three more members, 8 February 2022, https://www.wto.org/english/news_e/news22_e/msmes_08feb22_e.htm (94 participants including China and most major developed countries but not the U.S.).”).

There are many issues that have been raised as potential subjects for WTO reform including dispute settlement, industrial subsidies, state-owned and state-invested enterprises, excess capacity, transparency and many others.

With the U.S., EU, U.K., Japan, Canada and others seeking to reduce the role the Russian Federation can play in multilateral and plurilateral organizations while its war against Ukraine continues, it is unclear what progress will be made on the trade agenda at the WTO ahead of the 12th Ministerial. For example, G7 countries, the EU and others have suspended most favored nation status on goods and services from the Russian Federation. March 20, 2022: Banned imports, higher tariffs, other actions by trading partners as Russia and Belarus lose most favored nation treatment by G-7 countries and EU during the conflict in Ukraine, https://currentthoughtsontrade.com/2022/03/20/banned-imports-higher-tariffs-other-actions-by-trading-partners-as-russia-and-belarus-lose-most-faovered-nation-treatment-by-g-7-countries-and-eu-during-the-conflict-in-ukraine/.

They have also announced that they are removing the Russian Federation from the WTO Developed Countries Coordinating Group. See March 5, 2022: Joint letter from European Union and United States on removing the Russian Federation from the WTO Developed Countries Coordinating Group, https://currentthoughtsontrade.com/2022/03/05/joint-letter-from-european-union-and-united-states-on-removing-the-russian-federation-from-the-wto-developed-countries-coordinating-group/.

Russia’s President Putin has indicated that he wants a revised WTO strategy by June 1 to deal with sanctions imposed by western countries. See Reuters, Russia to update its strategy in World Trade Organization amid sanctions, says Putin, April 20, 2022, https://www.reuters.com/world/russia-update-its-strategy-world-trade-organization-amid-sanctions-says-putin-2022-04-20/ (“Russian President Vladimir Putin said on Wednesday that ‘illegal’ restrictions on Russian companies by Western states ran counter to World Trade Organization rules and told his government to update Russia’s strategy in the WTO by June 1. Speaking at a government meeting on the country’s metals industry, Putin said that Western countries had banned Russia from buying components needed to produce rolled metal, steel sheets and other products.”). It is unclear if that “revised strategy” will include blocking consensus in the WTO on topics being negotiated/discussed for the 12th Ministerial Meeting. Western countries have also opted to walk out of meetings when Russian delegates are participating/speaking. See, e.g., NPR, Janet Yellen and other finance ministers walk out of G20 meeting as Russia speaks, April 20, 2022, https://www.npr.org/2022/04/20/1093841174/janet-yellen-crystia-freeland-canada-rishi-sunak-uk-g20-walk-out-russia (“Treasury Secretary Janet Yellen and other global financial leaders walked out of a G20 session as Russian officials were speaking on Wednesday in an effort to underscore Moscow’s isolation following the invasion of Ukraine.”).

Thus, the atmosphere for moving trade talks forward is clouded at best at the present time.

As prior Director-Generals have done for prior Ministerial Confernces, WTO Director-General Ngozi Okonjo-Iweala has been traveling the world seeking support from major countries to a successful Ministerial Conference. See, e.g., WTO news release, DG calls on Brazil’s support in preventing food crisis, seeks leadership towards MC12, 19 April 2022, https://www.wto.org/english/news_e/news22_e/dgno_19apr22_e.htm (” Director-General Ngozi Okonjo-Iweala concluded a two-day trip to Brazil on 18-19 April, her first to Latin America as head of the WTO, meeting government officials, parliamentarians and businesspeople. She thanked Brazil for its constructive role in the WTO, highlighted the country’s potential role in alleviating risks of a food security crisis linked to the conflict in Ukraine and acknowledged the government’s concerns about the difficulties in securing fertilizers. She also sought Brazil’s continued and strong support for multilateralism and a fruitful 12th Ministerial Conference (MC12).”). The Director-General will be in Washington the week of April 25, 2022. See, e.g., Inside U.S. Trade’s World Trade Online, WTO director-general to visit Washington next week in lead-up to MC12, April 20, 2022, https://insidetrade.com/daily-news/wto-director-general-visit-washington-next-week-lead-mc12. The Inside U.S. Trade article reviews the tensions caused by the Russian invasion and the resulting uncertainty about what, if any, outcomes are possible for the 12th Ministerial Conference.

“Her conversations in Washington are likely to focus significantly on the waiver and on the upcoming 12th ministerial conference, set for the week of June 13 in Geneva. If all went according to plan, the ministerial gathering was to be the venue for delivering a long-awaited agreement on fisheries subsidies, a step forward on agriculture and a pandemic response package, including a compromise IP waiver.

“But the twice-postponed gathering is poised to be derailed once again – if not actually rescheduled – by political and diplomatic tensions arising from Russia’s invasion of Ukraine. Whether WTO members will be able to produce deals at MC12 is in doubt as the WTO has had to adapt to conducting its negotiations around the tensions. Okonjo-Iweala said last week that plenary meetings of the full membership have become more difficult to hold, with members opting instead for small-group or bilateral meetings.”

There have also been efforts to develop a factual background to support some elements of a possible WTO reform agenda. The U.S., EU and Japan have been working over the last few years on potential modifications to the current Subsidies and Countervailing Measures Agreement to address some of the major distortions in industrial goods trade caused by China’s state-directed economy — industrial subsidies, state-owned and state-invested enterprises, global excess capacity. China has indicated a willingness to discuss subsidies if all subsidies (including agricultural subsidies) are included. On April 22, 2022, a report prepared by the staff of the IMF, OECD, World Bank and WTO was released. See IMF, OECD, World Bank and WTO, Subsidies, Trade, and International Cooperation, April 22, 2022, https://www.wto.org/english/news_e/news22_e/igo_22apr22_e.pdf; WTO news release, Greater international cooperation needed on subsidies data, analysis and reform — report, 22 April 2022, https://www.wto.org/english/news_e/news22_e/igo_22apr22_e.htm. The Executive Summary of the report (pages 3-4) is copied below.

“Dealing constructively with subsidies in global commerce is central to G20 leaders’ goal of reforming and
strengthening the multilateral trading system. The growing use of distortive subsidies alters trade and
investment flows, detracts from the value of tariff bindings and other market access commitments, and
undercuts public support for open trade. Sharp differences over subsidies are contributing to global trade
tensions that are harming growth and living standards.

“There are good reasons why this issue, which has challenged policymakers for decades, should be addressed now. Among them: distinguishing ‘good’ and ‘bad’ subsidies is analytically and politically fraught, while the unilateral responses available to trading partners (such as ‘trade defense’ measures) are a limited deterrent. The renewed drive toward industrial policies to promote ‘strategic’ sectors may distort international competition, especially against smaller, fiscally constrained developing countries. With the frequency and complexity of distortive subsidies increasing, even as the need grows for active policies to address climate, health, food, and other emergencies, subsidies and the subsidies debate have brought significant discord to the trading system. The issue demands global attention and cooperation.

“Subsidies are common in all sectors, used by countries at all stages of development, take many forms, and affect all countries. Despite important gaps in our information about subsidies, the broad landscape is clear. Most merchandise trade occurs in products and markets in which at least one subsidized firm operates. National and sub-national entities provide subsidies through—to name a few forms—direct grants, tax incentives, and favorable terms for financing, energy, land, or other inputs. Many subsidies are explicitly aimed at the important task of correcting market failures and may do this well. Many others, however, are designed in ways that do little to advance their stated objective, or do so at high domestic cost or with harmful effects on the global commons and on other countries, notably the poorest and most vulnerable countries. International cooperation can reduce the overall use of subsidies and improve their design.

“Existing international rules provide a strong basis for regulating subsidies. International subsidy disciplines were progressively strengthened, notably in 1995 with the WTO Agreement on Subsidies and
Countervailing Measures and the WTO Agreement on Agriculture, although the agenda to negotiate
detailed subsidy rules for services has been largely set aside. Many major countries also adhere to the
disciplines of the OECD Export Credit Arrangement. Some recent free trade agreements have also gone
beyond WTO rules, containing, for instance, provisions disciplining the behavior of state-owned enterprises and more extensive lists of prohibited subsidies.

“Still, both longstanding and recently-exposed gaps remain in these international rules. Extensive trade distorting domestic farm subsidies are still allowed in many cases, and WTO members have yet to agree
special disciplines for harmful fisheries subsidies that contribute to overfishing. The recognition of gaps is
shaped by such developments as the emergence of global value chains; digital markets and related network concentration effects; the global importance of economies in which the state plays a central role,
and of international SOEs; the urgent challenge of climate change; and the recognition that well-crafted
subsidies can be an important part of the public response to economic and health emergencies. These
developments make the issue of subsidies in the trading system both more complex and more urgent.
Investment incentives are widespread, often at sub-national levels where they can be hard to monitor.
Much of this debate occurs in the context of the industrial sector. This paper does not advocate particular
outcomes. However, international cooperation that delivers improved subsidy disciplines, improves
business certainty, and reduces trade frictions would be superior to unilateral actions and should be
expected to reduce their use.

“In many of these areas, better information, more extensive objective analysis, and regular dialogue can
help governments accelerate reform of their own subsidies and expedite negotiations toward improved
international disciplines. Careful, high-quality economic analysis is needed to understand not only how well current subsidy programs meet domestic policy objectives, and at what cost, but also how they spill over onto international markets and how they interact with international policy goals, like climate mitigation. That effort must improve the information available on existing subsidy programs and their effects, especially on trading partners. It should feed into a structured inter-governmental dialogue, informed by analysis, and lead to a more common perspective on the appropriate roles of subsidies that, in turn, facilitates the development of updated norms and standards. Improved transparency and analysis, more robust intergovernmental consultation, and strengthened international rules can be expected to reduce the use of harmful subsidies and to improve their design—leading to better outcomes with fewer negative effects at home or abroad.

“The international organizations (IOs) authoring this report can strengthen their individual and joint work to support governments in this endeavor. While the brunt of this work lies with finance ministries, trade
ministries, and sectoral and specialized agencies of national governments, international organizations have key roles to play. The four authoring institutions are examining ways to help, individually and jointly, such as by collecting, organizing, and sharing data, coordinating analytical work agendas to develop methodologies to assess the cross-border effects of different forms of subsidies, and supporting inter-governmental dialogues. This will involve reaching out to and working with other international institutions as well.”

The report also contains a list of some recent international reports relating to subsidies (Box 1 on page 6, copied below).

“Box 1. Selected Recent International Reports Relating to Subsidies

“Noting that COVID-19 caused severe stress for tourism industries in the region and around the world, the Asian Development Bank’s Asian Economic Integration Report (ADB, 2021) examined measures to support tourism in selected ADB developing members. It draws positive lessons to help governments maintain critical levels of tourism infrastructure and to facilitate a rapid rebound in a sector that is key to many economies.

“Global Trade Alert set out to inventory subsidies of the “major players”—China, the EU, and the United States (Evenett and Fritz, 2021). It finds that in 2019, more than three-fifths of global goods trade was in products and on trade routes in which one or more subsidized Chinese, EU, or U.S. firms compete. When a major player introduces a new subsidy, the others usually respond within six months with their own subsidy.

“The 2021 FAO, UNDP, and UNEP report, A Multi-Billion-Dollar Opportunity: Repurposing Agricultural Support to Transform Food Systems, finds that some forms of support to agricultural producers are distortive and socially and environmentally harmful. It sets out a six-step guide for repurposing the provision of public goods and services for agriculture.

“The World Resources Institute 2021 report, Repurposing Agriculture Subsidies to Restore Farmland and Grow Rural Prosperity, likewise argues that public agricultural subsidies failed to achieve their stated objectives but that smart agricultural subsidies can restore degraded land and rural economies.\

“IMF (2020) advises governments on raising efficiency and managing other challenges related to SOEs—frequent recipients or providers of subsidies. It calls for global principles for multinational SOEs, noting that SOEs account for 20 percent of assets of the world’s largest 2,000 firms. Some IMF Article IV country reports have called for specific reforms of farm subsidies or industrial subsidies.

“As part of its ongoing work on agricultural support, OECD (2021a) provides country-comparable data and information and analyzes whether current support is helping to meet the triple challenge facing food systems (food security and nutrition, environmental sustainability, and livelihoods). OECD (2019a) and OECD (2019b) examine support received by the largest firms in the aluminum and semiconductor value chains; these reports shed light in particular on support provided through the financial system; current work also explores the environmental harm that can arise from subsidies.

“The case for international cooperation on subsidy disciplines was previously reviewed in WTO (2006), which also examined existing WTO subsidy disciplines. A recent World Trade Report (WTO, 2020) showed that international cooperation can shape the pursuit of digital development more effectively, while minimizing cross-border spillovers from national policies. WTO Trade Policy Reviews have triggered extensive discussions of subsidy policies in individual WTO members.

“Noting the growing role of the state in the context of COVID-19 and climate change, WEF (2021) calls for
international cooperation to tackle these global challenges and to address cross-border spillovers from state intervention. It outlines the current state of play and proposes ways forward across subsidies, state ownership and control, government procurement, investment screening, and trade remedies.”

The report from the four organizations was supported by a paper published from former WTO Deputy Director-General Alan Wm. Wolff last week, part of a forthcoming book World Trade Governance: The Future of the Multilateral Trading System. See Peterson Institute for International Economics, Working Paper 22-6 WTO 2025, Alan Wm. Wolff, Enhancing Global Trade Intelligence, April 2022, https://www.piie.com/sites/default/files/documents/wp22-6.pdf.

At most the staff report and the paper from former DDG Wolff support the need for reexamining subsidy disciplines. Any such reexamination will take years to complete but could be part of an announced package of WTO reform topics to be addressed going forward if there is agreement on such a list. See also November 24, 2020: Responding to a comment received on yesterday’s post, WTO subsidy disciplines – an update and coordination across areas is long overdue, https://currentthoughtsontrade.com/2020/11/24/responding-to-a-comment-received-on-yesterdays-post-wto-subsidy-disciplines-an-update-and-coordination-across-areas-is-long-overdue/; November 23, 2020: WTO subsidy disciplines – an update and coordination across areas is long overdue, https://currentthoughtsontrade.com/2020/11/23/wto-subsidy-disciplines-an-update-and-coordination-across-areas-is-long-overdue/.

The week of June 13, 2022 and the 12th Ministerial Conference is just eight weeks away. It is unclear what, if any, package of documents will be ready for adoption/release during the 12th Ministerial Conference in Geneva. In a member driven organization with a consensus system being the norm outcomes among 164 Members with dramatically different interests are hard to achieve. Thus, there has been limited progress in the past Ministerials. The Russian war in Ukraine adds a layer of uncertainty to what can be achieved at the Ministerial Conference in June this year.

Recent estimates of global effects from Russian invasion of Ukraine

Terence P. Stewart · April 19, 2022 · Sanctions on Russia following its invasion of Ukraine · IMF, Russian Federation, Ukraine, WTO · No Comments

As Russia’s unprovoked war against Ukraine moves through its eighth week, a variety of reports from multilateral organizations explain the severe global fallout from the war as well as the crippling effects on the Ukrainian economy.

On April 13, 2022, the World Bank, IMF, the UN World Food Program and WTO issued a joint statement which is copied below.

“WASHINGTON, 13 April 2022— The Heads of the World Bank Group (WBG), International Monetary Fund (IMF), United Nations World Food Program (WFP), and World Trade Organization (WTO) today called for urgent action on food security. World Bank Group President David Malpass, IMF Managing Director Kristalina Georgieva, WFP Executive Director David Beasley and WTO Director General Ngozi Okonjo-
Iweala issued the following joint statement ahead of the Spring Meetings of the IMF and World Bank Group next week:

“‘The world is shaken by compounding crises. The fallout of the war in Ukraine is adding to the ongoing COVID-19 pandemic that now enters its third year, while climate change and increased fragility and conflict pose persistent harm to people around the globe. Sharply higher prices for staples and supply shortages are increasing pressure on households worldwide and pushing millions more into poverty. The threat is highest for the poorest countries with a large share of consumption from food imports, but vulnerability is increasing rapidly in middle-income countries, which host the majority of the world’s poor. World Bank estimates warn that for each one percentage point increase in food prices, 10 million people are thrown into extreme poverty worldwide.’

“‘The rise in food prices is exacerbated by a dramatic increase in the cost of natural gas, a key ingredient of nitrogenous fertilizer. Surging fertilizer prices along with significant cuts in global supplies have important implications for food production in most countries, including major producers and exporters, who rely heavily on fertilizer imports. The increase in food prices and supply shocks can fuel social tensions in many of the affected countries, especially those that are already fragile or affected by conflict.’

“‘We call on the international community to urgently support vulnerable countries through coordinated actions ranging from provision of emergency food supplies, financial support, increased agricultural production, and open trade. We are committed to combining our expertise and financing to quickly step up our policy and financial support to help vulnerable countries and households as well as to increase domestic agricultural production in, and supply to, impacted countries. We can mitigate balance of payments pressures and work with all countries to keep trade flows open. In addition, we will further reinforce our monitoring of food vulnerabilities and are quickly expanding our multi-faceted policy advice to affected countries guided by the comparative advantages of our respective institutions.’

“‘We also urge the international community to help support urgent financing needs, including through grants. This should include financing of immediate food supplies, safety nets to address the needs of the poor, and for small farmers facing higher input prices. We also urge all countries to keep trade open and avoid restrictive measures such as export bans on food or fertilizer that further exacerbate the suffering of the most vulnerable people. It is especially important not to impose export restrictions on humanitarian food purchases by the UN’s World Food Program.’

“‘It is critical to quickly provide support for food insecure countries in a coordinated manner. We stand ready to work together with our multilateral and bilateral partners to help countries address this urgent crisis.’”

Joint Statement: The Heads of the World Bank Group, IMF, WFP, and WTO Call for Urgent Coordinated Action on Food Security, April 13, 2022, https://www.worldbank.org/en/news/statement/2022/04/13/joint-statement-the-heads-of-the-world-bank-group-imf-wfp-and-wto-call-for-urgent-coordinated-action-on-food-security

The World Bank has estimated that the Ukrainian economy will decline by 45% or more because of the war. Reuters, War to slash Ukraine’s GDP output by over 45%, World Bank forecasts, April 10, 2022, https://www.reuters.com/world/us/war-slash-ukraines-gdp-output-by-over-45-world-bank-forecasts-2022-04-10/. Effects in other countries are a combination of the war’s effects on prices of a number of agricultural and non-agricultural goods where Russia, Ukraine and/or Belarus are important global suppliers, supply chain disruptions that have continued from the pandemic and other inflationary pressures. So for example, the OECD has estimated the first year effects of the war and other challenges will reduce global GDP and will add to global inflation though the effects will vary by geographic area. OECD Economic Outlook, Interim Report, Economic and Social Impacts and Policy Implications of the War in Ukraine, MARCH 2022, https://www.oecd-ilibrary.org/docserver/4181d61b-en.pdf. Figure 5 from page 7 of the OECD paper provides estimates of the impact on GDP and on inflation for the Euro area, OECD countries in total, United States, World and World excluding Russia.

Similarly, Figure 3 from page 5 of the report shows the price increases for products where Russia and Ukraine are important sources of global trade.

The World Bank looks at various regions of the world in their Spring reports which show varying effects from the war. See World Bank, Reality Check: Forecasting Growth in the Middle East and North Africa in Times of Uncertainty, April 2022, https://openknowledge.worldbank.org/bitstream/handle/10986/37246/9781464818653.pdf (per capita GDP, “11 out of 17 MENA economies may not recover to pre-pandemic levels by the end of 2022″); World Bank, Africa’s Pulse, An Analysis of Issues Shaping Africa’s Economic Future, Boosting Resilience: The Future of Social Protection in Africa, April 2022 (Vol. 25), https://openknowledge.worldbank.org/bitstream/handle/10986/37281/9781464818714.pdf (Growth in Sub-Saharan Africa is projected to decelerate from 4% to 3.6% in 2022, and estimated at 3.9% or 4.2% in 2023 and 2024 respectively. The growth deceleration in 2022 reflects several short-term headwinds, the slowdown in the global economy, lingering effects of the coronavirus pandemic, elevated inflation, rising financial risks owing to high public debts reaching unsustainable levels, continued supply disruptions, and the war in Ukraine.”); World Bank, South Asia Economic Focus, Reshaping Norms: A New Way Forward, Spring 2022, https://openknowledge.worldbank.org/bitstream/handle/10986/37121/9781464818578.pdf (“South Asian economies are emerging from the deep COVID-19 recession, burdened by high inflation, rising current account deficits, and deteriorated fiscal balances, which are exacerbated by the impact of war in Ukraine. Even as the impact of the pandemic on growth is subsiding, partly because of increases in vaccination rates, the economic scars left behind after two years of the pandemic are deep. Inflation and deficits in trade balances reflect supply bottlenecks, pent-up demand, and rising commodity prices in international markets. Support measures and reduced revenues have deteriorated fiscal balances. All these problems have become more pressing because of the immediate impact of the war in Ukraine, which has pushed up prices of oil and other commodities in international markets.”); World Bank, Europe and Central Asia Economic Update, War in the Region, Spring 2022, https://www.worldbank.org/en/region/eca/publication/europe-and-central-asia-economic-update (“The war is having a devastating impact on human life and causing economic destruction in both countries, and will lead to significant economic losses in the Europe and Central Asia (ECA) region and the rest of the world. It is the second major shock in two years to trigger an economic contraction in the region,
with output in 2022 forecast to contract 4.1 percent—twice as steep as the recession in 2020 from the COVID-19 pandemic.”); World Bank, Semiannual Report for Latin America and the Caribbean, Consolidating the Recovery: Seizing Green Growth, April 2022, https://openknowledge.worldbank.org/bitstream/handle/10986/37244/9781464818677.pdf (“The Russian invasion of Ukraine in late-February 2022 has both imposed a drag on the regional recovery and injected vast uncertainty. Prices of wheat and energy soared in the immediate aftermath. Meanwhile, a new set of supply-chain disruptions—both arising from the war and from a new COVID lockdown in China—present
stagflationary forces that will complicate the job of monetary authorities. The direct depressive effects on global output may be modest, but the increased uncertainty and the sharp (even if short-term) rise in commodity prices will have first-order effects.”); World Bank, East Asia and the Pacific Economic Update, Braving the Storms, April 2022, https://openknowledge.worldbank.org/bitstream/handle/10986/37097/9781464818585.pdf (“At the beginning of 2022, the EAP countries appeared to be on the path of sustained recovery. The region had emerged from the difficult Delta wave and suffered relatively little from omicron wave. External trade and financial conditions remained benign, and governments were contemplating fiscal consolidation. since then, the acceleration in Us inflation prompted faster-than expected financial tightening, China saw a spike in CoViD-19 infections and continued strains on overleveraged real estate firms, and Russia invaded Ukraine. While some larger countries may be better equipped to weather these shocks, the repercussions of these events will dampen the growth prospects of most in the EAP region. Projections for regional growth in 2022 have therefore been reduced from 5.4 percent in the previous Update to 5 percent. In a low case scenario, if global conditions worsen and national policy responses are weak, growth could slow to 4 percent.”).

The World Trade Organization recently released a paper looking at the implications of the war in Ukraine on global trade and development. WTO, The Crisis in Ukraine, Implications of the war for global trade and development, April 2022, https://www.wto.org/english/res_e/booksp_e/imparctukraine422_e.pdf. The Executive Summary from the WTO paper is copied below.

“The crisis in Ukraine has created a humanitarian crisis of immense proportions and has also dealt a severe blow to the global economy. The brunt of the suffering and destruction are being felt by the
people of Ukraine themselves but the costs in terms of reduced trade and output are likely to be felt by people around the world through higher food and energy prices and reduced availability of goods exported by Russia and Ukraine. Poorer countries are at high risk from the war, since they tend to spend a larger fraction of their incomes on food compared to richer countries. This could impact political stability.

“From a macroeconomic perspective, higher prices for food and energy will reduce real incomes and depress global import demand. Sanctions will impose economic costs on not only Russia directly but also on its trading partners. Besides Russia and Ukraine, depressed gross domestic product (GDP) will probably be seen mostly in Europe given the region’s geographic proximity and its dependence on Russian energy. Trade costs will rise in the near term due to sanctions, export restrictions, higher energy costs and transport disruptions. As a result, the impact the war will have on world trade in 2022 could be greater than the impact on global GDP.

“While shares of Russia and Ukraine in world trade and output are relatively small, they are important
suppliers of essential products, notably food and energy. Both countries accounted for 2.5 per cent in
world merchandise trade and 1.9 per cent in world GDP in 2021. Yet they supplied around 25 per cent of wheat, 15 per cent of barley and 45 per cent of sunflower products exports in 2019.1 Russia alone accounted for 9.4 per cent of world trade in fuels, including a 20 per cent share in natural gas exports. Many countries are highly dependent on food imports from Russia and Ukraine. For example, more than half of wheat imports in Egypt, the Lebanese Republic and Tunisia come from Russia and Ukraine. Other countries are more dependent on imports of fuels from Russia, such as Finland (63 per cent) and Turkey (35 per cent).

“Russia and Ukraine are also key providers of inputs into industrial value chains. Russia is one of the main suppliers globally of palladium and rhodium, key inputs in the production of catalytic converters in the automotive sector and the manufacture of semiconductors. Semiconductor production also depends
to a substantial extent on neon supplied by Ukraine, which further provides a number of low-tech products to the European automobile value chain, such as wire harnesses. Prolonged disruptions in the supply of these goods could harm the recovery of automobile manufacturing.

“Sanctions are already having a strong impact on Russia’s economy, with possible medium to long-term consequences. Disconnecting Russian banks from the SWIFT settlement system and blocking Russia’s use of foreign exchange reserves have triggered a sharp depreciation of the rouble, reducing real incomes in the country. Many international firms are also abandoning the Russian market. Oil and gas exports have yet to be strongly affected by the sanctions, but the crisis could accelerate the global transition towards greener energy sources.

“Longstanding economic relationships have been disrupted by the war and by the sanctions imposed in its wake. WTO economists have simulated various scenarios to illustrate the channels through which trade could be affected and to explore possible short-run and long-run effects. Global trade growth is projected to slow by up to 2.2 percentage points in 2022. Longer term impacts could also be large and consequential. There is a risk that trade could become more fragmented in terms of blocs based on geopolitics. Even if no formal blocs emerge, private actors might choose to minimize risk by reorienting
supply chains. This could reduce global GDP in the long run by about 5 per cent, notably by restricting
competition and stifling innovation.

“The WTO has an important role to play in mitigating the negative effects of the crisis and in rebuilding
a post-war global economy. Keeping markets open will be critical to ensure that economic opportunities remain open to all countries. This will be especially true in the post-war period, when businesses and families will need to repair their balance sheets and rebuild their lives. Through its importance for international trade and its monitoring, convening and other functions, the WTO is central to ensuring that international trade continues to serve billions of people across the world.”

Rising energy prices and reduced volumes of some basic agricultural products are receiving a lot of attention because of the increasing hunger, malnutrition, number of people suffering extreme poverty that flow from the challenges being experienced at the moment. For example, the FAO paper on April 8, 2022 (CL 169/3) reviews in detail the challenges for food security from the disruption in exports from Russia and Ukraine of many food products, spiking prices for fertilizers from Russia as well as rising energy costs. See FAO Council, 169th Session, 8 April 2022, Impact of the Ukraine-Russia conflict on global food security and related matters under the mandate of the Food and Agriculture Organization of
the United Nations (FAO), https://www.fao.org/3/ni734en/ni734en.pdf. The Executive Summary to the report is copied below.

“The war that began on 24 February 2022 has caused extensive damage and loss of life in key population centres, spread across rural areas, and sparked massive displacement. More than 3.6 million people had been forced to abandon their homes and flee across borders to safety. Millions more are internally displaced. It is clear that the war has resulted in a massive, and deteriorating, food security challenge and disrupted livelihoods during the agricultural growing season in Ukraine and has also affected global food security.

“Already prior to the war in Ukraine, international food prices had reached an all-time high. This was mostly due to market conditions, but also high prices of energy, fertilizers and all other agricultural services. In February 2022, the FAO Food Price Index reached a new historical record, 21 percent above its level a year earlier, and 2.2 percent higher than its previous peak in February 2011.

“The Russian Federation and Ukraine are prominent players in global trade of food and agricultural products. In 2021, wheat exports by the Russian Federation and Ukraine accounted for about 30 percent of the global market. Russia’s global maize export market share is comparatively limited, standing at 3 percent between 2016/17 and 2020/21. Ukraine’s maize export share over the same period was more significant, averaging 15 percent and conferring it the spot of the world’s 4th largest maize exporter. Combined, sunflower oil exports from both countries represented 55 percent of global supply. The Russian Federation is also a key exporter of fertilizers. In 2020, it ranked as the top exporter of nitrogen fertilizers, the second leading supplier of potassium, and the third largest exporter of phosphorous fertilizer.

“Nearly 50 countries depend on the Russian Federation and Ukraine for at least 30 percent of their wheat import needs. Of these, 26 countries source over 50 percent of their wheat imports from these two countries. In that context, this war will have multiple implications for global markets and food security, representing a challenge for food security for many countries, and especially for low-income food import dependent countries and vulnerable population groups.

“Joint, coordinated actions and policy responses are needed to address the current challenges for the
people most in need and to mitigate the impact on food insecurity at global level.”

The heads of the International Monetary Fund and the World Bank, in statements on April 14 and 12 respectively provide sobering summaries of the challenges facing the world, including the war in Ukraine, and the implications for food security, global growth (or contraction), and a range of critical issues needing global cooperation such as climate change. See IMF, Speech of Kristalina Georgieva, IMF Managing Director, “Facing Crisis Upon Crisis: How the World Can Respond,” April 14, 2022, https://www.imf.org/en/News/Articles/2022/04/14/sp041422-curtain-raiser-sm2022; World Bank, Addressing Challenges to Growth, Security and Stability – Scene-Setter Speech by World Bank Group President David Malpass, April 12, 2022, https://www.worldbank.org/en/news/speech/2022/04/12/addressing-challenges-to-growth-security-and-stability-scene-setter-speech-by-world-bank-group-president-david-malpass. Some excerpts are provided below.

IMF Managing Director Georgieva:

“To put it simply: we are facing a crisis on top of a crisis.

“First, the pandemic: it turned our lives and economies upside down—and it is not over. The continued spread of the virus could give rise to even more contagious or worse, more lethal variants, prompting further disruptions—and further divergence between rich and poor countries.

‘Second, the war: Russia’s invasion of Ukraine, devastating for the Ukrainian economy, is sending shockwaves throughout the globe.

“Above all is the human tragedy—the suffering of ordinary men, women, and children in Ukraine, among them over 11 million displaced people. Our hearts go out to them.

“The economic consequences from the war spread fast and far, to neighbors and beyond, hitting hardest the world’s most vulnerable people. Hundreds of millions of families were already struggling with lower incomes and higher energy and food prices. The war has made this much worse, and threatens to
further increase inequality.

“And for the first time in many years, inflation has become a clear and present danger for many countries around the world.

“This is a massive setback for the global recovery.

“In economic terms, growth is down and inflation is up. In human terms, people’s incomes are
down and hardship is up.

“These double crises—pandemic and war—and our ability to deal with them, are further complicated by another growing risk: fragmentation of the world economy into geopolitical blocs—with different trade and technology standards, payment systems, and reserve currencies.

“Such a tectonic shift would incur painful adjustment costs. Supply chains, R&D, and production networks would be broken and need to be rebuilt.

“Poor countries and poor people will bear the brunt of these dislocations.

“This fragmentation of global governance is perhaps the most serious challenge to the rules-based framework that has governed international and economic relations for more than 75 years, and helped deliver significant improvements in living standards across the globe.

“It is already impairing our capacity to work together on the two crises we face. And it could leave us wholly unable to meet other global challenges—such as the existential threat of climate change.

“It is a consequential moment for the international community.

“The actions we take now, together, will determine our future in fundamental ways. It reminds me of Bretton Woods in 1944 when, in the dark shadow of war, leaders came together to envision a brighter world. It was a moment of unprecedented courage and cooperation.

“We need that spirit today, as we face bigger challenges and more difficult choices.”

World Bank President Malpas:

“We are again living through a dangerous period of overlapping crises and conflicts with Poland near the center. I have been deeply shocked and horrified at Russia’s invasion of Ukraine, the atrocities committed against the civilian population, and the loss of life and livelihoods for millions of Ukrainians. The attacks on people and infrastructure are causing tremendous suffering, threatening international peace and security, and endangering the basic social and economic needs of people around the world.”

* * *

“Overlapping Global Crises

“The violence is unfortunately not confined to Ukraine. Just over the last year, we have witnessed serious setbacks for development and security, including Afghanistan’s collapse, Lebanon’s crisis, and coups and violence across the Sahel, Ethiopia, Somalia, and Yemen. Millions of Syrians are living in refugee camps in Jordan, Lebanon, and Turkey. Inter-ethnic and inter-religious strife plagues Myanmar and other parts of Asia. And in Latin America and the Caribbean, levels of crime and violence are alarmingly high, with some urban and rural areas controlled by criminal gangs or drug cartels.

“The trend toward insecurity is deeply concerning. This year, 39 of the 189 member countries of the World Bank Group – 39 of 189 – are experiencing open conflict situations or remain worryingly fragile. The number of people living in conflict areas nearly doubled between 2007 and 2020. Today, in the Middle East and North Africa, one in every five people lives in an area affected by conflict. This unraveling of security has brought a surge in the number of refugees, which more than doubled over the last decade to exceed 30 million refugees in 2020. The war in Ukraine has already displaced an additional 10 million people from their homes, pushing more than 4 million people – primarily women and children – into neighboring countries, most of them to Poland and Romania.

“We recognize that each of the ongoing crises hits the vulnerable the hardest, often women and girls. And all the while, we are still suffering the health, economic, and social setbacks of a global pandemic and economic shutdowns. Millions of lives have been lost and millions more are suffering amid the massive reversals in development that hit the poor particularly hard.

“Since the outbreak of COVID-19, violence against women and girls has intensified. Global indicators on food, nutrition, and health have worsened. And children lost more than a year of education due to school closures, with 1.6 billion children out of school globally at the peak of lockdowns, reversing a full decade of gains in human capital.

“Never have so many countries experienced a recession at once, suffering lost capital, jobs, and livelihoods. At the same time, inflation continues to accelerate, reducing the real incomes of households around the world, especially the poor. The extraordinary monetary and fiscal policies that advanced economies have been implementing to boost their demand, combined with supply constraints and disruptions, have fueled price increases and have worsened inequality around the globe. One measure that captures the growing concern of inflation and inequality is the stagnation in real median income across much of the world. Another measure is the likelihood that poverty increases will continue in 2022 as inflation, currency depreciation, and high food prices hit home.

“The war in Ukraine and its consequences are also creating sudden shortages of energy, fertilizer, and food, pitting people against each other and their governments. Even people who are physically distant from this conflict are feeling its impacts.

“Food price spikes hit everyone and are devastating for the poorest and most vulnerable. For every one percentage point increase in food prices, 10 million people are expected to fall into extreme poverty. The rich can afford suddenly expensive staples, but the poor cannot. Malnutrition is expected to grow, and its effects will be the hardest to reverse in children.

“Trade disruptions have already sent grain and commodity prices soaring. Wheat exports from Black Sea ports have been sharply curtailed. And intense drought in South America is reducing global food production. Global food commodity markets are large and well-established, and – after a lag – they tend to self-adjust to disruptions in production. However, additional factors are making the current food supply problems more acute – namely the supply of fertilizers, energy prices, and self-imposed food export restrictions.

“Fertilizer prices are dependent on natural gas prices, which have surged. As LNG is shipped to Europe, LNG shortages are occurring elsewhere, reducing fertilizer production, and disrupting the sowing season and harvest productivity. Russia and Belarus are both large fertilizer producers, adding materially to the problem.

“The financial repercussions of the energy shock are intertwined with the global community’s efforts on climate change. Russia has been an important source for the world’s energy, including oil, coal, and gas – the latter supplying Europe through a network of pipelines. I’ve been pleased to see Europe follow a path toward diversifying its energy mix away from Russia and considering LNG imports and nuclear power for electricity baseload, but these take time. The rapid addition of major new energy production in Europe and other parts of the world will be a necessary ingredient for global recovery and energy security in Europe.

“The World Bank Group strongly supports the integration of climate and development goals. This recognizes the urgency of growth and development at the core of our mission of alleviating poverty and boosting shared prosperity; and the global community’s pledges to slow the growth in human-linked greenhouse gas emissions. These pledges for global public goods will require hundreds of complex, multi-decade projects that reduce emissions and are funded by the global community. We are working to tackle these challenges through analytical work, including our Country Climate and Development Reports and our Infrastructure Sector Assessment Programs. We are pleased to support Poland’s efforts to increase energy efficiency and continue its transition away from coal.

“Weakening Economic Outlook

“On the economic front, trends are not encouraging. Prior to the war in Ukraine, the recovery in 2022 was already losing momentum due to rising inflation and lingering supply bottlenecks. While advanced economies were expected to return almost to their pre-pandemic growth rates in 2023, developing economies were lagging substantially behind.

“The war in Ukraine and the COVID-19 lockdowns in China are further reducing the recovery path. Of concern, the repercussions are worsening the inequality as the war affects commodity and financial markets, trade, and migration linkages, and investor and consumer confidence. Advanced economies with well-developed social protection systems are cushioning parts of their populations from the damage from inflation and trade blockages, but poorer countries have limited fiscal resources and weaker systems to support those in need. Currency depreciations and inflation are hitting the poor hard, causing fast increases in 2022 poverty rates. Adding to the burden, developing country debt has risen sharply to a 50-year high—at roughly 250 percent of government revenues. Debt vulnerabilities are particularly acute in low-income countries, where sixty percent are already experiencing or at high risk of debt distress.

“Most emerging market and developing economies are ill-prepared to face the coming debt shock. Exposures to financial sector risk are opaque at this point, but one measure, the cost of insuring against default in emerging markets, has reached its highest point since the onset of the pandemic.”

A few thoughts

While there has been improved cooperation among multilateral institutions in addressing some of the crises identified, including supporting Ukraine during this period of enormous challenge from Russia’s unprovoked war, solutions to some of the inflationary spikes appear more remote during the pendency of the war and are aggravated by China’s lockdown of areas of the country in pursuit of its zero-COVID policy.

It is clear that Europe, the United States and some of their close allies will be changing investment and trade flows to address the unacceptable dependence on countries which don’t support the global rule of law and respect for national sovereignty. There will likely be spillover effects for other countries unable or unwilling to distance themselves from the Russian Federation. It is hard to see such fragmentation ending even with the end of Russia’s war whenever that occurs.

The increase in food security concerns are at least partially addressable by joint action to keep markets open and not impose export restrictions and ensure funding for UN World Food Program purchases during a period of inflated food prices. While the WTO’s efforts during the COVID-19 pandemic have improved transparency on export and import actions on food and medicines, it is unclear what level of cooperation will occur from countries with a history of imposing export restraints on food during periods of rising food prices. As history shows, increased food insecurity often leads to increased social unrest, as was true in 2007-2008.

While the need to move from fossil fuel imports is apparent for European countries and hence can have positive effects on increased use of renewable energy sources, the current high prices for fossil fuels and the role of Russia in the global supply of such fuels has countries scrambling to increase production to address short-term demand needs. Such increased production of fossil fuels and reduced cooperation among many countries on some issues will likely hurt global efforts to address the existential issue of climate change.

Russia has reportedly started a new phase of its invasion of Ukraine in the east this week. See New York Times, Ukraine Live Updates: Russia Declares New Phase of War as Forces Clash in East, April 19, 2022, https://www.nytimes.com/live/2022/04/19/world/ukraine-russia-war-news. How long the conflict will go on is, of course, unknown. But the rest of 2022 is likely to be challenging for governments and people around the world addressing the fallout from the war and other crises.

Additional trade and financial sanctions imposed on Russian Federation as evidence of atrocities in Ukraine by Russian soldiers mounts

Terence P. Stewart · April 11, 2022 · Sanctions on Russia following its invasion of Ukraine · Belarus, Canada, European Union, Japan, Russian Federation, Ukraine, United Kingdom, United States · No Comments

As the Russian troops withdrew from around Kyiv, images of dead civilians in the town of Bucha led to further outrage among many countries resulting in a new round of trade and financial sanctions being imposed by the U.S., EU, U.K., Canada, Japan, Australia and New Zealand. The atrocities also led to a vote at the U.N. to suspend the Russian Federation from the Human Rights Council. See White House, Statement of President Joe Biden on the UN Vote Suspending Russia from the Human Rights Council, April 7, 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/04/07/statement-of-president-joe-biden-on-the-un-vote-suspending-russia-from-the-human-rights-council/.

Keeping up with all sanctions being imposed is challenging in light of the expanding set of actions being taken although different organizations have compiled lists. For example, Reuters posts a time and country based list in Tracking sanctions against Russia, https://graphics.reuters.com/UKRAINE-CRISIS/SANCTIONS/byvrjenzmve/. The version I reviewed was updated on April 8, 2022 and shows actions through April 7. “Reuters is tracking government sanctions and actions against Russia taken by large companies and organisations around the world in the lead up to and following its invasion of Ukraine.” Reuters shows sanctions imposed by 41 governments (viewing the EU as 27) and 99 actions taken by large companies and organizations.

A fact sheet released by the White House on April 6 summarizes actions being taken by the United States in light of the continuing Russian aggression and atrocities. The White House, FACT SHEET: United States, G7 and EU Impose Severe and Immediate Costs on Russia, April 6, 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/04/06/fact-sheet-united-states-g7-and-eu-impose-severe-and-immediate-costs-on-russia/. The fact sheet is copied below.

“Today, the United States, with the G7 and the European Union, will continue to impose severe and immediate economic costs on the Putin regime for its atrocities in Ukraine, including in Bucha. We will document and share information on these atrocities and use all appropriate mechanisms to hold accountable those responsible. As one part of this effort, the United States is announcing devastating economic measures to ban new investment in Russia, and impose the most severe financial sanctions on Russia’s largest bank and several of its most critical state-owned enterprises and on Russian government officials and their family members. These sweeping financial sanctions follow our action earlier this week to cut off Russia’s frozen funds in the United States to make debt payments. Importantly, these measures are designed to reinforce each other to generate intensifying impact over time.

“The United States and more than 30 allies and partners across the world have levied the most impactful, coordinated, and wide-ranging economic restrictions in history. Experts predict Russia’s GDP will contract up to 15 percent this year, wiping out the last fifteen years of economic gains. Inflation is already spiking above 15 percent and forecast to accelerate higher. More than 600 private sector companies have already left the Russian market. Supply chains in Russia have been severely disrupted. Russia will very likely lose its status as a major economy, and it will continue a long descent into economic, financial, and technological isolation. Compared to last year, U.S. exports to Russia of items subject to our new export controls have decreased 99 percent by value – and the power of these restrictions will compound over time as Russia draws down any remaining stockpiles of spare parts for certain planes, tanks, and other resources needed for Putin’s war machine.

“As long as Russia continues its brutal assault on Ukraine, we will stand unified with our allies and partners in imposing additional costs on Russia for its actions. Today, the United States is announcing the following actions:

“Full blocking sanctions on Russia’s largest financial institution, Sberbank, and Russia’s largest private bank, Alfa Bank. This action will freeze any of Sberbank’s and Alfa Bank’s assets touching the U.S financial system and prohibit U.S. persons from doing business with them. Sberbank holds nearly one-third of the overall Russian banking sector’s assets and is systemically critical to the Russian economy. Alfa Bank is Russia’s largest privately-owned financial institution and Russia’s fourth largest financial institution overall.

“Prohibiting new investment in the Russian Federation. President Biden will sign a new Executive Order (E.O.) that includes a prohibition on new investment in Russia by U.S. persons wherever located, which will further isolate Russia from the global economy. This action builds on the decision made by more than 600 multinational businesses to exit from Russia. The exodus of the private sector includes manufacturers, energy companies, large retailers, financial institutions, as well as other service providers such as law and consulting firms. Today’s E.O. will ensure the enduring weakening of the Russian Federation’s global competitiveness.

“Full blocking sanctions on critical major Russian state-owned enterprises. This will prohibit any U.S. person from transacting with these entities and freeze any of their assets subject to U.S. jurisdiction, thereby damaging the Kremlin’s ability to use these entities it depends on to enable and fund its war in Ukraine. The Department of Treasury will announce these entities tomorrow.

“Full blocking sanctions on Russian elites and their family members, including sanctions on: President Putin’s adult children, Foreign Minister Lavrov’s wife and daughter, and members of Russia’s Security Council including former President and Prime Minister of Russia Dmitry Medvedev and Prime Minister Mikhail Mishustin. These individuals have enriched themselves at the expense of the Russian people. Some of them are responsible for providing the support necessary to underpin Putin’s war on Ukraine. This action cuts them off from the U.S. financial system and freezes any assets they hold in the United States.

“The U.S. Treasury prohibited Russia from making debt payments with funds subject to U.S. jurisdiction. Sanctions do not preclude payments on Russian sovereign debt at this time, provided Russia uses funds outside of U.S. jurisdiction. However, Russia is a global financial pariah — and it will now need to choose between draining its available funds to make debt payments or default.

“Commitment to supporting sectors essential to humanitarian activities. As we continue escalating our sanctions and other economic measures against Russia for its brutal war against Ukraine, we reiterate our commitment to exempting essential humanitarian and related activities that benefit the Russian people and people around the world: ensuring the availability of basic foodstuffs and agricultural commodities, safeguarding access to medicine and medical devices, and enabling telecommunications services to support the flow of information and access to the internet which provides outside perspectives to the Russian people. These activities are not the target of our efforts, and U.S. and Western companies can continue to operate in these sectors in Russia. When necessary, relevant departments and agencies will issue appropriate exemptions and carveouts to ensure such activity is not disrupted.”

Similarly, the European Commission announced proposed additional sanctions (fifth round) on April 5 and agreed sanctions were announced by the Council of the European Union on April 8. See Press statement by President von der Leyen on the fifth round of sanctions against Russia, Strasbourg, 5 April 2022, https://ec.europa.eu/commission/presscorner/detail/en/STATEMENT_22_2281; Council of the EU Press release, 8 April 2022, EU adopts fifth round of sanctions against Russia over its military aggression against
Ukraine, https://www.consilium.europa.eu/en/press/press-releases/2022/04/08/eu-adopts-fifth-round-of-sanctions-against-russia-over-its-military-aggression-against-ukraine/; Official Journal of the European Union, L111, 8 April 2022. The Council’s statement is copied below.

“In light of Russia’s continuing war of aggression against Ukraine, and the reported atrocities committed by Russian armed forces in Ukraine, the Council decided today to impose a fifth package of economic and individual sanctions against Russia.

“The agreed package includes a series of measures intended to reinforce pressure on the Russian government and economy, and to limit the Kremlin’s resources for the aggression.

“‘These latest sanctions were adopted following the atrocities committed by Russian armed forces in Bucha and other places under Russian occupation. The aim of our sanctions is to stop the reckless, inhuman and aggressive behaviour of the Russian troops and make clear to the decision makers in the Kremlin that their illegal aggression comes at a heavy cost.’ Josep Borrell, High Representative for Foreign Affairs and Security Policy

“The package comprises:

“- a prohibition to purchase, import or transfer coal and other solid fossil fuels into the EU if they originate in Russia or are exported from Russia, as from August 2022. Imports of coal into the EU are currently worth EUR 8 billion per year.

“- a prohibition to provide access to EU ports to vessels registered under the flag of Russia. Derogations are granted for agricultural and food products, humanitarian aid, and energy.

“- a ban on any Russian and Belarusian road transport undertaking preventing them from transporting goods by road within the EU, including in transit. Derogations are nonetheless granted for a number of products, such as pharmaceutical, medical, agricultural and food products, including wheat, and for road transport for humanitarian purposes.

“- further export bans, targeting jet fuel and other goods such as quantum computers and advanced semiconductors, high-end electronics, software, sensitive machinery and transportation equipment, and new import bans on products such as: wood, cement, fertilisers, seafood and liquor. The agreed export and import bans only account for EUR 10 billion and EUR 5.5 billion respectively.

“- a series of targeted economic measures intended to strengthen existing measures and close loopholes, such as: a general EU ban on participation of Russian companies in public procurement in member states, the exclusion of all financial support to Russian public bodies. an extended prohibition on deposits to crypto-wallets, and on the sale of banknotes and transferrable securities denominated in any official currencies of the EU member states to Russia and Belarus, or to any natural or legal person, entity or body in Russia and Belarus,.

“Furthermore, the Council decided to sanction companies whose products or technology have played a role in the invasion, key oligarchs and businesspeople, high-ranking Kremlin officials, proponents of disinformation and information manipulation, systematically spreading the Kremlin’s narrative on Russia’s war aggression in Ukraine, as well as family members of already sanctioned individuals, in order to make sure that EU sanctions are not circumvented.

“Moreover a full transaction ban is imposed on four key Russian banks representing 23% of market share in the Russian banking sector. After being de-SWIFTed these banks will now be subject to an asset freeze, thereby being completely cut off from EU markets.

“In its conclusions of 24 March 2022, the European Council stated that the Union remains ready to close loopholes and target actual and possible circumvention of the restrictive measures already adopted, as well as to move quickly with further coordinated robust sanctions on Russia and Belarus to effectively thwart Russian abilities to continue the aggression.

“Russia’s war of aggression against Ukraine grossly violates international law and is causing massive loss of life and injury to civilians. Russia is directing attacks against the civilian population and is targeting civilian objects, including hospitals, medical facilities, schools and shelters. These war crimes must stop immediately. Those responsible, and their accomplices, will be held to account in accordance with international law. The siege of Mariupol and other Ukrainian cities, and the denial of humanitarian access by Russian military forces are unacceptable. Russian forces must immediately provide for safe pathways to other parts of Ukraine, as well as humanitarian aid to be delivered to Mariupol and other besieged cities.

“The European Council demands that Russia immediately stop its military aggression in the territory of Ukraine, immediately and unconditionally withdraw all forces and military equipment from the entire territory of Ukraine, and fully respect Ukraine’s territorial integrity, sovereignty and independence within its internationally recognised borders.

“The relevant legal acts will soon be published in the Official Journal.”

As listed above, the Official Journal with the legal actions identified was published on April 8 (OJ L111).

The United Kingdom also took action on April 6 to expand sanctions. Government of the United Kingdom Press Release, UK imposes sweeping new sanctions to starve Putin’s war machine, 6 April 2022, https://www.gov.uk/government/news/uk-imposes-sweeping-new-sanctions-to-starve-putins-war-machine. The sanctions announced in the press release are listed below.

“Key sanctions announced today include:

“asset freezes against Sberbank and Credit Bank of Moscow. Sberbank is Russia’s largest bank and this freeze is being taken in co-ordination with the US

“an outright ban on all new outward investment to Russia. In 2020 UK investment in Russia was worth over £11 billion. This will be another major hit to the Russian economy and further limit their future capabilities

“by the end of 2022, the UK will end all dependency on Russian coal and oil, and end imports of gas as soon as possible thereafter. From next week, the export of key oil refining equipment and catalysts will also be banned, degrading Russia’s ability to produce and export oil – targeting not only the industry’s finances but its capabilities as a whole

“action against key Russian strategic industries and state owned enterprises. This includes a ban on imports of iron and steel products, a key source of revenue. Russia’s military ambitions are also being thwarted by new restrictions on its ability to acquire the UK’s world-renowned quantum and advanced material technologies

“and targeting a further eight oligarchs active in these industries, which Putin uses to prop up his war economy.”

Canada, Japan and Australia also announced additional sanctions. See Government of Canada, Canada announces it will impose additional sanctionson Russian and Belarusian regimes, April 4, 2022, https://www.canada.ca/en/global-affairs/news/2022/04/canada-announces-it-will-impose-additional-sanctions-on-russian-and-belarusian-regimes.html; Reuters, Japan bans Russian coal imports, expels eight diplomats, April 8, 2022, https://www.reuters.com/world/asia-pacific/japan-considers-restrictions-coal-imports-russia-jiji-2022-04-07/; The Japan Times, Japan to expel eight Russians, including diplomats, as Kishida announces new sanctions, 8 April 2022, https://www.japantimes.co.jp/news/2022/04/08/national/japan-russia-expel-diplomats/ (“Kishida, however, announced a sweeping new round of sanctions, declaring that Japan will phase out imports of Russian coal, ban imports of Russian machinery, lumber and vodka, bar new investments in Russia and freeze assets held by major Russian lenders Sberbank and Alfa Bank. Japan will also freeze the assets of an additional 400 or so military personnel and lawmakers and some 20 military-related organizations, including state-run companies, Kishida said.”); Reuters, Australia to impose sanctions on 67 more Russians over Ukraine, April 7, 2022, https://www.reuters.com/world/australia-impose-sanctions-67-russians-over-ukraine-2022-04-07/; New Zealand to apply trade sanctions in response to Russian atrocities, April 6, 2022, https://www.beehive.govt.nz/release/new-zealand-apply-trade-sanctions-response-russian-atrocities (“The Government have announced that they will apply 35% tariffs to all imports from Russia, and extend the existing export prohibitions to industrial products closely connected to strategic Russian industries. This is New Zealand’s most significant economic response to the Russian invasion to date. ‘The images and reports emerging of atrocities committed against civilians in Bucha and other regions of Ukraine is abhorrent and reprehensible, and New Zealand continues to respond to Putin’s mindless acts of aggression,’ Foreign Minister Nanaia Mahuta said. ‘Under the Russia Sanctions Act, New Zealand will apply tariffs across the board to all Russian imports, as well as ban the export of industrial products such as ICT equipment and engines, sending a clear message that New Zealand will not fund or support the Russia war machine,’ Trade and Export Growth Minister Damien O’Connor said.”).

On April 8, President Biden also signed two Congressional bills into law, one suspending normal trade relations with Russia and Belarus and one banning imports of oil, gas and coal from Russia (President Biden had already banned such imports). See White House, Bills Signed: H.R. 6968 and H.R. 7108, APRIL 08, 2022, https://www.whitehouse.gov/briefing-room/legislation/2022/04/08/bills-signed-h-r-6968-and-h-r-7108/ (“On Friday, April 8, 2022, the President signed into law: H.R. 6968, the ‘Ending Importation of Russian Oil Act,’ which statutorily prohibits the importation of energy products from the Russian Federation; and H.R. 7108, the ‘Suspending Normal Trade Relations with Russia and Belarus Act,’ which suspends normal trade relations with the Russian Federation and the Republic of Belarus and seeks to further leverage trade and human rights sanctions.”).

While major importing nations of Russian oil and gas have been unable or unwilling to date to cut off purchases of oil and gas, the level of economic and financial sanctions imposed on the Russian Federation and Belarus coupled with the withdrawal of major businesses (temporarily or permanently) from Russia are having significant negative effects on the Russian economy both short term and longer term. These effects coupled with the damage to the Ukrainian economy inflicted by the Russian war on Ukraine will have global effects. As reviewed in an earlier post, Ukraine and Russia are major exporters of various agricultural products. The war is both creating increased food insecurity and driving inflation on agricultural products which hurts all consumers but the poorest the hardest. See March 30, 2022: Food security challenges posed by the Russian invasion of Ukraine, https://currentthoughtsontrade.com/2022/03/30/food-security-challenges-posed-by-the-russian-invasion-of-ukraine/. Indeed, global food prices reached an all time high in March. UN News, Ukraine war drives international food prices to ‘new all-time high’, 8 April 2022, https://news.un.org/en/story/2022/04/1115852

The WTO’s Director-General Ngozi Okonjo-Iweala has indicated that global trade growth will be nearly 50% lower than previously projected for 2022 (2.5% vs. 4.7%) flowing from the war in Ukraine and ongoing supply chain issues. Sunday Observer, Ukraine war to halve global trade growth – WTO, 10 April 2022, ww.sundayobserver.lk/2022/04/10/business/ukraine-war-halve-global-trade-growth-wto. The war and individual countries reactions to Russia’s aggression are also likely to have longer term effects on global integration and supply chains. One is already seeing significant reductions in foreign investment flows into China. China’s actions or inactions towards Russia’s aggression may reduce foreign investor confidence in the Chinese economy as a place for investment at least for exports. A return to isolation of some countries from the larger global community is certainly afoot. The only question is whether states besides Russia and Belarus will be in the ostracized group.

With Russia continuing its aggression against Ukraine and with apparent scorched earth tactics being pursued, it is likely that the latest round of sanctions will not be the last. The strains on the global economy are likely to worsen in the coming months.

WTO Dispute Settlement in 2022 — to date (April 5, 2022) European Union is only WTO Member to file new disputes

Terence P. Stewart · April 5, 2022 · dispute settlement · Australia, China, Egypt, European Union, Russian Federation, Taiwan, United States · No Comments

With 2022 more than one quarter over, the European Union remains the only WTO Member to file a new WTO dispute this year, and it has filed five requests for consultation. The United States has spent the first fifteen months of the Biden Administration seeking resolution to long-standing disputes but to date has filed no new cases (2021-2022). China had filed a number of disputes in 2021 and is the subject of various disputes filed in the 2021-2022 including two of the EU cases this year.

Two of the five cases filed in 2022 by the EU were against China and are reviewed in prior posts. See February 21, 2022: The European Union’s February 18, 2022 request for consultations with China over China’s “anti-suit injunctions” in intellectual property disputes and its failure to publish decisions and respond to EU inquiries, https://currentthoughtsontrade.com/2022/02/21/the-european-unions-february-18-2022-request-for-consultations-with-china-over-chinas-anti-suit-injunctions-in-intellectual-property-disputes-and-its-failure-to-publish-decisions-and-respond/; January 27, 2022: The European Union requests consultations with China at the WTO for restrictions on Lithuanian goods imposed by China, https://currentthoughtsontrade.com/2022/01/27/the-european-union-requests-consultations-with-china-at-the-wto-for-restrictions-on-lithuania-goods-imposed-by-china/. On the intellectual property dispute, Japan, United States and Canada have requested to join the consultations. On the EU’s challenge to China’s actions on goods from Lithuania, six other Members have sought to join the consultations — Australia, Taiwan, Japan, United States, United Kingdom, and Canada.

The other three requests for consultations filed by the EU this year include one filed with the Russian Federation (DS608) concerning the exportation of wood products, one with Egypt (D609) concerning registration requirements relating to the importation of certain products and the latest one with the United Kingdom (DS612) concerning measures relating to the allocation of contracts for difference in low carbon energy generation.

The case against the Russian Federation deals with the termination of tariff-rate quotas on exports of wood products, other increases in export duties on wood products, reduction of the number of border crossing points for the exportation of wood products and the introduction of export restrictions or prohibitions on certain wood products by the Eurasian Economic Union. WTO inconsistencies alleged by the EU include Art. I:1, II:1(a), XI:1, XIII:1 of GATT 1994 and Paragraph 2, second sentence, of the Protocol on the Accession of the Russian Federation in conjunction with paragraphs 638, 668, and 1450 of the Report of the Working Party. WT/DS608/1/Rev.1, G/L/1434/Rev.1 (27 February 2022).

The request for consultations with Egypt involves challenges to Egyptian measures that apply to EU companies wishing to export to Egypt where registration requirements exist (29 categories of goods “including agricultural and food products, cosmetics, toys, textiles, garments, household appliances, furniture and ceramic tiles.”). The requirements are alleged to burdensome, non-transparent, costly and time-consuming and some registration applications have not been processed even after years. The Egyptian measures of concern raise questions about consistency with WTO GATT 1994 Articles XI:1, VIII:1(c), VIII:3, X:1, X:3(a); Art. 4.2 of the Agriculture Agreement and Articles 1.2, 1.5 3.3, 3.5(e) and 3.5(f) of the Import Licensing Agreement. WT/DS609/1, G/L/1425 (27 January 2022). The Russian Federation has sought to join consultations. WT/DS609/2.

The most recent request for consultations with the United Kingdom involves local content requirements for incentivised low carbon electricity generation projects (e.g., offshore wind). “The measures at issue described above appear to be inconsistent with the United Kingdom’s obligations under the covered agreements, in particular Article III:4 of the GATT 1994, inasmuch as, by incentivising applicants to commit to and implement an ambitious percentage of Untied Kingdom content of the allocation of CfD, they accord less favourable treatment to imported goods than to like domestic goods.” WT/DS612/1, G/L/1428 (30 March 2022).

Of the five cases, the two against China are probably the most important systemically. The case about retaliation by China against Lithuania addresses a recurring problem with China punishing WTO Members who take positions with which China disagrees, The intellectual property case as described in a prior post is important to prevent China from blocking IP rights holders from obtaining the benefits of IP that the TRIPS Agreement safeguards.

The Russian Federation case may proceed but is overshadowed by Russia’s invasion of Ukraine and sanctions imposed by many countries, including by the EU. That said, the case deals with what appear to be clear violations of WTO obligations by Russia.

The case against Turkey is typical of a range of disputes over the years against countries who adopt a series of barriers to access to the market to protect domestic industries. While there can always be potentially relevant standards issues or health/safety issues, the actions of Egypt sound as though they simply slow down, limit or block import trade.

Finally, the case against the United Kingdom deals with the efforts of many countries to speed up adoption of renewable energy and reflect the important systemic issue of the interface between domestic incentives and WTO obligations on national treatment.

At the last Dispute Settlement Body meeting (March 28, 2022), many WTO Members continued to seek the reestablishment of a two tier dispute settlement process which the United States continues to block. See WTO News Release, Members continue push to commence Appellate Body appointment process, 28 March 2022, https://www.wto.org/english/news_e/news22_e/dsb_28mar22_e.htm. The statements made appear to be identical or similar to those made over the last several years. The WTO news release on the meeting and the issue of the Appellate Body is copied below in relevant part.

“Appellate Body appointments

“Mexico, speaking on behalf of 123 members, introduced for the 52nd time the group’s proposal to start the selection processes for filling vacancies on the Appellate Body. The extensive number of members submitting the proposal reflects a common concern over the current situation in the Appellate Body which is seriously affecting the overall WTO dispute settlement system against the best interest of members, Mexico said for the group.

“The United States reiterated it was not in a position to support the proposed decision. The US continues to have systemic concerns with the Appellate Body, which it has explained and raised over the past 16 years and across multiple administrations. The US said it believes that WTO members must undertake fundamental reform if the dispute settlement system is to remain viable and credible. The dispute settlement system can and should better support the WTO’s negotiating and monitoring functions, the US said, adding that it looked forward to further discussions with members on these important issues.

“Around 20 delegations (including the EU for its 27 members and Nigeria for the African Group) took the floor to reiterate the importance of the WTO’s two-tiered dispute settlement system to the stability and predictability of the multilateral trading system. Several cited this issue as the top priority for reform of the organization and said the continued impasse was causing both commercial harm to members and systemic harm to multilateral trade.

“For the 123 members, Mexico again came back to say the fact a member may have concerns about certain aspects of the functioning of the Appellate Body cannot serve as pretext to impair and disrupt the work of the DSB and dispute settlement in general, and that there was no legal justification for the current blocking of the selection processes, which is causing concrete nullification and impairment of rights for many members.

“The DSB chair, Ambassador Athaliah Lesiba Molokomme of Botswana, noted the previous General Council chair has been working on the issue of restoring a fully functioning dispute settlement system within the context of preparations for the WTO’s 12th Ministerial Conference. She said she hoped members would be able to find a solution to this matter.”

I have reviewed in many prior posts the longstanding and well articulated concerns of the United States, concerns which have largely not been addressed in the process to date. See, e.g., February 14, 2020: USTR’s Report on the WTO Appellate Body – An Impressive Critique of the Appellate Body’s Deviation from Its Proper Role, https://currentthoughtsontrade.com/2020/02/14/ustrs-report-on-the-wto-appellate-body-an-impressive-critique-of-the-appellate-bodys-deviation-from-its-proper-role/

I have also in recent posts looked at individual disputes where the U.S. was the respondent and reviewed problems with the decisions. See, e.g., February 9, 2022: The WTO Panel Report, UNITED STATES – SAFEGUARD MEASURE ON IMPORTS OF LARGE RESIDENTIAL WASHERS, WT/DS546/R (8 February 2022), https://currentthoughtsontrade.com/2022/02/09/the-wto-panel-report-united-states-safeguard-measure-on-imports-of-large-residential-washers-wt-ds546-r-8-february-2022/; January 27, 2022: WTO Arbitration Report on China’s challenge to U.S. countervailing duty investigations — while retaliation is much smaller than China sought, core problems with original Appellate Body decision flags challenge to restoring the Dispute Settlement binding process, https://currentthoughtsontrade.com/2022/01/27/wto-arbitration-report-on-chinas-challenge-to-u-s-countervailing-duty-investigations-while-retaliation-is-much-smaller-than-china-sought-core-problems-with-original-appellate-body-decision-flag/; December 29, 2021: WTO Dispute Settlement — What the Recently Adopted Panel Report on United States – Antidumping and Countervailing Duties on Ripe Olives from Spain says about the existing dispute settlement system and about needed WTO reforms, https://currentthoughtsontrade.com/2021/12/29/wto-dispute-settlement-what-the-recently-adopted-panel-report-on-united-states-antidumping-and-countervailing-duties-on-ripe-olives-from-spain-says-about-the-existing-dispute-settlement-system-an/.

Thus, it is unlikely that the twice delayed 12th Ministerial Conference to be held in Geneva June 13-15 this year will resolve the impasse on the Appellate Body. While it is possible that a process may be agreed to to examine the root problems and formulate possible solutions as part of the WTO reform agenda, even that may be optimistic in the current environment.

Existing disputes continue to proceed, with various resolutions possible in cases even among countries who have not signed up to the Agreement on the Interim Arbitration Process, although two dozen panel reports have been “appealed” but cannot be heard until/unless an Appellate Body is reconsituted. Such appeals have been taken by a number of Members including by Members who are parties to the interim process (e.g., EU on a panel report of a challenge to a trade remedy proceeding against the Russian Federation). See, e.g., WTO Dispute Settlement, Appellate Body, https://www.wto.org/english/tratop_e/dispu_e/appellate_body_e.htm (listing 24 cases where appeals are pending).

This Friday (April 8, 2022) , there is a Dispute Settlement Body meeting to consider a joint request by the Republic of Korea and the United States in the dispute involving UNITED STATES – SAFEGUARD MEASURE ON IMPORTS OF LARGE RESIDENTIAL WASHERS that would have the DSB adopt a decision that the panel report is adopted unless an appeal is filed by July 7, 2022 (essentially extending the time to appeal the panel report presumably to give the parties more time to consider a mutually acceptable resolution). WT/DS546/8 (29 March 2022).

So whether there is a resolution to the Appellate Body impasse or not, WTO Members have ongoing options to address trade concerns including through Committee work, bilateral interactions and disputes through the WTO or through FTAs.

Food security challenges posed by the Russian invasion of Ukraine

Terence P. Stewart · March 30, 2022 · food security, Sanctions on Russia following its invasion of Ukraine · Russian Federation, Ukraine · No Comments

Ukraine and Russia are important exporters of wheat, corn and sunflower oil. See, e.g., WTO Trade Profiles 2021 at 376 (Ukraine top three agricultural expoers were sunflower-seed, or cotton oil ($5.32 billion), corn ($4.885 billion) and wheat and meslin ($3.594 billion)) and 298 (Russian Federation, top two agricultural exports were wheat and meslin ($6.403 billion), sunflower seed or cotton oil ($2.206 billion). Ukraine’s exports in 2022 are certain to be disrupted by the Russian war in the country which is harming infrastructure, the ability of farmers to plant crops, increasing input costs and maritime costs. Effects on Russian exports are less clear but could be affected as well.

The United Nation’s Food and Agriculture Organization (FAO) released an updated evaluation of risks on food security both for Ukrainians and for the world from the ongoing conflict last week (March 25), See FAO, Information Note, The importance of Ukraine and the Russian Federation for global agricultural markets and the risks associated with the current conflict, 25 March 2022 Update, https://www.fao.org/3/cb9236en/cb9236en.pdf. The Executive Summary (pages 1-4) is copied below.

“Executive Summary

“1. Market structure, trade profiles and recent price trends

“1.1 Market shares

“• The Russian Federation and Ukraine are among the most important producers of agricultural commodities in the world. Both countries are net exporters of agricultural products, and they both play leading supply roles in global markets of foodstuffs and fertilisers, where exportable supplies are often concentrated in a handful of countries. This concentration could expose these markets to increased vulnerability to shocks and volatility.

“• In 2021, either the Russian Federation or Ukraine (or both) ranked amongst the top three global exporters of wheat, maize, rapeseed, sunflower seeds and sunflower oil, while the Russian Federation also stood as the world’s top exporter of nitrogen fertilizers, the second leading supplier of potassium fertilizers and the third largest exporter of phosphorous fertilizers.

“1.2 Trade profiles

“• Many countries that are highly dependent on imported foodstuffs and fertilizers, including numerous that fall into the Least Developed Country (LDC) and Low-Income Food-Deficit Country (LIFDC) groups, rely on Ukrainian and Russian food supplies to meet their consumption needs. Many of these countries, already prior to the conflict, had been grappling with the negative effects of high international food and fertilizer prices.

“Risk analysis: Assessing the risks emanating from the conflict

“2.1 Trade risks

“• In Ukraine, the escalation of the conflict raises concerns on whether crops will be harvested and products exported. The war has already led to port closures, the suspension of oilseed crushing operations and the introduction of export licensing requirements for some products. All of these could take a toll on the country’s exports of grains and vegetable oils in the months ahead. Much uncertainty also surrounds Russian export prospects, given sales difficulties that may arise as a result of economic sanctions imposed on the country.

“2.2 Price risks

“• FAO’s simulations gauging the potential impacts of a sudden and steep reduction in grain and sunflower seed exports by the two countries indicate that these shortfalls might only be partially compensated by alternative sources during the 2022/23 marketing season. The capacity of many exporting countries to boost output and shipments may be limited by high production and input costs. Worryingly, the resulting global supply gap could raise international food and feed prices by 8 to 22 percent above their already elevated baseline levels.

“• If the conflict keeps crude oil prices at high levels and prolongs the two countries’ reduced global export participation beyond the 2022/23 season, a considerable supply gap would remain in global grain and sunflowerseed markets, even as alternative producing countries expand their output in response to the higher output prices. This would keep international prices elevated well above baseline levels.

“2.3 Logistical risks

“• In Ukraine, there are also concerns that the conflict may result in damages to inland transport infrastructure and seaports, as well as storage and processing infrastructure. This is all the more so given the limited capacity of alternatives, such as rail transport for seaports or smaller processing facilities for modern oilseeds crushing facilities, to compensate for their lack of operation.

“• More generally, apprehensions also exist regarding increasing insurance premia for vessels destined to berth in the Black Sea region, as these could exacerbate the already elevated costs of maritime transportation, compounding further the effects on the final costs of internationally sourced food paid by importers.

“2.4 Production risks

“• Although early production prospects for 2022/23 winter crops were favourable in both Ukraine and the
Russian Federation, in Ukraine, the conflict may prevent farmers from attending to their fields and harvesting and marketing their crops, while disruptions to essential public services could also negatively affect agricultural activities.

“• Current indications are that, as a result of the conflict, between 20 and 30 percent of areas sown to winter crops in Ukraine will remain unharvested during the 2022/23 season, with the yields of these crops also likely to be adversely affected. Furthermore, considerable uncertainties surround Ukrainian farmers’ capacity to plant crops during the fast approaching spring crop cycle.

“• The conflict is also likely to affect the ability of Ukraine to control its animal disease burden, significantly increasing the risk of proliferation of animal diseases, notably of African swine fever (ASF), within Ukraine and in neighbouring countries.

“• In the case of the Russian Federation, although no major disruption to crops already in the ground appears imminent, uncertainties exist over the impact that the international sanctions imposed on the country will have on food exports. Any loss of export markets could depress farmer incomes, thereby negatively affecting future planting decisions.

“• Economic sanctions imposed on the Russian Federation could also disrupt its imports of agricultural inputs, notably pesticides and seeds, on which the country is highly dependent. This could result in less plantings, lower yields and lower qualities, exposing the Russian agricultural sector and global food supplies, at large, to non-negligible risks.

“2.5 Humanitarian risks

“• The conflict is set to increase humanitarian needs in Ukraine, while deepening those of millions of people that prior to its escalation were already displaced or requiring assistance due to the more than eight-year conflict in the eastern part of the country. By directly constraining agricultural production, limiting economic activity and raising prices, the conflict will further undercut the purchasing power of local populations, with consequent increases in food insecurity and malnutrition.

“• Humanitarian needs in neighbouring countries, where displaced populations are seeking refuge, are also set to increase substantially.

“• Globally, if the conflict results in a sudden and prolonged reduction in food exports by Ukraine and the Russian Federation, it will exert additional upward pressure on international food commodity prices to the detriment of economically vulnerable countries, in particular. FAO’s simulations suggest that under such a scenario, the global number of undernourished people could increase by 8 to 13 million people in 2022/23, with the most pronounced increases taking place in Asia-Pacific, followed by sub-Saharan Africa, and the Near East and North Africa. If the war lasts, impacts will go well beyond 2022/23.

“2.6 Energy risks

“• The Russian Federation is a key player in the global energy market. As a highly energy-intensive industry, especially in developed regions, agriculture will inevitably be affected by the sharp increase in energy prices that has accompanied the conflict.

“• Agriculture absorbs high amounts of energy directly, through the use of fuel, gas and electricity, and indirectly, through the use of agri-chemicals such as fertilisers, pesticides and lubricants.

“• With prices of fertilizers and other energy-intensive products rising as a consequence of the conflict, overall input prices are expected to experience a considerable boost. The higher prices of these inputs will first translate into higher production costs and eventually into higher food prices. They could also lead to lower input use levels, depressing yields and harvests in the 2022/23 season, thus giving further upside risk to the state of global food security in the coming years.

“• Higher energy prices also make agricultural feedstocks (especially maize, sugar and oilseeds/vegetable oils) competitive for the production of bio-energy and, given the large size of the energy market relative to the food market, this could pull food prices up to their energy parity equivalents.

“2.7 Exchange rate, debt, and growth risks

“• The Ukrainian hryvnia reached a record low against the United States dollar (USD) in early March 2022, with likely repercussions for Ukrainian agriculture, including a boost to its export competitiveness and curbs on its ability to import.

“• Although their extent remains unclear at this stage, conflict-induced damages to Ukraine’s productive capacity and infrastructure are expected to entail very high recovery and reconstruction costs.

“• The economic sanctions imposed on the Russian Federation have also led to a significant depreciation of the Russian rouble. Although this should make Russian exports of agricultural commodities more affordable, a lasting rouble depreciation would negatively affect investment and productivity growth prospects in the country.

“• Weakening economic activity and a depreciated rouble are also expected to have serious effects on countries in Central Asia through the reduction of remittance flows, as for many of these countries remittances constitute a significant part of gross domestic product (GDP)

“• The current conflict may also have global spillovers. While its impact on the global economy remains uncertain at this stage and will depend on several factors, the most vulnerable countries and populations are expected to be hit hard by slower economic growth and increased inflation, at a time when the world is still attempting to recover from the recession triggered by the COVID-19 pandemic.

“• Agriculture is the backbone of the economies of many developing countries, the majority of which rely on the United States dollar for their borrowing needs. As such, a lasting appreciation of the USD vis-à-vis other currencies may have negative significant economic consequences for these countries, including for their agrifood sectors. Moreover, the potential reduction of GDP growth in several parts of the world will affect global demand for agrifood products with negative consequences for global food security. Lower GDP growth will also likely reduce the availability of funds for development, especially if global military expenses increase.

“Policy recommendations

“• In order to prevent or limit the conflict’s detrimental impacts on the food and agricultural sectors of Ukraine and the Russian Federation, every effort should be made to keep international trade in food and fertilizers open to meet domestic and global demand. Supply chains should be kept fully operational, including by protecting standing crops, livestock, food processing infrastructure, and all logistical systems.

“• In order to absorb conflict-induced shocks and remain resilient, countries that depend on food imports from Ukraine and the Russian Federation will need to find alternative export suppliers for their food needs. They should also rely on existing food stocks and enhance the diversity of their domestic production bases.

“• The food security impacts of the conflict on vulnerable groups necessitate timely monitoring and well-targeted social protection interventions to alleviate the hardship caused by the conflict and to foster a fast recovery from it. To assist the internally displaced people, refugees and groups directly affected by the conflict, the reach of Ukraine’s national social protection system should be expanded by registering additional population groups within the Unified Social Information System.

“• In countries hosting refugees, access to existing social protection systems and job opportunities should also be eased by lifting legal access barriers and, where needed, by increasing the capacity of host countries’ social protection systems to absorb additional caseloads.

“• Countries affected by potential disruptions ensuing from the conflict must carefully weigh measures they put in place against their potentially detrimental effect on international markets including over the longer term. Particularly, export restrictions must be avoided. They exacerbate price volatility, limit the buffer capacity of the global market, and have negative impacts over the medium term.

“• The spread of African swine fever (ASF) and other animal diseases must be contained by improving biosecurity and good husbandry practices at all geographical levels, by taking steps to facilitate early detection, timely reporting and rapid disease containment, and by implementing measures that support virus detection, such as surveillance schemes and targeted sampling of animals.

“• Market transparency and policy dialogue should be strengthened, as they play key roles when agricultural commodity markets are under uncertainty and disruptions need to be minimised to ensure that international markets continue to function properly and that trade in food and agricultural products flows smoothly.”

Figure 15 of the paper (page 10) identifies countries largely dependent on Ukraine and Russia for wheat.

The FAO also released a separate paper on the food security challenges for the people of Ukraine on March 25, 2022. *See* FAO, Note on the impact of the war on food security in Ukraine, 25 March 2022, https://www.fao.org/3/cb9171en/cb9171en.pdf.

The FAO’s latest Food Price Index (released March 4, 2022, shows agricultural products already at all time highs. See FAO, The FAO Food Price Index rises to a new all-time high in February, Release date: 04/03/2022, https://www.fao.org/worldfoodsituation/foodpricesindex/en/#:~:text=Release%20date%3A%2004%2F03%2F,February%202011%20by%203.1%20points.

As reviewed in a prior post, countries imposing sanctions on Russia, including the G-7 and the EU, are working to minimize the food security issues. March 26, 2022: Blockage of Accession of Belarus to WTO, additional sanctions on Russia and other recent developments, https://currentthoughtsontrade.com/2022/03/26/blockage-of-accession-of-belarus-to-wto-additional-sanctions-on-russia-and-other-recent-developments/ (“The G-7 Leaders’ Statement on March 24, 2022 outlined their efforts to address the potential food security issues caused by Russia’s invasion of Ukraine. See G-7 Leaders’ Statement, March 24, 2022, paragraphs 17 and 18, https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/24/g7-leaders-statement/#:~:text=We%2C%20the%20Leaders%20of%20the,against%20independent%20and%20sovereign%20Ukraine. ’17. More immediately, President Putin’s war places global food security under increased pressure. We recall that the implementation of our sanctions against Russia takes into account the need to avoid impact on global agricultural trade. We remain determined to monitor the situation closely and do what is necessary to prevent and respond to the evolving global food security crisis. We will make coherent use of all instruments and funding mechanisms to address food security, and build resilience in the agriculture sector in line with climate and environment goals. We will address potential agricultural production and trade disruptions, in particular in vulnerable countries. We commit to provide a sustainable food supply in Ukraine and support continued Ukrainian production efforts. 18. We will work with and step up our collective contribution to relevant international institutions including the World Food Programme (WFP), in parallel with Multilateral Development Banks and International Financial Institutions, to provide support to countries with acute food insecurity. We call for an extraordinary session of the Council of the Food and Agriculture Organization (FAO) to address the consequences on world food security and agriculture arising from the Russian aggression against Ukraine. We call on all participants of the Agriculture Markets Information System (AMIS) to continue to share information and explore options to keep prices under control, including making stocks available, in particular to the WFP. We will avoid export bans and other trade-restrictive measures, maintain open and transparent markets, and call on others to do likewise, consistent with World Trade Organization (WTO) rules, including WTO notification requirements.’”).

The issue is taking center stage at the WTO as reviewed in a recent press notice from the WTO on the Director-General’s comments at an informal meeting of the General Council. See WTO news release, DG Okonjo-Iweala: “This is not the time to retreat inward,” 28 March 2022, https://www.wto.org/english/news_e/news22_e/dgno_28mar22_e.htm. Some of the news release is copied below.

“’For dozens of poor countries and tens of millions of people, basic food security is in danger,” she warned. “These countries already have been some of the slowest economic recoveries from the pandemic, and international cooperation on trade is necessary to help mitigate risks of poverty, hunger, even famine and social unrest.’

“The Director-General noted that the UN Secretary-General has set up a three-tiered steering committee involving heads of government, heads of international organizations and technical experts to deal with the issue of surging energy and food prices.

“The WTO is also expected to play a key role in finding solutions to the food crisis, the Director-General noted. The chair of the WTO’s agriculture negotiations, Ambassador Gloria Abraham Peralta of Costa Rica, is planning a food security conference that will take place at the end of April. WTO Secretariat staff have also been carrying out analysis on food security issues which will be shared with members shortly.

“’We at the WTO have a solid basis on which to consider workable solutions to the present crisis,” the DG declared.

“In the near-term, international cooperation on trade will be needed to minimize the impact of supply crunches for key commodities where prices are already high by historical standards and to keep markets functioning smoothly, the Director-General said. While only 12 members have imposed export restrictions on food to date, coordinated government action is needed to avoid a repeat of the cascading export restrictions that exacerbated the rise of food prices in the crisis of 2008-2010.

“In addition, countries with buffer stocks that can afford to share could coordinate the release of wheat, barley, other cereals and grains and oils into international markets, thereby alleviating the supply squeeze. Countries such as the United States, Canada, Australia, Argentina, and France could increase wheat cultivation while others such as China, Germany, Morocco, Saudi Arabia, Egypt, and Nigeria could increase global supply of fertilizer. Africa, with plentiful land and other resources, can also take steps to produce more food itself by using more adaptable varieties of wheat, maize and other crops.

“Trade facilitation measures could also be brought into play to ease the free flow of goods, while efforts should be made to allow the UN’s World Food Programme full access to humanitarian purchases. Prompt notification and information sharing regarding food supplies and stockpiles can help the international community better manage the situation and keep markets functioning more smoothly.”

WTO Members have a poor track record of not retreating from sharing core commodities during periods of shortages, which actions result in increased price volatility and significant harm to food importing nations. The transparency exercise as part of the COVID-19 pandemic on actions on both medical goods and agricultural products has improved the ability to understand actions being taken. But to date, Members continue to take actions to restrict exports when internal food security concerns arise.

I have written with former colleagues a number of papers in the past looking at the food security problems during earlier periods in the last fifteen years and the risks of social unrest that arise for many countries when core commodities become unaffordable. They are imbedded below.

GDP

1-Stewar-Manaker

2-2015-Global-Hunger-and-the-WTO-how-the-International-Trade-Rules-Address-Food-Security

Let’s hope that the focus of the G-7, EU and agricultural exporting countries and the attention being given to the issue at the WTO will result in a minimization of increased food insecurity to people around the world in the coming months.

Blockage of Accession of Belarus to WTO, additional sanctions on Russia and other recent developments

Terence P. Stewart · March 26, 2022 · Sanctions on Russia following its invasion of Ukraine · European Union, G-7, Russian Federation, Ukraine · No Comments

Extensive trade and financial sanctions have been imposed by the G-7 countries and EU and others on Russia and Belarus for Russia’s unprovoked war on Ukraine. The U.S., EU, United Kingdom, Japan, Republic of Korea, Australia, Canada, New Zealand and others have imposed a series of actions. In meetings of the G-7, NATO and U.S.-EU this week, joint action to continue to pressure Russia and Belarus to cease hostilities in Ukraine was reviewed.

At the WTO, a number of Members notified the General Council that accession negotiations with Belarus would not continue. Belarus was described as “unfit” to be a Member. JOINT STATEMENT REGARDING THE APPLICATION FROM BELARUS FOR ACCESSION TO THE WORLD TRADE ORGANIZATION, COMMUNICATION FROM ALBANIA; AUSTRALIA; CANADA; EUROPEAN UNION; ICELAND; JAPAN; REPUBLIC OF KOREA; MONTENEGRO; NEW ZEALAND; NORTH MACEDONIA; NORWAY; UKRAINE; UNITED KINGDOM AND UNITED STATES, 24 March 2022, WT/GC/246. The joint statement is embedded below.

246-1

While, as the joint statement notes, there has been no progress in the accession talks since 2000 based on events within Belarus, the joint statement makes clear that Belarus will not become a member of the WTO, certainly not in the foreseeable future.

The actions of Russia with the support from Belarus in invading Ukraine have led to a massive backlash and effort to remove or limit the role of Russia (and Belarus) in the global economy and in multilateral organizations. In previous posts, I have reviewed efforts by various countries to remove most favored nation treatment on Russia and Belarus. March 20, 2022: Banned imports, higher tariffs, other actions by trading partners as Russia and Belarus lose most favored nation treatment by G-7 countries and EU during the conflict in Ukraine, https://currentthoughtsontrade.com/2022/03/20/banned-imports-higher-tariffs-other-actions-by-trading-partners-as-russia-and-belarus-lose-most-faovered-nation-treatment-by-g-7-countries-and-eu-during-the-conflict-in-ukraine/. The G-7 and EU have limited access to funding for Russia from the IMF, World Bank and other institutions, are attempting to limit Russia’s role in the WTO. Additional sanctions were announced this week in Brussels. See FACT SHEET: United States and Allies and Partners Impose Additional Costs on Russia, March 24, 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/24/fact-sheet-united-states-and-allies-and-partners-impose-additional-costs-on-russia/.

“Today’s actions include:

“Full blocking sanctions on more than 400 individuals and entities, including the Duma and its members,
additional Russian elites, and Russian defense companies that fuel Putin’s war machine.

“This includes:

“328 Duma members and sanctioning the Duma as an entity.

“Herman Gref, the head of Russia’s largest financial institution Sberbank and a Putin advisor since the 1990s.

“Russian elite Gennady Timchenko, his companies and his family members.

“17 board members of Russian financial institution Sovcombank.

“48 Large Russian defense state-owned enterprises that are part of Russia’s defense-industrial base and produce weapons that have been used in Russia’s assault against Ukraine’s people, infrastructure, and territory, including Russian Helicopters, Tactical Missiles Corporation, High Precision Systems, NPK Tekhmash OAO, Kronshtadt. We are targeting, and will continue to target, the suppliers of Russia’s war effort and, in turn, their supply chain.

“Establishment of an initiative focused on sanctions evasions.

“G7 leaders and the European Union today announced an initiative to share information about and coordinate responses related to evasive measures intended to undercut the effectiveness and impact of our joint sanctions actions. Together, we will not allow sanctions evasion or backfilling. As part of this effort, we will also engage other governments on adopting sanctions similar to those already imposed by the G7 and other partners.

“Continuing to blunt the Central Bank’s ability to deploy international reserves, including gold, to prop up the Russian economy and fund Putin’s brutal war.

“G7 leaders and the European Union will continue to work jointly to blunt Russia’s ability to deploy its international reserves to prop up Russia’s economy and fund Putin’s war, including by making clear that any transaction involving gold related to the Central Bank of the Russian Federation is covered by existing sanctions.”

This week President Biden noted the U.S. preference to have Russia removed from the G-20, although press accounts indicate such a move even if backed by the G-7 would be blocked by China and possibly others. See, e.g., Reuters, Russia’s G20 membership under fire from U.S., Western allies, March 22, 2022, https://www.reuters.com/world/europe/poland-pushes-call-russia-be-excluded-g20-2022-03-22/; Reuters, Russia’s Putin gets Chinese backing to stay in G20, March 23, 2022, https://www.reuters.com/world/europe/russias-ambassador-indonesia-says-putin-plans-attend-g20-summit-2022-03-23/. If Russia is not excluded, it is unclear if G-7 Members and others might opt not to attend any G-20 meetings during the pendency of the war.

At the WTO, the joint statement to the General Council on the need of Members to take actions in light of the threats posed by Russia was followed by a response from Russia. The two documents are embedded below.

244

245

The two largest economic challenges from the war in Ukraine is escalating energy prices and food security flowing from the large percentage of global wheat shipments coming from Ukraine and Russia. While the U.S. and Canada have banned imports of oil and/or gas from Russia in recent weeks, that option is not immediately available to the EU countries. See March 9, 2022: U.S. joins Canada in banning imports of Russian oil and gas; EU announces plan to drastically reduce reliance on Russian gas; United Kingdom will phase out imports of oil and gas from Russia by end of 2022; Australian oil companies stop purchasing Russian oil, https://currentthoughtsontrade.com/2022/03/09/u-s-joins-canada-in-banning-imports-of-russian-oil-and-gas-eu-announces-plan-to-drastically-reduce-reliance-on-russian-gas-united-kingdom-will-phase-out-imports-of-oil-and-gas-from-russia-by-end-of/ (“The European Commission announced a proposed ambitious program to diversify gas supplies and expand renewables to achieve a potential two-thirds reduction in dependence on Russian oil and gas by the end of 2022 for the European Union. The program, RePowerEU, was announced on March 8th and contains a number of documents.”).

The U.S. and the EU reached agreement on joint efforts to help reduce EU dependence on Russia energy which include U.S. commitments to export to the EU (or get third countries to export to the EU) a quantity of liquified natural gas equal to the LNG purchased from Russia in 2021 (15 BCM) and to ramp up exports to the EU of LNG in the coming years to 50 BCM. See Joint Statement between the United States and the European Commission on European Energy Security, March 25, 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/25/joint-statement-between-the-united-states-and-the-european-commission-on-european-energy-security/; FACT SHEET: United States and European Commission Announce Task Force to Reduce Europe’s Dependence on Russian Fossil Fuels, March 25, 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/25/fact-sheet-united-states-and-european-commission-announce-task-force-to-reduce-europes-dependence-on-russian-fossil-fuels/.

Because of the dependence of many countries on imports of grains from Ukraine and Russia, the war in Ukraine poses significant food security issues. The WTO’s Director-General has recently noted the potential for social unrest from food insecurity. See The Guardian, War in Ukraine could lead to food riots in poor countries, warns WTO boss, March 24, 2022. (“In an interview with the Guardian, the WTO director general expressed concern about the knock-on effects of Russia’s invasion – stressing the dependence of many African countries on food supplies from the Black Sea region.”).

The G-7 Leaders’ Statement on March 24, 2022 outlined their efforts to address the potential food security issues caused by Russia’s invasion of Ukraine. See G-7 Leaders’ Statement, March 24, 2022, paragraphs 17 and 18, https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/24/g7-leaders-statement/#:~:text=We%2C%20the%20Leaders%20of%20the,against%20independent%20and%20sovereign%20Ukraine.

“17. More immediately, President Putin’s war places global food security under increased pressure. We recall that the implementation of our sanctions against Russia takes into account the need to avoid impact on global agricultural trade. We remain determined to monitor the situation closely and do what is necessary to prevent and respond to the evolving global food security crisis. We will make coherent use of all instruments and funding mechanisms to address food security, and build resilience in the agriculture sector in line with climate and environment goals. We will address potential agricultural production and trade disruptions, in particular in vulnerable countries. We commit to provide a sustainable food supply in Ukraine and support continued Ukrainian production efforts.

“18. We will work with and step up our collective contribution to relevant international institutions including the World Food Programme (WFP), in parallel with Multilateral Development Banks and International Financial Institutions, to provide support to countries with acute food insecurity. We call for an extraordinary session of the Council of the Food and Agriculture Organization (FAO) to address the consequences on world food security and agriculture arising from the Russian aggression against Ukraine. We call on all participants of the Agriculture Markets Information System (AMIS) to continue to share information and explore options to keep prices under control, including making stocks available, in particular to the WFP. We will avoid export bans and other trade-restrictive measures, maintain open and transparent markets, and call on others to do likewise, consistent with World Trade Organization (WTO) rules, including WTO notification requirements.”

It is clear that food security in the coming months will be an important focus within the WTO Committee on Agriculture. See WTO news release, Agriculture negotiators chart path towards MC12, 21 March 2022, https://www.wto.org/english/news_e/news22_e/agng_21mar22_e.htm (“Several members highlighted the impact of the conflict in Ukraine on the negotiation process as well as the resulting threats to food security. Some members also highlighted the importance of transparency, called for food markets to be kept open, and urged members to refrain from imposing export restrictions. Delegations acknowledged the unprecedented challenges to global food security and stressed the need to deliver a comprehensive outcome on agriculture at MC12 that would place food security at the forefront. Many reiterated their clear support for a multilateral decision as soon as possible to waive food purchases by the World Food Programme (WFP) from any export restriction.”).

Comments

The war in Ukraine is leading to an isolation of the Russian Federation and Belarus and a rethinking of the global economic integration of the last thirty years. How large the retreat from global economic integration turns out to be will depend on various factors including the duration of the war, the extent to which some countries aid the Russian war effort and hence lead to a larger group of sanctioned countries, and the basic incompatibility of state-controlled/directed economies with the current global trading system architecture. The changes in supply chains, trade flows and investment decisions that have been made in the last month will have profound effects on global commerce going forward.

Short term, because of the disruption in grain production and shipments from Ukraine, there is an immediate challenge to food security which if not addressed effectively can have debilitating effects including societal upheaval in a number of developing countries as was seen in 2008-2009.

The WTO has an obvious role to play on the food security issue. Time will tell how many Members contribute to a meaningful solution on food security.

Banned imports, higher tariffs, other actions by trading partners as Russia and Belarus lose most favored nation treatment by G-7 countries and EU during the conflict in Ukraine

Terence P. Stewart · March 20, 2022 · Sanctions on Russia following its invasion of Ukraine · Belarus, Canada, Japan, Russian Federation, Ukraine, United Kingdom · No Comments

In prior posts, I reviewed the joint statement by G-7 countries on their intention to suspend most favored nation treatment on Russia and stop the accession process into the WTO for Belarus in light of the ongoing conflict in Ukraine as well as actions to ban imports of petroleum and coal products and other economic sanctions. See, e.g., March 13, 2022: Additional trade and other sanctions imposed by G-7 and EU countries on Russia and Belarus on March 11, 2022, https://currentthoughtsontrade.com/2022/03/13/additional-trade-and-other-sanctions-imposed-by-g-7-and-eu-countries-on-russia-and-belarus-on-march-11-2022/; March 9, 2022: U.S. joins Canada in banning imports of Russian oil and gas; EU announces plan to drastically reduce reliance on Russian gas; United Kingdom will phase out imports of oil and gas from Russia by end of 2022; Australian oil companies stop purchasing Russian oil; https://currentthoughtsontrade.com/2022/03/09/u-s-joins-canada-in-banning-imports-of-russian-oil-and-gas-eu-announces-plan-to-drastically-reduce-reliance-on-russian-gas-united-kingdom-will-phase-out-imports-of-oil-and-gas-from-russia-by-end-of/.

Press accounts review Japan suspending most favored nation treatment as part of the G-7 effort last week. Kyodo News, Japan to revoke Russia’s “most favored nation” status over Ukraine, March 16, 2022, https://english.kyodonews.net/news/2022/03/2f6fbf6da2af-update1-japan-to-revoke-russias-most-favored-nation-status-over-ukraine.html.

Canada, a G-7 member, took action first, both banning imports of oil and applying 35% tariffs to other imports from Russia and Belarus. Government of Canada, Canada cuts Russia and Belarus from Most-Favoured-Nation Tariff treatment, March 3, 2022, https://www.canada.ca/en/department-finance/news/2022/03/canada-cuts-russia-and-belarus-from-most-favoured-nation-tariff-treatment.html (“Today, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, and the Honourable Mary Ng, Minister of International Trade, Export Promotion, Small Business and Economic Development, announced that the Government of Canada has issued the Most-Favoured-Nation Tariff Withdrawal Order (2022-1), removing these countries’ entitlement to the Most-Favoured-Nation Tariff (MFN) treatment under the Customs Tariff. This Order results in the application of the General Tariff for goods imported into Canada that originate from Russia or Belarus. Under the General Tariff, a tariff rate of 35 per cent will now be applicable on virtually all of these imports. Russia and Belarus will join North Korea as the only countries whose imports are subject to the General Tariff.”); Government of Canada, Government of Canada Moves to Prohibit Import of Russian Oil, February 28, 2022, https://www.canada.ca/en/natural-resources-canada/news/2022/02/government-of-canada-moves-to-prohibit-import-of-russian-oil.html

The United Kingdom has also taken action on revoking MFN treatment of Russian goods. UK Government Press Release, UK announces new economic sanctions against Russia and Belarus, 15 March 2022, https://www.gov.uk/government/news/uk-announces-new-economic-sanctions-against-russia (“UK to deny Russia and Belarus access to Most Favoured Nation tariff for hundreds of their exports, depriving both nations key benefits of WTO membership. UK government publishes initial list of goods worth £900 million – including vodka – which will now face additional 35 percent tariff, on top of current tariffs.”).

In the European Union, action has been announced denying most favored nation status to Russia. European Commission, Statement by President von der Leyen on the fourth package of restrictive measures against Russia, 11 March 2022, https://ec.europa.eu/commission/presscorner/detail/en/STATEMENT_22_1724 (” First, we will deny Russia the status of most-favoured-nation in our markets. This will revoke important benefits that Russia enjoys as a WTO member. Russian companies will no longer receive privileged treatment in our economies.” “Fifth, very importantly, we will prohibit the import of key goods in the iron and steel sector from the Russian Federation.”). The fourth package of restrictive measures are contained in regulations and decisions included in L81I of volume 65 of the European Union Official Journal, March 15, 2022, Fifth, very importantly, we will prohibit the import of key goods in the iron and steel sector from the Russian Federation.”). The European Commission provided the following question and answer about denying Russia MFN treatment.

“What are the consequences of denying Russia most-favoured-nation (MFN) status?

“Removal of MFN status means suspending the benefits that come from being a WTO Member, more specifically the benefit of not being discriminated against by other Members. For example, MFN treatment guarantees that a Member will not be subject to higher tariffs than other Members, or to import bans that do not apply to other Members. Suspension of MFN treatment means that the Member concerned – in this case Russia – may be subject to higher tariffs and import bans.

“The EU has decided to act not through an increase on import tariffs, but through set of sanctions that comprise bans on the imports or exports of goods, as this is much quicker and more effective than preparing a completely new tariff schedule from scratch.

“In practice, the EU has already removed a number of trade benefits that Russia previously enjoyed through the imposition of sanctions. Additionally, the EU has restricted the provision of SWIFT financial services to certain Russian banks, which constitutes a disapplication of MFN vis-à-vis Russia under the General Agreement on Trade in Services (GATS). Today’s sanctions remove further trade benefits from Russia.”

European Commission, Question and Answers: fourth package of restrictive measures against Russia, 15 March 2022, https://ec.europa.eu/commission/presscorner/detail/en/QANDA_22_1776.

In the United States, the President through executive order has restricted exports of luxury goods and many other items to Russia and Belarus and banned imports of oil, gas, coal and a number of other products reviewed in earlier posts. March 13, 2022: Additional trade and other sanctions imposed by G-7 and EU countries on Russia and Belarus on March 11, 2022, https://currentthoughtsontrade.com/2022/03/13/additional-trade-and-other-sanctions-imposed-by-g-7-and-eu-countries-on-russia-and-belarus-on-march-11-2022/; March 9, 2022: U.S. joins Canada in banning imports of Russian oil and gas; EU announces plan to drastically reduce reliance on Russian gas; United Kingdom will phase out imports of oil and gas from Russia by end of 2022; Australian oil companies stop purchasing Russian oil. https://currentthoughtsontrade.com/2022/03/09/u-s-joins-canada-in-banning-imports-of-russian-oil-and-gas-eu-announces-plan-to-drastically-reduce-reliance-on-russian-gas-united-kingdom-will-phase-out-imports-of-oil-and-gas-from-russia-by-end-of/; February 28, 2022: Trade sanctions following Russia’s invasion of Ukraine, https://currentthoughtsontrade.com/2022/02/28/trade-sanctions-following-russias-invasion-of-ukraine/.

Such actions constitute treating Russia and Belarus differently (though Belarus is not a WTO Member and hence not entitled to MFN treatment by reason of WTO membership). To formally remove most favored nation treatment from Russia in the U.S., Congress must act. On Thursday, March 17, 2022, the House of Representatives passed a bill that would, inter alia, deny MFN treatment to Russia and Belarus and encourage USTR to take other actions at the WTO to block forward movement on Belarus’ accession to the WTO and urge other WTO Members to similarly deny MFN treatment to Russia. H.R. 7108 is embedded below.

House-bill-to-strip-PNTR-from-Russia-passed-House-on-3-17-2022

The United States tariff schedule has two columns of rates. Column 1 is the most favored nation rate. Column 2 is the other rate, often considerably higher. The House bill would have all imports from Russia and Belarus subject to the Column 2 rate. Moreover, the bill gives the President the authority to raise rates on products from those two countries above the Column 2 rate. The vast majority of imports from Russia are oil and gas products ($17.4 billion of $29.7 bill total imports in 2021) which already banned by Executive Order. Other products (worth about $1.5 billion) have also been banned by Executive order. Of the remaining imports the following fourteen 4-digit HS categories accounted for $8.14 billion of the imports from Russia in 2021

HS7110 PLATINUM $ 2,449,856,890

HS7201 PIG IRON AND SPIEGELEISEN IN PIGS, BLOCKS OR OTHER PRIMARY FORMS $1,157,617,274

HS7207 SEMIFINISHED PRODUCTS OF IRON OR NONALLOY STEEL $886,744,073

HS3102 MINERAL OR CHEMICAL FERTILIZERS, NITROGENOUS $723,784,769

HS2844 RADIOACTIVE CHEMICAL ELEMENTS AND ISOTOPES AND THEIR COMPOUNDS $669,931,951

HS7601 ALUMINUM, UNWROUGHT $423,969,585

HS7202 FERROALLOYS $419,659,133

HS3104 MINERAL OR CHEMICAL FERTILIZERS, POTASSIC $366,158,625

HS4412 PLYWOOD, VENEERED PANELS AND SIMILAR LAMINATED WOOD $345,745,434

HS9306 BOMBS, GRENADES, TORPEDOES, ETC., AMMO $173,633,545

HS7106 SILVER (INCLUDING SILVER PLATED WITH GOLD OR PLATINUM) $144,208,220

HS8412 ENGINES AND MOTORS NESOI, AND PARTS THEREOF $133,429,434

HS8108 TITANIUM AND ARTICLES THEREOF, INCLUDING WASTE AND SCRAP $130,833,908

HS4002 SYNTHETIC RUBBER AND FATICE IN PRIMARY FORMS, ETC. $114,129,678

For three of the 14 categories, the column 2 rate is duty free just like the column 1 rate — HS7110, HS3102, HS 3104. For three others, column 2 rates range free to 45% (HS2844, HS8108) or 65% (HS7106. The other 8 categories had column 2 rates that were all above free and generally substantially higher than column 1 rates.

HS 7201, column 2 rates rom 2.5% to $1.10/ton

HS7207, 20%

HS7601, 10.5-25%

HS7202, 6.5-35%; up to 6.6cents/kg.

HS4412, 40-50%

HS 9306, 30-45%

HS8412, 27.5-35%

HS4002, 20%.

When the legislation becomes law (likely by end of March), the higher column 2 rates will apply to all imports from Russia and Belarus not banned from entry. For those categories that would remain duty free under column 2, President Biden will have the authority to raise rates (actually he will have the authority to raise rates on any products from the two countries).

While the trade actions outlined above are but one part of a much broader set of sanctions imposed by many trading partners, they add to the breadth of sanctions being imposed in light of the unprovoked invasion of Ukraine by Russia and the complicity of Belarus. The sanctions will remain in place and will likely continue to be increased until Ukraine’s sovereignty is respected, Russian troops (and various mercenaries brought in by Russia) withdrawn and a freely elected Ukrainian government either remains in place or is elected.

A global trading system without the Russian Federation (and other autocratic states?) – what the fallout from the Russian invasion of Ukraine may mean for global trade

Terence P. Stewart · March 15, 2022 · Sanctions on Russia following its invasion of Ukraine · Canada, European Union, Russian Federation, Ukraine, United States · One Comment

The unprovoked invasion by the Russian Federation into Ukraine has led to the largest group of financial and economic sanctions by a large portion of the global community in modern times. Canada has withdrawn most favored nation treatment from Russia, a move that is being followed by the EU, United States and others. Russia has been excluded from the Developed Countries Coordinating Group within the WTO, and G-7 countries (and the EU) are working to ensure that multilateral organizations like the IMF and World Bank and the European Bank for Reconstruction and Development cannot be used by Russia for loans. There are calls in some countries (e.g., the United States) to work to remove Russia from the WTO.

On March 11, 2022 two staunch supporters of the global trading system penned an article that appeared in The National Interest that raise a number of important questions including the following one —

“As the collective will grows to confront the destabilizing authoritarianism of Russia, as well as one of its strongest backers, China, what should become of the institutions that enabled their rapid integration into the post-Cold War world economy?” Rufus Yerxa and Wendy Cutler, No Longer Business as Usual at the World Trade Organization, March 11, 2022, https://nationalinterest.org/feature/no-longer-business-usual-world-trade-organization-201149. Amb. Yerxa is a former Deputy Director-General of the WTO and former Deputy U.S. Trade Representative and U.S. Ambassador to the GATT. Ms. Cutler is a former Acting Deputy U.S. Trade Representative who was deepely involved in the Trans Pacific Partnership negotiations for the United States and is the Vice President and Managing Director of the Asia Society Policy Institute. Both are lifelong supporters of a global trading system and the rule of law. The answer to the question posed appears in the next to last paragraph of the article.

“Indeed, the current crisis may lead the United States and like-minded members to chart a new trade future outside of the WTO framework, not necessarily abandoning the WTO entirely, but creating a new multilateral structure with deeper commitments among countries dedicated to free-market democracy. This may be the only leverage available to change the status quo.”

The article is surprising considering the authors but reflects the evolving concerns of many former trade negotiators that the global trading system is not functioning well because of the non-market economic system of some (particularly China) and now the unacceptable actions of the autocratic state of the Russian Federation. For example, in 2020 I reviewed an article by a former director general for trade for the European Commission that argued for the need for countries to leave the WTO and set up a separate multilateral trading system to exclude China since China was not moving to a market economy. July 25, 2020: A new WTO without China? The July 20, 2020 Les Echos opinion piece by Mogens Peter Carl, a former EC Director General for Trade and then Environment, https://currentthoughtsontrade.com/2020/07/25/a-new-wto-without-china-the-july-20-2020-les-echos-opinion-piece-by-mogens-peter-carl-a-former-ec-director-general-for-trade-and-then-environment/.

Many commentators, including me, have written on the need for a new trading order among countries with similar economic systems. See, e.g., March 31, 2021: “Blowing up the trading system” — Clyde Prestowitz’s suggested way for the world to move forward in light of China’s economic system, https://currentthoughtsontrade.com/2021/03/31/blowing-up-the-trading-system-clyde-prestowitzs-suggested-way-for-the-world-to-move-forward-in-light-of-chinas-economic-system/; January 16, 2022: Is it time for a new approach to bilateral trade with China?, https://currentthoughtsontrade.com/2022/01/16/is-it-time-for-a-new-approach-to-bilateral-trade-with-china/.

One possible approach to a parallel system with more ambitious and current rules among largely market economies would be an expansion of the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) to include the United States and European Union (neither of which has a current application — the U.S. having withdrawn under the Trump Administration) with acceptance of current applicants other than China. A former European Commissioner for Trade advocated the EU and US joining the CPTPP in an article for the Peterson Institute for International Economics in January this year. See Cecilia Malmstrom (PIIE), The EU should use its trade power strategically, January 4, 2022, https://www.piie.com/blogs/realtime-economic-issues-watch/eu-should-use-its-trade-power-strategically (“The European Union should also seek to enter the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and convince the United States to do the same. The European Union already has agreements with most members of the CPTPP, but an FTA would signal the European Union’s readiness to strengthen global trading rules with its partners.”). Considering China’s record at the WTO and its coercive practices against some of the CPTPP members, it is hard to understand how the CPTPP members can accept China as a member in the coming years.

While neither the United States nor the European Union are looking to abandon the WTO, the Russian invasion of Ukraine is creating enormous tensions for many Members in dealing with the Russian Federation within the WTO, and there have been growing concerns about the inability of the WTO system to address the massive distortions to global trade created by the Chinese economic system. Reform at the WTO is difficult and typically requires consensus of existing Members. This presumably dooms reforms needed to bring China’s system into alignment with WTO principles including market orientation. While Members can decide to suspend most favored nation treatment, there is no obvious path to removing Russia as a member. Thus, continued challenges at the WTO are likely to continue in the months and years ahead.

The article last week from Amb. Yerxa and Ms. Cutler points to the growing concern about the survivability of the current system with rogue states like the Russian Federation and non-market economic actors like China. As the article concludes, “Responsible global leaders now confront a troubling reality: the old notion that countries who trade together are less likely to go to war has been laid to rest on Ukrainian soil. It can no longer be business as usual at the WTO.” What the current war in Ukraine means for the WTO remains unclear. The coming months will likely provide answers to the continued relevance of the WTO and the need for a separate system for democratic, market economies.

Additional trade and other sanctions imposed by G-7 and EU countries on Russia and Belarus on March 11, 2022

Terence P. Stewart · March 13, 2022 · Sanctions on Russia following its invasion of Ukraine · Russian Federation, Ukraine · No Comments

As Russia continues its hostilities towards Ukraine with assistance from Belarus, a wide range of countries continue to ratchet up sanctions, both trade and non-trade, on Russia and Belarus. The latest announcements came on March 11, 2022.

The G-7 issued a joint statement on March 11th. The joint statement is embedded below followed by an excerpt of the language on new actions being taken. The G-7 includes Canada, France, Germany, Italy, Japan, United Kingdom, United States and the European Union.

3-11-2022-Joint-Statement-by-the-G7-Announcing-Further-Economic-Costs-on-Russia-_-The-White-House

“Since President Putin launched the Russian Federation’s invasion on February 24, our countries have imposed expansive restrictive measures that have severely compromised Russia’s economy and financial system, as evidenced by the massive market reactions. We have collectively isolated key Russian banks from the global financial system; blunted the Central Bank of Russia´s ability to utilise its foreign reserves; imposed sweeping export bans and controls that cut Russia off from our advanced technologies; and targeted the architects of this war, that is Russian President Vladimir Putin and his accomplices, as well as the Lukashenko regime in Belarus.

“In addition to announced plans, we will make further efforts to reduce our reliance on Russian energy, while ensuring that we do so in an orderly fashion and in ways that provide time for the world to secure alternative and sustainable supplies. In addition, private sector companies are leaving Russia with unprecedented speed and solidarity. We stand with our companies that are seeking an orderly withdrawal from the Russian market.

“We remain resolved to isolate Russia further from our economies and the international financial system. Consequently, we commit to taking further measures as soon as possible in the context of our ongoing response and consistent with our respective legal authorities and processes:

First, we will endeavor, consistent with our national processes, to take action that will deny Russia Most-
Favoured-Nation status relating to key products. This will revoke important benefits of Russia’s membership of the World Trade Organization and ensure that the products of Russian companies no longer receive Most-Favoured-Nation treatment in our economies. We welcome the ongoing preparation of a statement by a broad coalition of WTO members, including the G7, announcing their revocation of Russia’s Most-Favoured-Nation status.

“Second, we are working collectively to prevent Russia from obtaining financing from the leading multilateral financial institutions, including the International Monetary Fund, the World Bank and the European Bank for Reconstruction and Development. Russia cannot grossly violate international law and expect to benefit from being part of the international economic order. We welcome the IMF and World Bank Group’s rapid and ongoing efforts to get financial assistance to Ukraine. We also welcome the steps the OECD has taken to restrict Russia’s participation in relevant bodies.

“Third, we commit to continuing our campaign of pressure against Russian elites, proxies and oligarchs close to President Putin and other architects of the war as well as their families and their enablers. We commend the work done by many of our governments to identify and freeze mobile and immobile assets belonging to sanctioned individuals and entities, and resolve to continue this campaign of pressure as a matter of priority. To that end, we have operationalised the task force announced on February 26, which will target the assets of Russian elites close to President Putin and the architects of his war. Our sanctions packages are carefully targeted so as not to impede the delivery of humanitarian assistance.

“Fourth, we commit to maintaining the effectiveness of our restrictive measures, to cracking down on evasion and to closing loop-holes. Specifically, in addition to other measures planned to prevent evasion, we will ensure that the Russian state and elites, proxies and oligarchs can not leverage digital assets as a means of evading or offsetting the impact of international sanctions, which will further limit their access to the global financial system. It is commonly understood that our current sanctions already cover crypto-assets. We commit to taking measures to better detect and interdict any illicit activity, and we will impose costs on illicit Russian actors using digital assets to enhance and transfer their wealth, consistent with our national processes.

“Fifth, we are resolved to fighting off the Russian regime’s attempts to spread disinformation. We affirm and support the right of the Russian people to free and unbiased information.

“Sixth, we stand ready to impose further restrictions on exports and imports of key goods and technologies on the Russian Federation, which aim at denying Russia revenues and at ensuring that our citizens are not underwriting President Putin’s war, consistent with national processes. We note that international companies are already withdrawing from the Russian market. We will make sure that the elites, proxies and oligarchs that support President Putin’s war are deprived of their access to luxury goods and assets. The elites who sustain Putin’s war machine should no longer be able to reap the gains of this system, squandering the resources of the Russian people.

“Seventh, Russian entities directly or indirectly supporting the war should not have access to new debt and equity investments and other forms of international capital. Our citizens are united in the view that their savings and investments should not fund the companies that underpin Russia’s economy and war machine. We will continue working together to develop and implement measures that will further limit Russia’s ability to raise money internationally.

“We stand united and in solidarity with our partners, including developing and emerging economies, which unjustly bear the cost and impact of this war, for which we hold President Putin, his regime and supporters, and the Lukashenko regime, fully responsible. Together, we will work to preserve stability of energy markets as well as food security globally as Russia’s invasion threatens Ukraine’s capacity to grow crops this year.

“We continue to stand with the Ukrainian people and the Government of Ukraine. We will continue to evaluate the impacts of our measures, including on third countries, and are prepared to take further measures to hold President Putin and his regime accountable for his attack on Ukraine.”

Thus, the additional sanctions include actions going forward to remove most favored nation treatment to Russia which will permit countries to impose higher tariffs on imports from Russia, to prohibit certain imports (e.g., oil and gas by Canada and the U.S., other products as identified by individual countries) and expand export restraints (e.g., new ban on export of luxury goods to Russia), eliminating access to financing from the IMF, World Bank and European Bank for Reconstruction and Development, clarifying that crypto assets are subject to sanctions and more.

In the United States, President Biden signed an Executive Order on March 11 to identify additional sanctions being imposed by the United States. The Executive Order is copied below (https://www.whitehouse.gov/briefing-room/presidential-actions/2022/03/11/executive-order-on-prohibiting-certain-imports-exports-and-new-investment-with-respect-to-continued-russian-federation-aggression/)

“Executive Order on Prohibiting Certain Imports, Exports, and New Investment with Respect to Continued Russian Federation Aggression

“MARCH 11, 2022

“PRESIDENTIAL ACTIONS

“By the authority vested in me as President by the Constitution and the laws of the United States of America, including the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) (IEEPA), the National Emergencies Act (50 U.S.C. 1601 et seq.), and section 301 of title 3, United States Code,
I, JOSEPH R. BIDEN JR., President of the United States of America, in order to take additional steps with respect to the national emergency declared in Executive Order 14024of April 15, 2021, relied on for additional steps taken in Executive Order 14039 of August 20, 2021, and expanded by Executive Order 14066 of March 8, 2022, hereby order:

“Section 1. (a) The following are prohibited:

“(i) the importation into the United States of the following products of Russian Federation origin: fish, seafood, and preparations thereof; alcoholic beverages; non-industrial diamonds; and any other products of Russian Federation origin as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State and the Secretary of Commerce;

“(ii) the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United Statesperson, wherever located, of luxury goods, and any other items as may be determined by the Secretary of Commerce, in consultation with the Secretary of State and the Secretary of the Treasury, to any person located in the Russian Federation;

“(iii) new investment in any sector of the Russian Federation economy as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State, by a United States person, wherever located;

“(iv) the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United Statesperson, wherever located, of U.S. dollar-denominated banknotes to the Government of the Russian Federation or any person located in the Russian Federation; and

“(v) any approval, financing, facilitation, or guarantee by a United States person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited by this section if performed by a United States person or within the United States.

“(b) The prohibitions in subsection (a) of this section apply except to the extent provided by statutes, or in regulations, orders, directives, or licenses that may be issued pursuant to this order, or pursuant to the export control authorities implemented by the Department of Commerce, and notwithstanding any contract entered into or license or permit granted prior to the date of this order.

“Sec. 2. (a) Any transaction that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate any of the prohibitions set forth in this order is prohibited.

“(b) Any conspiracy formed to violate any of the prohibitions set forth in this order is prohibited.

“Sec. 3. Nothing in this order shall prohibit transactions for the conduct of the official business of the Federal Government or the United Nations (including its specialized agencies, programs, funds, and related organizations) by employees, grantees, or contractors thereof.

“Sec. 4. For the purposes of this order:

“(a) the term ‘entity’ means a partnership, association, trust, joint venture, corporation, group, subgroup, or other organization;

“(b) the term ‘person’ means an individual or entity;

“(c) the term ‘Government of the Russian Federation’ means the Government of the Russian Federation, any political subdivision, agency, or instrumentality thereof, including the Central Bank of the Russian Federation, and any person owned, controlled, or directed by, or acting for or on behalf of, the Government of the Russian Federation; and

“(d) the term ‘United States person’ means any United States citizen, lawful permanent resident, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States.

“Sec. 5. The Secretary of the Treasury and the Secretary of Commerce, in consultation with the Secretary of State, are hereby authorized to take such actions, including the promulgation of rules and regulations, and to employ all powers granted to the President by IEEPA, as may be necessary to carry out the purposes of this order. The Secretary of the Treasury and the Secretary of Commerce may, consistent with applicable law, redelegate any of these functions within the Department of the Treasury and the Department of Commerce, respectively. All executive departments and agencies of the United States shall take all appropriate measures within their authority to implement this order.

“Sec. 6. (a) Nothing in this order shall be construed to impair or otherwise affect:

“(i) the authority granted by law to an executive department or agency, or the head thereof; or

“(ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.

“(b) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.

“(c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.

“JOSEPH R. BIDEN JR.
“THE WHITE HOUSE,
“March 11, 2022.”

The European Commission’s President, Ursula von der Leyen, provided an overview of additional EU sanctions in her statement of March 11th (https://ec.europa.eu/commission/presscorner/detail/en/statement_22_1724).

“Statement by President von der Leyen on the fourth package of restrictive measures against Russia

“Versailles, 11 March 2022

“Russia’s ruthless invasion of Ukraine continues. Civilians are relentlessly attacked, including in
schools, apartment buildings, and hospitals. And despite repeated offers by the Ukrainian side,
Russia has not shown any willingness to seriously engage so far in negotiations for a diplomatic
solution. Instead, all we hear are new lies and false accusations. And cynically, humanitarian
corridors are either still not opened or being bombed by Russian forces shortly after they are
announced.

“So today, we, the EU and our partners in the G7, continue to work in lockstep to ramp up the
economic pressure against the Kremlin. The three sweeping waves of sanctions we have adopted, as
well as the extension of their scope this week, have hit Russia’s economy very hard. The ruble has
plummeted. Many key Russian banks are cut-off from the international banking system. Companies
are leaving the country, one after the other, not wanting to have their brands associated with a
murderous regime. Tomorrow, we will take a fourth package of measures to further isolate Russia
and drain the resources it uses to finance this barbaric war.

“First, we will deny Russia the status of most-favoured-nation in our markets. This will revoke
important benefits that Russia enjoys as a WTO member. Russian companies will no longer receive
privileged treatment in our economies. We will also work to suspend Russia’s membership rights in
leading multilateral financial institutions, including the International Monetary Fund and the World
Bank. We will ensure that Russia cannot obtain financing, loans, or any other benefits from these
institutions. Because Russia cannot grossly violate international law and, at the same time, expect to
benefit from the privileges of being part of the international economic order.

“Second, we will continue pressuring Russian elites close to Putin as well as their families and
enablers. This is why G7 Finance-, Justice- and Home Affairs Ministers will meet next week to
coordinate the task force we set up targeting Putin’s cronies.

“Third, we are making sure that the Russian state and its elites cannot use crypto assets to
circumvent the sanctions. We will stop the group close to Putin and the architects of his war from
using these assets to grow and transfer their wealth.

“Fourth, we will ban the export of any EU luxury goods from our countries to Russia, as a direct blow
to the Russian elite. Those who sustain Putin’s war machine should no longer be able to enjoy their
lavish lifestyle while bombs fall on innocent people in Ukraine.

“Fifth, very importantly, we will prohibit the import of key goods in the iron and steel sector from the
Russian Federation. This will hit a central sector of Russia’s system, deprive it of billions of export
revenues and ensure that our citizens are not subsidising Putin’s war.

“Finally, we will propose a big ban on new European investments across Russia’s energy sector.
Because we should not be feeding the energy dependency which we want to leave behind us. This
ban will cover all investments, technology transfers, financial services, etcetera, for energy
exploration and production – and thus have a big impact on Putin.

“The EU stands firmly with the brave people of Ukraine. This is why, just this morning, we disbursed
EUR 300 million in emergency macro-financial assistance to support Ukraine’s finances. This is the
first tranche of our EUR 1.2 billion financial aid package. More will follow. This crisis is
unprecedented. And so is the unity and speed of reaction our democracies have shown so far. You
have heard me say this before and I firmly repeat it: Ukraine will prevail.”

Similar actions are being taken by the United Kingdom and Japan.

Canada had already announced revoking most favored nation treatment for Russia and Belarus and had banned imports of oil and gas. My last post reviewed actions by the U.S., EU and United Kingdom in the oil and gas space. See March 9, 2022: U.S. joins Canada in banning imports of Russian oil and gas; EU announces plan to drastically reduce reliance on Russian gas; United Kingdom will phase out imports of oil and gas from Russia by end of 2022; Australian oil companies stop purchasing Russian oil, https://currentthoughtsontrade.com/2022/03/09/u-s-joins-canada-in-banning-imports-of-russian-oil-and-gas-eu-announces-plan-to-drastically-reduce-reliance-on-russian-gas-united-kingdom-will-phase-out-imports-of-oil-and-gas-from-russia-by-end-of/.

Based on the WTO’s publication Trade Profiles 2021, in 2019 the EU (which included the United Kingdom at the time) was the largest destination for Russian exports (41.3%) and largest source of Russian imports (34.2%). The U.S., Canada and Japan are not shown as among Russia’s five largest export markets for goods. The U.S. (5.4%) and Japan (3.6%) join the EU as among the top five sources of imports into Russia in 2019. WTO Trade Profiles 2021, page 298, https://www.wto.org/english/res_e/publications_e/trade_profiles21_e.htm.

As noted in an earlier post,

“The Russian Federation is not a major trading partner of the United States. In 2021, U.S. imports for consumption from Russia were just $29.657 billion (just 1.05% of total U.S. imports for consumption). The bulk of U.S. imports from Russia ($17.406 billion) are products from Chapter 27 of the Harmonized System (largely oil, gas and downstream products)). Russia accounts for 8.17% of total U.S. imports of products under Chapter 27. At the same time, the United States exports to the world nearly 12 times the amount of the oil and gas products that it imports from Russia in the three major four-digit HS categories (HS 2709, HS 2710, HS 2711). The U.S. also exports relatively small volumes of goods to Russia — $5.531 billion (less than 4/10ths of 1 percent of total U.S. exports).”

February 28, 2022: Trade sanctions following Russia’s invasion of Ukraine, https://currentthoughtsontrade.com/2022/02/28/trade-sanctions-following-russias-invasion-of-ukraine/

The U.S. has now prohibited the imports of oil, gas, and coal products. The additional announced import bans cover around $1.5 billion of goods from Russia ($1.2 of fish and seafood products, $305 million of diamonds and $18.5 million of spirits (2021 U.S. imports for consumption of HS 03, 7102 and 2208). Other products could be added as noted in the Executive Order. Based on 2021 U.S. import statistics, here are other major 4-digit HS categories of products from Russia.

HS7110, PLATIMUN, UNWROUGHT OR IN SEMIMANUFACTURED FORMS, OR IN POWDER FORM $2,449,856,890

HS7201, PIG IRON AND SPIEGELEISEN IN PIGS, BLOCKS OR OTHER PRIMARY FORMS $1,157,617,274

HS7207, SEMIFINISHED PRODUCTS OF IRON OR NONALLOY STEEL $886,744,073

HS3102, MINERAL OR CHEMICAL FERTILIZERS, NITROGENOUS $723,784,769

HS2844, RADIOACTIVE CHEMICAL ELEMENTS AND ISOTOPES AND THEIR COMPOUNDS; MIXTURES AND RESIDUES CONTAINING THESE PRODUCTS $669,931,951

HS7601 ALUMINUM, UNWROUGHT $423,969,585

HS7202 FERROALLOYS $419,659,133

HS3104, MINERAL OR CHEMICAL FERTILIZERS, POTASSIC $366,158,625

HS4412 PLYWOOD, VENEERED PANELS AND SIMILAR LAMINATED WOOD $345,745,434

HS9306, BOMBS, GRENADES, TORPEDOES AND SIMILAR MUNITIONS OF WAR AND PARTS THEREOF; CARTRIDGES AND OTHER AMMUNITION AND PROJECTILES AND PARTS THEREOF $173,633,545.

As the EU is Russia’s largest trading partner, actions by the EU will have the largest trade effect on Russia. The ban on imports of some iron and steel products from Russia by the EU is presumably a multibillion Euro action.

A joint paper from UC San Diego and St. Gallen Endowment released on March 11, 2022 provides estimates of additional costs on the Russian economy from the loss of most favored nation treatment and actions on oil and gas. See Simon J. Evenett and Marc-Andreas Muendler, Making Moscow Pay, How Much Extra Bite will G7 & EU Trade Sanctions Have?, 11 March 2022. https://mcusercontent.com/4d3c72e64f71605940b148af0/files/ec2fa8af-8662-06b7-05b0-6defeac28f74/Making_Moscow_Pay_by_Revoking_MFN_11_March_2022_finalised.pdf. The authors summarize the results of their analysis as follows (page 1).

“Following the revocation of MFN treatment of Russian goods, the members of the G7 and European Union (EU27) can raise import tariffs sharply. We outline three trade sanction scenarios in this computation-based brief and report their predicted effects on Russian GDP, on bilateral exports, and on Russian job losses. Once the Russian economy has adjusted, the most severe trade sanction scenario is expected to result in a permanent GDP reduction of 1.06%, in bilateral Russian exports to the G7 and EU27 nations falling by 70.9%, and in 522,000 job losses from the Russian energy sector. Losses on this scale for Russia amount to a third of the estimated GDP gain from its WTO accession. The same scenario is estimated to result in 206,000 job losses in the G7 and EU27 and to reduce their joint GDP by 0.06% permanently.”

The additional trade sanctions are, of course, just the latest actions and the short term results of the other collective sanctions has been severe on the Russian economy. Bans on investment and financing and exports of technology and critical goods have potentially significant short, medium and long-term effects on the Russian economy. The world has already seen the steep decline of the Russian currency and a need to close the Russian stock market over the last week or so.

The luxury goods export ban by the G-7 countries and EU is another shot at Pres. Putin’s inner circle and the nation’s oligarchs who support Putin and those in Belarus. In the U.S., the initial list of “luxury goods” is included in a notice from the U.S. Department of Commerce Bureau of Industry and Security. See unpublished Federal Register notice (to be published on March 16, 2022), U.S. Department of Commerce Bureau of Industry and Security, Imposition of Sanctions on ‘Luxury Goods’ Destined for Russia and Belarus and for Russian and Belarusian Oligarchs and Malign Actors Under the Export Administration
Regulations (EAR), 2022-05604.pdf (federalregister.gov). The list of luxury goods in the notice includes wines and spirits, tobacco products, perfumes and certain beauty products, plastic products for sports, yachts, travel bags and handbags, furs and fur skins, silk and silk products, carpets, high value clothing ($1,000/unit or higher), camping and sporting equipment, high value footwear ($1,000/unit or higher), porcelain and china, lead crystal glassware, jewelry including gemstones, silver and gold bullion, coins and products, marine engines, passenger vehicles, motorcycles, watches, pianos, art works (paintings, sculpture, other).

Final comments

Sanctions are intended to apply pressure on Russia and Belarus to expedite a resolution to the unprovoked conflict underway in Ukraine. While many have pointed to the challenges of making sanctions effective, there are few other options short of an expanded war to press the Russians to cease their aggression.

The latest package of sanctions agreed to by the G-7 countries and EU continue to ratchet up pressure on the governments of Russia and Belarus and isolate them from multilateral financial institutions and other multilateral organizations and reduce their access to the markets of many major countries. With the withdrawal of many non-Russian companies from the Russian market during the war and the refusal of many others to deal with Russian goods, President Putin’s war is moving Russia backwards economically — a process likely to take decades to overcome.

With the war continuing to escalate in Ukraine, the sanctions announced on March 11 will not be the last.

U.S. joins Canada in banning imports of Russian oil and gas; EU announces plan to drastically reduce reliance on Russian gas; United Kingdom will phase out imports of oil and gas from Russia by end of 2022; Australian oil companies stop purchasing Russian oil.

Terence P. Stewart · March 9, 2022 · Oil and gas, Sanctions on Russia following its invasion of Ukraine · Australia, Belarus, European Union, Russian Federation, Ukraine, United Kingdom, United States · No Comments

March 8, 2022 saw major announcements on new sanctions on the Russian Federation and/or Belarus from the United States, European Union and the United Kingdom and a continued exodus of major oil companies from Russian involvement.

In the United States, President Biden announced new actions in the form of an Executive order which bans –

“The importation into the United States of Russian crude oil and certain petroleum products, liquefied natural gas, and coal.

“* * *

“New U.S. investment in Russia’s energy sector, which will ensure that American companies and American investors are not underwriting Vladimir Putin’s eff orts to expand energy production inside Russia.
Americans will also be prohibited from financing or enabling foreign companies that are making investment to produce energy in Russia.”

The White House, FACT SHEET: United States Bans Imports of Russian Oil, Liquefied Natural Gas, and Coal, March 8, 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/08/fact-sheet-united-states-bans-imports-of-russian-oil-liquefied-natural-gas-and-coal/.

The Executive Order reads in full –

“I, JOSEPH R. BIDEN JR., President of the United States of America, hereby expand the scope of the national emergency declared in Executive Order 14024 of April 15, 2021, and relied on for additional steps taken in Executive Order 14039 of August 20, 2021, finding that the Russian Federation’s unjustified, unprovoked, unyielding, and unconscionable war against Ukraine, including its recent further invasion in violation of international law, including the United Nations Charter, further threatens the peace, stability, sovereignty, and territorial integrity of Ukraine, and thereby constitutes an unusual and extraordinary threat to the national security and foreign policy of the United States. Accordingly, I hereby order:

“Section 1. (a) The following are prohibited:

“(i) the importation into the United States of the following products of Russian Federation origin: crude oil; petroleum; petroleum fuels, oils, and products of their distillation; liquefied natural gas; coal; and coal products;

“(ii) new investment in the energy sector in the Russian Federation by a United States person, wherever located; and

“(iii) any approval, financing, facilitation, or guarantee by a United States person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited by this section if performed by a United States person or within the United States.

“(b) The prohibitions in subsection (a) of this section apply except to the extent provided by statutes, or in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or license or permit granted prior to the date of this order.

“(b) Any conspiracy formed to violate any of the prohibitions set forth in this order is prohibited.

“Sec. 4. For the purposes of this order:

“(a) the term ‘entity’ means a partnership, association, trust, joint venture, corporation, group, subgroup, or other organization;

“b) the term ‘person’ means an individual or entity; and

“(c) the term ‘United States person’ means any United States citizen, lawful permanent resident, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States.

“Sec. 5. The Secretary of the Treasury, in consultation with the Secretary of State, is hereby authorized to take such actions, including the promulgation of rules and regulations, and to employ all powers granted to the President by IEEPA, as may be necessary to carry out the purposes of this order. The Secretary of the Treasury may, consistent with applicable law, redelegate any of these functions within the Department of the Treasury. All executive departments and agencies of the United States shall take all appropriate measures within their authority to implement this order.

“Sec. 6. (a) Nothing in this order shall be construed to impair or otherwise affect:

“(i) the authority granted by law to an executive department or agency, or the head thereof; or

“(ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.

“(b) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.

“JOSEPH R. BIDEN JR.

“THE WHITE HOUSE,

“March 8, 2022.”

Executive Order on Prohibiting Certain Imports and New Investments With Respect to Continued Russian Federation Efforts to Undermine the Sovereignty and Territorial Integrity of Ukraine, March 8, 2022, https://www.whitehouse.gov/briefing-room/presidential-actions/2022/03/08/executive-order-on-prohibiting-certain-imports-and-new-investments-with-respect-to-continued-russian-federation-efforts-to-undermine-the-sovereignty-and-territorial-integrity-of-ukraine/.

The new prohibitions do not prevent honoring existing contracts in the next 45 days. President Biden reviewed that the steps were taken after consultations with allies realizing that many allies were not in a position to take identical action at the moment reflecting very different situations in terms of domestic production of oil and gas and dependency on imports from Russia. See The White House, Remarks by President Biden Announcing U.S. Ban on Imports of Russian Oil, Liquefied Natural Gas, and Coal, March 8, 2022, https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/03/08/remarks-by-president-biden-announcing-u-s-ban-on-imports-of-russian-oil-liquefied-natural-gas-and-coal/ (“We’re moving forward on this ban, understanding that many of our European Allies and partners may not be in a position to join us. The United States produces far more oil domestically than all of European — all the European countries combined. In fact, we’re a net exporter of energy. So we can take this step when others cannot. But we’re working closely with Europe and our partners to develop a long-term strategy to reduce their dependence on Russian energy as well.”).

The United Kingdom announced that it would phase out imports of oil from Russia during 2022. See Financial Times, US and UK ban Russian oil and gas imports in drive to punish Putin, March 8, 2022, https://www.ft.com/content/2e0b1d84-e595-4c5a-be4e-928417b9c7cc (“UK prime minister Boris Johnson’s government said it would phase out the import of Russian oil by the end of the year. Kwasi Kwarteng, UK business secretary, said the British government would organise an ‘orderly transition’ away from Russian oil imports. But Rishi Sunak, UK chancellor, told a cabinet meeting that consumers would pay a price for the ban, with lower-income households particularly hard hit. The UK is less dependent on Russia than much of mainland Europe, with Russian supplies making up 8 per cent of overall oil imports into the UK. Johnson is expected to make a statement later this week on reducing British imports of Russian gas.”).

The European Commission announced a proposed ambitious program to diversify gas supplies and expand renewables to achieve a potential two-thirds reduction in dependence on Russian oil and gas by the end of 2022 for the European Union. The program, RePowerEU, was announced on March 8th and contains a number of documents. The opening statement of Executive Vice-President Timmermans is copied below in part.

“Opening remarks by Executive Vice-President Timmermans

“* * *

“It is abundantly clear that we are too dependent on Russia for our energy needs. It is not a free
market if there is a state actor willing to manipulate it.

“The answer to this concern for our security lies in renewable energy and diversification of supply.

“Renewables give us the freedom to choose an energy source that is clean, cheap, reliable, and ours.
And, instead of continuing to fund fossil fuel imports and fund Russian oligarchs, renewables create
new jobs here in Europe.

“With the plan we outline today, the EU can end its dependence on Russian gas and repower Europe.
Fit for 55, once implemented, will reduce the EU’s total gas consumption by 30% by 2030. That’s
100 billion cubic meters of gas we will no longer need.

“Now, we will take it to the next level.

“By the end of this year, we can replace 100 bcm of gas imports from Russia. That is two-thirds of
what we import from them. This will end our over-dependency and give us much needed room to
maneuver. Two thirds by the end of this year.

“It is hard, bloody hard. But, it is possible, if we are willing to go further and faster than we have
done before.

“REPowerEU is our plan to make Europe independent from Russian gas.

“It is based on two tracks:

“First: we will diversify supply and bring in more renewable gases.

“With more LNG and pipeline imports, we can replace 60 bcm of Russian gas within the next
12 months.

“By doubling sustainable production of biomethane we can replace another 18 bcm, using
the Common Agricultural Policy to help farmers become energy producers.

“We can also increase the production and import of renewable hydrogen. A Hydrogen
Accelerator will develop integrated infrastructure and offer all Member States access to
affordable renewable hydrogen. 20 million tonnes of hydrogen can replace 50 bcm of Russian
gas.

“We will also start replacing natural gas with renewable gases. This, in sum, is the first pillar of
REPowerEU.

“In parallel, we must accelerate our clean energy transition. Renewables make us more
independent, and they are more affordable and reliable than the volatile gas market.

“So, we need to put millions more photovoltaic panels on the roofs of our homes,
businesses, and farms. We must also double the installation rate of heat pumps over the
next 5 years.

“This is low-hanging fruit. By the end of this year, almost 25% of Europe’s current electricity
production could come from solar energy.

“In addition to this, we need to speed up permitting procedures to grow our on- and offshore wind capacity, and rollout large-scale solar projects. This is a matter of overriding public interest.

“Some of these changes will not happen overnight, and that’s why we also need to prepare for next
winter.

“By October, gas storage facilities in the EU must be filled up to 90% capacity. And the Commission is
ready to support joint procurement of gas.

“Finally, and most importantly, we need to protect those who are struggling to pay their energy bills.

“Our plan today proposes several ways to help the most exposed households and businesses.

“Kadri will go through these in more detail.

“To conclude, RePowerEU is our plan to break our dependency on Russian gas, and to find freedom in
our energy choices.

“We can do it, and we can do it fast.

“All we need is the courage and grit to get us there. If ever there was a time to do it, it is now.

European Commission, Opening remarks by Executive Vice-President Timmermans and Commissioner Simson at the press conference on the REPowerEU Communication, Brussels, 8 March 2022.

See European Commission, COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS, REPowerEU: Joint European Action for more affordable, secure and sustainable energy, Strasbourg, 8.3.2022, COM(2022) 108 final.

While Australia does not appear to have announced a ban on imports of Russian oil into Australia, its two oil companies have announced cessation of procurement or lack of procurement from Russia. See Reuters, Australian refiners cease purchase of Russian crude oil, voice support for Ukraine, March 8, 2022, https://www.reuters.com/business/energy/australias-viva-energy-cease-purchase-russian-crude-oil-2022-03-08/.

Other actions

While the U.S. Congress has bills pending before both the House of Representatives and the Senate that would remove normal trade relations status on Russia (i.e., end most favored nation treatment) and instruct the US Trade Representative to seek suspension or removal of Russia from the WTO, press reports indicate that with President Biden’s action on Russian oil, gas and coal, the Administration has asked for a different piece of legislation from Congress, one that wouldn’t (at least at present) address normal trade relations or Russia in the WTO. See Inside U.S. Trade’s World Trade Online, House drops push to strip Russia of PNTR at administration’s request, March 8, 2022, https://insidetrade.com/daily-news/house-drops-push-strip-russia-pntr-administration%E2%80%99s-request. While Canada has suspended normal trade relations on goods from Russia and Belarus, U.S. inaction presumably reflects the focus of the U.S. and European allies on other sanction issues while seeking internal support for the step of suspending normal trade relations.

On March 9, 2022, the EU announced additional financial sanctions of Belarus and an expansion of individuals being sanctioned in Russia. See European Commission press release, Ukraine: EU agrees to extend the scope ofsanctions on Russia and Belarus, 9 March 2022, https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1649. Most of the press release is copied below.

“The European Commission welcomes today’s agreement of Member States to adopt further targeted sanctions in view of the situation in Ukraine and in response to Belarus’s involvement in the aggression. In particular, the new measures impose restrictive measures on 160 individuals and amend Regulation (EC) 765/2006 concerning restrictive measures in view of the situation in Belarus and Regulation (EU) 833/2014 concerning Russia’s actions destabilising the situation in Ukraine. These amendments create a closer alignment of EU sanctions regarding Russia and Belarus and will help to ensure even more effectively that Russian sanctions cannot be circumvented, including through Belarus.

“For Belarus, the measures introduce SWIFT prohibitions similar to those in the Russia regime, clarify that crypto assets fall under the scope of “transferable securities” and further expand the existing financial restrictions by mirroring the measures already in place regarding Russia sanctions.

“In particular, the agreed measures will:

“Restrict the provision of SWIFT services to Belagroprombank, Bank Dabrabyt, and the Development Bank of the Republic of Belarus, as well as their Belarusian subsidiaries.

“Prohibit transactions with the Central Bank of Belarus related to the management of reserves or assets, and the provision of public financing for trade with and investment in Belarus.

“Prohibit the listing and provision of services in relation to shares of Belarus state-owned entities on EU trading venues as of 12 April 2022.

“Significantly limit the financial inflows from Belarus to the EU, by prohibiting the acceptance of deposits exceeding €100.000 from Belarusian nationals or residents, the holding of accounts of Belarusian clients by the EU central securities depositories, as well as the selling of euro-denominated securities to Belarusian clients.

“Prohibit the provision of euro denominated banknotes to Belarus.

“For Russia, the amendment introduces new restrictions on the export of maritime navigation and radio communication technology, adds Russian Maritime Register of Shipping to the list of state-owned enterprises subject to financing limitations and introduces a prior information sharing provision for exports of maritime safety equipment.

“In addition, it also extends the exemption relating to the acceptance of deposits exceeding €100.000 in EU banks to Swiss and EEA nationals.

“Finally, the EU confirmed the common understanding that loans and credit can be provided by any means, including crypto assets, as well as further clarified the notion of “transferable securities”, so as to clearly include crypto-assets, and thus ensure the proper implementation of the restrictions in place.

“Furthermore, the amendment introduces new restrictions.

“Furthermore, an additional 160 individuals have been listed in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.

“The listed individuals include:

“- 14 oligarchs and prominent businesspeople involved in key economic sectors providing a substantial source of revenue to the Russian Federation – notably in the metallurgical, agriculture, pharmaceutical, telecom and digital industries -, as well as their family members.

“- 146 members of the Russian Federation Council, who ratified the government decisions of the ‘Treaty of Friendship, Cooperation and Mutual Assistance between the Russian Federation and the Donetsk People’s Republic’ and the ‘Treaty of Friendship, Cooperation and Mutual Assistance between the Russian Federation and the Luhansk People’s Republic’.

“Altogether, EU restrictive measures now apply to a total of 862 individuals and 53 entities.”

As Russia continues to escalate its hostilities in Ukraine, the U.S., EU, G7 and other countries continue to make clear that there will be major costs imposed on Russia for the unprovoked war. While many of the sanctions are financial, some are trade focused. The move away from Russian oil and gas and the restrictions on the export to Russia of materials and technology for the sector will significantly reduce Russian gross domestic product over time with so much of the economy currently tied to oil, gas and coal.

Joint letter from European Union and United States on removing the Russian Federation from the WTO Developed Countries Coordinating Group

Terence P. Stewart · March 5, 2022 · Sanctions on Russia following its invasion of Ukraine · European Union, Russian Federation, Ukraine · No Comments

With the Russian war in Ukraine intensifying, western countries and their allies continue to up the level of sanctions. My last three posts have looked at trade components of the sanctions imposed by a host of governments and what steps might occur at the WTO. See March 4, 2022: Removal of MFN benefits for goods from Russia and Belarus — Canada moves first; Ukraine applies economic embargo on Russia; EU and US consider removal of MFN benefits, https://currentthoughtsontrade.com/2022/03/04/removal-of-mfn-benefits-for-goods-from-russia-and-belarus-canada-moves-first-ukraine-applies-economic-embargo-on-russia-eu-and-us-consider-removal-of-mfn-benefits/; March 2, 2022: A former Appellate Body Chair argues WTO Members have the ability to remove the Russian Federation from WTO Membership; other proposals to strip MFN benefits from Russia and services restrictions, https://currentthoughtsontrade.com/2022/03/02/a-former-appellate-body-chair-argues-wto-members-have-the-ability-to-remove-the-russian-federation-from-wto-membership-other-proposals-to-strip-mfn-benefits-from-russia-and-services-restrictions/; February 28, 2022: Trade sanctions following Russia’s invasion of Ukraine, https://currentthoughtsontrade.com/2022/02/28/trade-sanctions-following-russias-invasion-of-ukraine/.

On March 4, 2022, the European Union and the United States forwarded a joint letter to the WTO’s Chairman of the General Council alerting the WTO that the other members of the Developed Countries Coordinating Group would no longer be including the Russian Federation in their deliberations on potential chairs of WTO bodies and committees.

The EU Mission to the WTO provided a tweet that included the joint letter. The tweet says, “EU 🇪🇺 and US 🇺🇸 informed the Chair of the WTO General Council today that Russia’s participation in the Developed Countries Coordinating Group of the WTO is suspended. Russia is an aggressor state that blatantly violates international law. #StandWithUkraine️”. https://twitter.com/EUmissionWTO

The letter is included below.

EU-US-letter-to-WTO-re-removal-of-Russia-from-developed-country-coordinating-group

Yesterday’s article in Inside U.S. Trade’s World Trade Online reviews the limited effect of the action, particularly in light of the recent announcement of the slate of Chairs for committees and bodies. See Inside U.S. Trade’s World Trade Online, U.S., EU, others suspend Russia from WTO coordinating group, March 4, 2022, https://insidetrade.com/daily-news/us-eu-others-suspend-russia-wto-coordinating-group (“The move will have little immediate impact, according to Inu Manak, a senior fellow at the Council on Foreign Relations, because the WTO announced its committee chairs last month. However, she said, it sends a “fairly big signal,” as the members of the coordinating group are symbolically kicking Russia out of the influential club that chooses who leads discussions at the WTO.”).

Still in the offing is what additional trade actions — such as stripping Russia of most favored nation (“MFN”) tariff treatment, banning imports of Russian oil and gas, or attempting to expel Russia from the WTO — will be pursued or implemented. As noted in yesterday’s post, Canada has led on stripping Russia of MFN treatment and banning imports of Russian oil and gas. The U.S. and EU have one or both under consideration. It is unclear if other countries are considering one or both actions as well. None have yet endorsed the idea of expelling Russia from the WTO, though at least one former WTO Appellate Body Chair has opined that such an action could occur under WTO provisions. See March 2, 2022: A former Appellate Body Chair argues WTO Members have the ability to remove the Russian Federation from WTO Membership; other proposals to strip MFN benefits from Russia and services restrictions, https://currentthoughtsontrade.com/2022/03/02/a-former-appellate-body-chair-argues-wto-members-have-the-ability-to-remove-the-russian-federation-from-wto-membership-other-proposals-to-strip-mfn-benefits-from-russia-and-services-restrictions/.

Yesterday’s action by developed countries in the WTO signals that actions within multilateral organizations will be part of the effort to get the Russian Federation to cease its unprovoked war with Ukraine. Considering the increasing levels of hostility, countries opposing the Russian and Belarusan actions need to speed up further sanctions.

Removal of MFN benefits for goods from Russia and Belarus — Canada moves first; Ukraine applies economic embargo on Russia; EU and US consider removal of MFN benefits

Terence P. Stewart · March 4, 2022 · Sanctions on Russia following its invasion of Ukraine · Belarus, Canada, European Union, Russian Federation, Ukraine, United States, WTO · No Comments

Canada

Amid the global outcry at the actions of the Russian Federation in waging war on Ukraine, countries are reviewing options to increase the economic pain on Russia and Belarus which has permitted its country to be used for staging and other purposes. Canada acted on March 3, 2022 by removing both the Russian Federation and Belarus from receiving most favored nation treatment on any imports into Canada. See Department of Finance Canada, Canada cuts Russia and Belarus from Most-Favoured-Nation Tariff treatment, March 3, 2020, https://www.canada.ca/en/department-finance/news/2022/03/canada-cuts-russia-and-belarus-from-most-favoured-nation-tariff-treatment.html; Deputy Prime Minister of Canada Chrystia Freeland, Canada cuts Russia and Belarus from Most-Favoured-Nation Tariff treatment, March 3, 2022, https://deputypm.canada.ca/en/news/news-releases/2022/03/03/canada-cuts-russia-and-belarus-most-favoured-nation-tariff-treatment; Canada Border Services Agency, Order withdrawing the Most-Favoured-Nation status from Russia and Belarus, Customs Notice 22-02, https://www.cbsa-asfc.gc.ca/publications/cn-ad/cn22-02-eng.html. The press releases contain the following explanation of the action being taken.

“Russia’s invasion of Ukraine, supported by Belarus, is a violation of international law and threat to the rules-based international order. Canada is taking further action to ensure those who do not support the rules-based international order cannot benefit from it.

“Today, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, and The Honourable Mary Ng, Minister of International Trade, Export Promotion, Small Business and Economic Development, announced that the Government of Canada has issued the Most-Favoured-Nation Tariff Withdrawal Order (2022-1), removing these countries’ entitlement to the Most-Favoured-Nation Tariff (MFN) treatment under the Customs Tariff.

“This Order results in the application of the General Tariff for goods imported into Canada that originate from Russia or Belarus. Under the General Tariff, a tariff rate of 35 per cent will now be applicable on virtually all of these imports. Russia and Belarus will join North Korea as the only countries whose imports are subject to the General Tariff.

“This measure is in addition to the many punitive actions that Canada and its allies have already taken against Russia and Belarus as a result of the illegal and unprovoked invasion of Ukraine, including other trade restrictions under the Special Economic Measures Act.

“Quotes

“‘Today, I am announcing that Canada will be the first country to revoke Russia’s and Belarus’s Most-Favoured-Nation status as a trading partner under Canadian law. We are working closely with our partners and allies to encourage them to take the same step. Simply put, this means that Russia and Belarus will no longer receive the benefits – particularly low tariffs – that Canada offers to other countries that are fellow members of the WTO. The economic costs of the Kremlin’s barbaric war are already high, and they will continue to rise. Canada and our allies are united in our condemnation of President Putin and his war of aggression, and we are united in our support for the remarkable Ukrainians who are so bravely resisting his assault.’

“– The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance

“‘It is the direct result of Russia’s unjustified invasion of Ukraine that has triggered our government’s removal of the Most-Favoured-Nation Tariff (MFN) treatment on almost all imports from Russia and Belarus. Canada is stepping up by putting significant economic pressure on Russia, and is providing resources to Ukraine including military equipment and emergency humanitarian support. Canada remains resolute in our solidarity with Ukraine and the Ukrainian people, and we will continue supporting them as they fight to defend their freedom and democracy.’

“– The Honourable Mary Ng, Minister of International Trade, Export Promotion, Small Business
and Economic Development”.

Later in the press release there is a list of other actions Canada has taken in response to the Russian war against Ukraine including the following.

“This measure complements other recent measures targeting trade with Russia and Belarus, which will come into force imminently, including the ban on crude oil imports from Russia and Belarus, announced on February 28, 2022, and the ban on Russian owned or registered ships and fishing vessels from Canadian ports and internal waters, announced on March 1, 2022.

2. Ukraine

Ukraine notified the WTO on March 2, 2022 that “Ukraine severed its diplomatic relations with the aggressor state, decided to impose a complete economic embargo and no longer apply the WTO agreements in its relations with the Russian Federation.” The Ukrainian letter to the Chairman of the WTO General Council is included below.

Letter-from-Ukraine-to-WTO-re-not-applying-WTO-obligations-to-Russia

3. United States

In the United States, withdrawal of MFN treatment is being considered by the Congress with bills introduced in both the House and the Senate as well as bills to ban imports of oil and petroleum products from Russia. See February 28, 2022: Trade sanctions following Russia’s invasion of Ukraine, https://currentthoughtsontrade.com/2022/02/28/trade-sanctions-following-russias-invasion-of-ukraine/ (reviewing H.R. 6835); see also S.3717 introduced by Senators Cassidy and Brown (“A bill to withdraw normal trade relations treatment from, and apply certain provisions of title IV of the Trade Act of 1974 to, products of the Russian Federation, and for other purposes”); S.3722 introduced by Senate Finance Committee Chairman Wyden (“a bill to withdraw normal trade relations treatment from, and apply certain provisions of title IV of the Trade Act of 1974 to products of the Russian Federation, and for other purposes”); S.3718 introduced by Senator Marshall and eight others (a bill to prohibit the importation of petroleum and petroleum products from the Russian Federation”). These bills are in addition to many others looking to impose additional sanctions on the Russian Federation.

While the U.S. has applied some sanctions on Belarus, at present the bills before Congress do not seek removal of MFN treatment from goods from Belarus. As Belarus is not yet a WTO Member (it is going through the accession process), there are not the same WTO considerations in removal of MFN treatment on goods from Belarus.

4. European Union

Press articles indicate that the EU is actively considering whether to remove MFN treatment for Russia. See, e.g., Bloomberg, EU Seeks to End Russia’s Most-Favored Nation Status at WTO, March 3, 2022, https://www.bloomberg.com/news/articles/2022-03-03/eu-seeks-to-suspend-russia-s-most-favored-nation-status-at-wto (“‘In reaction to the Russian aggression against Ukraine, the EU has adopted sweeping sanctions vis-a-vis Russia, which undoubtedly have a major impact on trade,’ European Commission Spokeswoman Miriam Garcia Ferrer said in an emailed reply to Bloomberg. ‘We are discussing options available to us in the WTO context. This includes the possibility of removing MFN treatment to Russia on the basis of the WTO national security exception.’”); Financial Times, Canada imposes tariffs on Russian imports by using WTO exemption, March 4, 2022, https://www.ft.com/content/88b1b680-cc23-4e69-ba2d-69c7d96910b0 (“Bernd lange, chair of the European parliament’s international trade committee, tweeted: ‘We cannot continue with business as usual in WTO when it comes to trade with Russia. One step could be to remove MFN status.'”).

The EU has been Russia’s largest trading partner, importing $188 billion worth of goods in 2021. See https://www.statista.com/statistics/1099626/russia-value-of-trade-in-goods-with-eu/. A large portion of EU imports from the Russian Federation are oil and gas. The Financial Times articles indicates that in 2020 more than two thirds of imports from Russia into the EU were oil and gas.

Comments

One can expect that there will be continuing efforts to increase the sanctions and trade costs on Russia and Belarus for the unprovoked war in Ukraine. Denying both countries MFN treatment can be expected by some countries. Canada’s lead hopefully will be followed by the U.S. and EU and others.

In a number of countries, informal bans on Russian goods, including oil and gas is already occurring. See, e.g., BBC News, Ukraine sanctions: UK dockers refuse tanker of Russian gas, March 4, 2022, https://www.bbc.com/news/uk-england-kent-60619112.

The larger issue of whether WTO Members should exclude Russia from the organization is also attracting at least private sector comments. See, e.g., March 2, 2022: A former Appellate Body Chair argues WTO Members have the ability to remove the Russian Federation from WTO Membership; other proposals to strip MFN benefits from Russia and services restrictions, https://currentthoughtsontrade.com/2022/03/02/a-former-appellate-body-chair-argues-wto-members-have-the-ability-to-remove-the-russian-federation-from-wto-membership-other-proposals-to-strip-mfn-benefits-from-russia-and-services-restrictions/; Kevin D. Williamson, National Review, Force Russia from WTO?, February 28, 2022, https://www.nationalreview.com/corner/force-russia-from-wto/.

Many countries have raised the conflict at the WTO during the recent February 23-24, 2022 General Council meeting and at the recent February 28, 2022 Dispute Settlement Body meeting. See, e.g., EU Statements at the General Council Meeting, 23 and 24 February 2022, https://eeas.europa.eu/delegations/world-trade-organization-wto/111430/eu-statements-general-council-meeting-23-and-24-february-2022_en (“Thursday 24 February 2022 (morning), STATEMENT ON THE INVASION OF UKRAINE BY THE RUSSIAN FEDERATION, We heard many Delegations talking about the tragedy to human lives brought about by the Covid pandemic. Today the tragedy is people being killed by the use of force following the invasion of Ukraine this morning. This is a sad day for Europe, a sad day for the world. The European Union strongly condemns this unjustified attack on Ukraine, an independent and sovereign State. This constitutes a gross violation of international law. In these dark hours, our thoughts are with the innocent women, men and children as they face this unprovoked attack and fear for their lives.“); Statements by the United States at the Meeting of the WTO Dispute Settlement Body
Geneva, February 28, 2022, https://uploads.mwp.mprod.getusinfo.com/uploads/sites/25/2022/03/Feb28.DSB_.Stmt_.as_.deliv_.fin_.pdf “• Before addressing the present agenda item, the United States will comment on the atrocious situation that we see happening on the ground in Ukraine. • The United States stands with Ukraine. The United States condemns Russia’s further invasion of and continuing military assault against the sovereign nation and people of Ukraine, and condemns this violation of the core principles that uphold global peace and security. The United States will continue to support the Ukrainian people as they defend their country from this unprovoked attack and we commend the true and tremendous courage we are seeing from the Ukrainian people, the armed forces, and Ukrainian leaders. The United States has expressed its views before and after the UN Security Council vote and I refer Members to our previous official statements for more details.”).

While the WTO news releases include a statement from the Director-General on the Ukraine conflict, the press releases reviewing meetings where the Ukraine conflict has been raised by Members is silent on the issue being raised. See, e.g., WTO news release, WTO dispute panel to review Chinese complaint regarding Australian duties, February 28, 2022, https://www.wto.org/english/news_e/news22_e/dsb_28feb22_e.htm; WTO news release, WTO chairpersons for 2022, February 24, 2022, https://www.wto.org/english/news_e/pres22_e/pr898_e.htm; WTO news release, WTO members agree on mid-June dates for reconvening MC12, https://www.wto.org/english/news_e/news22_e/mc12_23feb22_e.htm; WTO news release, WTO members initiate membership talks for Turkmenistan, February 23, 2022, https://www.wto.org/english/news_e/news22_e/acc_23feb22_e.htm.

It is not clear if major Members like the U.S. and EU will seek specific action against Russia within the WTO in the coming weeks or simply pursue any action unilaterally (or in coordination with certain other trading partners). Hopefully, concerned nations will see that Russia is held accountable at all multilateral organizations, including the WTO. One can assume that accession negotiations with Belarus will stop progressing until there is a satisfactory resolution of the conflict from the view of many of the existing WTO Members (other than the Russian Federation).

It is possible that WTO Members at least on a plurilateral basis will look at steps to facilitate medical and food assistance to Ukraine during the crisis. Such action is occurring and will certainly continue to occur by certain WTO Members outside of the context of the WTO, but the WTO has a role it could play. Similarly, the WHO recently took action to get 36 tons of medical supplies to the Polish border with Ukraine as the following tweet reviews. More can and should be done.

WHO-medical-assistance

Just as the COVID-19 pandemic has tested the world and involve trade elements for its resolution, so too the unprovoked war on Ukraine started by Russia and facilitated by Belarus is testing the world and needs a meaningful trade response as part of the effort to achieve a peaceful resolution.

A former Appellate Body Chair argues WTO Members have the ability to remove the Russian Federation from WTO Membership; other proposals to strip MFN benefits from Russia and services restrictions

Terence P. Stewart · March 2, 2022 · Sanctions on Russia following its invasion of Ukraine · Russian Federation · No Comments

In my post on February 28, 2022, I reviewed actions in the U.S. and various other trading partners to impose additional export controls on goods going to Russia because of its invasion of Ukraine as well as a House bill to both strip normal trade relations from Russia and have the US seek to have Russia removed from the WTO. See February 28, 2022: Trade sanctions following Russia’s invasion of Ukraine, https://currentthoughtsontrade.com/2022/02/28/trade-sanctions-following-russias-invasion-of-ukraine/.

That same day, James Bacchus, a former WTO Appellate Body Chair, published an opinion in the Wall
Street Journal indicating that WTO Members have the ability under Art. X of the Marrakesh Agreement Establishing the WTO to expel Russia from the organization if they have the will. See Wall Street Journal, Boot Russia From the WTO, February 28, 2022, https://www.wsj.com/articles/boot-russia-from-the-wto-world-trade-organization-putin-international-economic-sanctions-tariff s-legal-authority-11646092051. Mr. Bacchus urges the United States to lead the effort to have Russia expelled from the WTO because of the unprovoked war started by Russia with Ukraine. Article X of the Marrakesh Agreement Establishing the WTO deals with amendments to the WTO and not specifically with removal of a Member. Mr. Bacchus’ piece is relying on language from Art. X:5 which states in part that “The Ministerial Conference may decide by a three-fourths majority of the Members that any amendment made effective under the preceding provision is of such a nature that any Member which has not accepted it within a period specified by the Ministerial Conference in each case shall be free to withdraw from the WTO or to remain a Member with the consent of the Ministerial Conference.” As recognized by Mr. Bacchus, the organization typically operates by consensus. Nonetheless, his opinion piece raises at least an approach that might be tried (propose an amendment to the WTO (e.g.. WTO membership is suspended at such time as the Member invades another WTO Member without UN authorization) and get Members to agree to vote on it and achieve 3/4 support).

In the U.S. Congress, the Chairman of the Senate Finance Committee, Senator Wyden of Oregon, issued a press release on March 1, 2022 which included some additional trade and finance steps that could be taken to increase the sanctions on Russia. See Wyden Outlines Finance Committee Next Steps to Hold Russia Accountablefor Ukraine Invasion, March 1, 2022, https://www.finance.senate.gov/chairmans-news/wyden-outlines-finance-committee-next-steps-to-hold-russia-accountable-for-ukraine-invasion. Chairman Wyden’s list provides six additional steps that the U.S. should be taking to sanction Russia. The second deals with trade and is copied below.

” Second, we need to make sure tariff treatment of Russia reflects its pariah status. Permanent normal trade relations are extended to countries as they join the World Trade Organization (WTO) and agree to abide by rules that ensure a level playing field in international trade. Removing normal trade relations will raise tariffs on Russian goods and send a message that unprovoked invasions of a foreign nation will not be tolerated in any arena. In addition, Russia’s actions to throttle internet access and censor online content as a means to crush dissent and limit access to reliable information not only raise human and civil rights concerns, but also act as a barrier to trade. We must consider how trade tools can be used to address such digital authoritarianism by any actor.”

President Biden, in his state of the union address on March 1, 2022, indicated that the United States was joining the European Union and Canada in closing U.S. airspace to Russian aircraft. Such closure obviously restricts trade in some service sectors.

Some states and businesses are boycotting purchase of Russian goods.

It is clear that countries around the world will be ratcheting up sanctions on Russia and Belarus as Russia’s war in Ukraine continues to intensify. Much of the sanctions are finance-related but trade sanctions are a part and likely to become more important over time.

Trade sanctions following Russia’s invasion of Ukraine

Terence P. Stewart · February 28, 2022 · Sanctions on Russia following its invasion of Ukraine · Russian Federation · No Comments

The United States, the European Union, United Kingdom, Canada, Japan, Republic of Korea, Taiwan, Australia and New Zealand have imposed various financial sanctions on certain actors in the Russian Federation following last week’s invasion of Ukraine.

There have also been new export restrictions on various products of potential importance to the Russian economy and military being imposed by these same countries. For example, the United States Department of Commerce is publishing revised regulations on export controls of products to the Russian Federation. The document which is available online at the moment will be published in the Federal Register on March 3, 2022. The “Background” section of the revised regulations describes the reason for the modifications and coverage. As noted the new restrictions are primarily aimed at Russia’s defense, aerospace and maritime sectors.

“I. Background

“In response to the Russian Federation’s (Russia’s) further invasion of Ukraine, the Bureau of Industry and Security (BIS) imposes extensive sanctions on Russia by amending the Export Administration Regulations (15 CFR parts 730 – 774) (EAR). Russia’s invasion of Ukraine flagrantly violates international law, is contrary to U.S. national security and foreign policy interests, and undermines global order, peace, and security, and therefore necessitates these stringent and expansive sanctions. The Commerce Department’s sanctions are one aspect of the broad U.S. Government response to Russia’s unprovoked aggression and are being imposed in coordination with allies and partners.

“In response to Russia’s 2014 invasion of Ukraine and occupation of the Crimean region, the U.S. Government, in coordination with its partners and allies, imposed restrictions on Russia, including asset-blocking measures, licensing requirements applicable to exports, reexports, and transfers (in-country) of items subject to the EAR destined for certain Russian entities, and special controls on items subject to the EAR intended for use in specified Russian industry sectors. Leading up to Russia’s further invasion of Ukraine, the U.S. Government announced that should Russia encroach further on Ukraine’s territory, it would impose additional, comprehensive sanctions with significant consequences.

“The export control measures implemented in this final rule protect U.S. national security and foreign policy interests by restricting Russia’s access to items that it needs to project power and fulfill its strategic ambitions. These items include sophisticated technologies designed and produced in the United States, as well as certain foreign-produced items that contain or are based on U.S.-origin technology subject to the EAR or other technology that is subject to the EAR that are essential inputs to Russia’s key technology and other sectors. BIS is primarily targeting the Russian defense, aerospace, and maritime sectors with these new export controls. These export controls include controls on the export from abroad of certain foreign-produced items that are subject to the EAR. Given the global dominance of U.S.-origin software, technology, and equipment (including tooling), these new controls, implemented in parallel with similarly
stringent measures by partner and allied countries, will cover a broad scope of items that Russia seeks to advance its strategic ambitions and consequently impair the country’s key industrial sectors.”

DEPARTMENT OF COMMERCE, Bureau of Industry and Security, 15 CFR Parts 734, 738, 740, 742, 744, 746, and 772, [Docket No. 220215-0048], RIN 0694-AI71, Implementation of Sanctions Against Russia Under the Export Administration Regulations (EAR), https://public-inspection.federalregister.gov/2022-04300.pdf.

Will one or more countries impose import restrictions on Russia for its invasion of Ukraine?

In the United States, some members of Congress have introduced legislation which, if passed and signed into law, would revoke permanent most favored nation treatment for imports from the Russian Federation with an annual review on any waiver dependent on Russia’s withdrawal from Ukraine and the existence of freely elected Ukrainian leadership. In the House of Representatives, the bill introduced would also require the U.S. to seek to limit Russia’s participation in the WTO. See H.R. 6835, To Withdraw Normal Trade Relations Treatment from, and apply certain provisions of Title IV of the Trade Act of 1974 to, products of the Russian Federation, Congressional Record H1146, 117 Cong. 2nd Session (Feb. 25, 2022), https://www.congress.gov/117/crec/2022/02/25/168/35/CREC-2022-02-25.pdf. While the text of the bill is not yet available online, the press release from the sponsors (copied below) lays out the purpose.

“End ‘Favored Nation’ Trade Relations with Russia, Bar Russia From WTO

“Washington, D.C. – U.S. Representative Lloyd Doggett, Chair of the House Ways and Means Health Subcommittee, and U.S. Representative Earl Blumenauer, Chair of the House Ways and Means Trade Subcommittee, announce today that they are introducing legislation to end Permanent Normal Trade Relations (PNTR) with the Russian Federation and to initiate a process to formally deny Russia access to the World Trade Organization (WTO), following its unprovoked invasion of Ukraine.

“’In seeking multiple ways to respond to Russia’s unprovoked invasion of Ukraine, we should close every possible avenue for Russian participation in the world economy,’ said Rep. Doggett. ‘Our legislation takes one such step of the type previously used in 1992 in response to Serbian aggression. It would remove most favored nation trade treatment for Russian imports by terminating Permanent Normal Trade Relations (PNTR). The U.S. should deny Russia previously-granted WTO terms and seek to expel Russia from the World Trade Organization (WTO). As Putin undermines the stability carefully built since World War II, he and his oligarch pals should not benefit from the trading system created to ensure that stability and peace.’

“’The United States must use every tool at our disposal, short of armed conflict, to protect Ukraine’s independence. Putin’s unprovoked and unprecedented actions warrant a proportional response that includes terminating Permanent Normal Trading Relations and denying it WTO membership,’ said Rep. Blumenauer. ‘Putin and his cronies should not be insulated from the consequences of their unjustified actions and I intend to use my position as the chairman of the Ways and Means Subcommittee on Trade to ensure that.’

End “Favored Nation” Trade Relations with Russia, Bar Russia From WTO, February 25, 2022, https://doggett.house.gov/media/blog-post/end-favored-nation-trade-relations-russia-bar-russia-wto.

It is understood that similar legislation will be introduced in the Senate this week.

The Russian Federation is not a major trading partner of the United States. In 2021, U.S. imports for consumption from Russia were just $29.657 billion (just 1.05% of total U.S. imports for consumption). The bulk of U.S. imports from Russia ($17.406 billion) are products from Chapter 27 of the Harmonized System (largely oil, gas and downstream products)). Russia accounts for 8.17% of total U.S. imports of products under Chapter 27. At the same time, the United States exports to the world nearly 12 times the amount of the oil and gas products that it imports from Russia in the three major four-digit HS categories (HS 2709, HS 2710, HS 2711). The U.S. also exports relatively small volumes of goods to Russia — $5.531 billion (less than 4/10ths of 1 percent of total U.S. exports).

If the U.S. enacts the introduced legislation, Russian imports would be subject to Column 2 rates of duty absent legislation modifying the non-MFN rate. For oil and gas products, Column 2 imports duties are 2-4 times the MFN rates for oil and derived products imported from Russia (HS 2709 and 2710) and duty free for natural gas products imported from Russia (HS 2711). However, rates are low even under Column 2. For other products from Russia, increased duties would be substantial. For example, most steel mill products under Chapter 72 would be subject to Column 2 tariffs of 20% or more versus duty free treatment pursuant to MFN. U.S. imports of such products from Russia in 2021 were $2.641 billion.

So revoking MFN treatment to Russia will have some effect, even if modest overall.

The WTO does not have a procedure for removing Members from the organization other than a Member choosing to withdraw. So it is not clear what opposition to continued membership of a country by other Members would lead to. Some have identified types of disputes that could be brought to address broad-based nullification and impairment from economic systems not like market based economies. See, e.g., Wall Street Journal, For U.S. to Stay in WTO, China May Have to Leave, August 22, 2018, https://www.wsj.com/articles/for-u-s-to-stay-in-wto-china-may-have-to-leave-1534935600. It is not clear that such an approach would be of interest vis-a-vis Russia.

It is, of course, the case that WTO Members are entitled to MFN treatment for their goods. To the extent trading partners opt to withdraw MFN treatment or other rights of Membership, there are potential justifications (e.g., GATT Art. XXI). But even without such justifications, it is a form of limiting WTO benefits to a Member who is viewed as a pariah for extraordinary conduct. Actions by WTO Members against Russia would likely be subject to retaliation (though no retaliation should be taken absent a WTO dispute resolution, though would likely be taken).

It is unknown if the U.S. Administration will support the legislation that has been introduced and, if so, if trading partners would join in adding import restrictions to the sanctions imposed to date on Russia. The fact that members of Congress are looking at additional sanction activity reflects the extraordinary situation Russia’s unprovoked invasion has created.

The trade and investment restrictions flowing from censorship — a recent U.S. International Trade Commission Report and the implications for the ongoing Joint Statement Initiative on E-Commerce

Terence P. Stewart · January 28, 2022 · Uncategorized · China, India, Russian Federation · No Comments

Eighty-six WTO Members are engaged in the ongoing Joint Statement Initiative negotiations on e-commerce. See WTO, Joint Initiative on E-Commerce, https://www.wto.org/english/tratop_e/ecom_e/joint_statement_e.htm (“As of January 2021, there are 86 WTO members participating in these discussions, accounting for over 90 per cent of global trade. As is the case for all the joint initiatives, participation in the e-commerce JI is open to all WTO members. The initiative is jointly co-convened by Ambassador George Mina (Australia), Ambassador YAMAZAKI Kazuyuki (Japan) and Ambassador Tan Hung Seng (Singapore).”). Among the 86 Members who are participating in the negotiations are China, Russia, Indonesia and Turkey as well as major developed countries from Europe, the U.S., Japan, Korea, Canada, Australia, and New Zealand. Not included in the list as of January last year were India and Vietnam. The lack of meaningful rules on e-commerce is a reflection of the challenges the WTO negotiating function has faced in moving forward with multilateral rules.

Reports from the WTO have been that the plurilateral negotiations on e-commerce have made good progress through the end of 2021. See WTO news release, E-commerce co-convenors welcome substantial progress in negotiations, 14 December 2021, https://www.wto.org/english/news_e/news21_e/ecom_14dec21_e.htm; WTO Joint Statement Initiative on E-commerce, Statement by Ministers of Australia, Japan and Singapore, December 2021, https://www.wto.org/english/news_e/news21_e/ji_ecom_minister_statement_e.pdf. The Joint Statement is copied below.

“The COVID-19 pandemic has highlighted the digital economy’s importance, accelerated the digital
transformation and heightened the need for global rules governing digital trade. As Co-convenors of the
Joint Statement Initiative on Electronic Commerce, we are committed to responding to this challenge. This
initiative will update the WTO rulebook in an area of critical importance to the global economy.

“We recognise the importance of the digital economy in post-COVID-19 economic recovery. The digital
economy offers enormous opportunities for developing Members and least-developed country (LDC)
Members, including by lowering the costs for businesses, particularly MSMEs, to access and participate in
global markets. WTO rules and commitments on digital trade can help unlock these opportunities.

“In this context, we will continue to drive negotiations towards a high standard and commercially meaningful outcome building on existing WTO agreements and frameworks. We will continue to promote inclusiveness and encourage the participation of as many WTO Members as possible in the negotiations, which were launched in our January 2019 Ministerial statement.

“We welcome the substantial progress made to date in the negotiations. We have achieved good
convergence in negotiating groups on eight articles – online consumer protection; electronic signatures and authentication; unsolicited commercial electronic messages; open government data; electronic contracts; transparency1; paperless trading; and open internet access. The outcomes already achieved in these areas will deliver important benefits including boosting consumer confidence and supporting businesses trading online.

“In addition, we have seen the consolidation of text proposals in other areas, including on customs duties on electronic transmissions, cross-border data flows, data localisation, source code, electronic transactions frameworks, cybersecurity, and electronic invoicing, as well as advanced discussions on market access. We will intensify negotiations in these areas from early 2022. We note that provisions that enable and promote the flow of data are key to high standard and commercially meaningful outcome.

“Participants in the initiative support the continuation of the multilateral e-commerce moratorium in
fostering certainty and predictability for businesses. The co-convenors consider it crucial that the initiative
makes permanent among participants the practice of not imposing customs duties on electronic
transmissions.

“”In light of the strong progress that has been achieved to date, the co-convenors will arrange the JSI work programme to secure convergence on the majority of issues by the end of 2022. We will identify
opportunities throughout 2022 for Ministers to provide guidance on key issues in the negotiations.
We look forward to working with all participating Members as we intensify the negotiations and work
towards a successful conclusion.

“The Hon Dan Tehan MP, Minister for Trade, Tourism and Investment, Australia
“H.E. Mr HAYASHI Yoshimasa, Minister for Foreign Affairs, Japan
“H.E. Mr HAGIUDA Koichi, Minister of Economy, Trade and Industry, Japan
“H.E. Mr Gan Kim Yong, Minister for Trade and Industry, Singapore

“____

“1 Subject to the final scope of provisions and architecture”

Absent from the topics being discussed (based on the joint statement) are rules around censorship, although some topics can indirectly affect censorship actions (localisation and free flow of data).

Censorship is a major problem for digital trade and service providers, a fact made clear by a recent study from the U.S. International Trade Commission in response to a request from the U.S. Senate Finance Committee. See U.S. International Trade Commission, Foreign Censorship, Part 1: Policies and Practices Affecting U.S. Businesses, Inv. No. 332-585, Publ. 5244 (December 2021), https://www.usitc.gov/publications/332/pub5244.pdf. It is hard to understand how the U.S., EU countries and others can sign off on an e-commerce agreement that doesn’t address the enormous harmful trade effects from censorship.

Part of the Executive Summary of the USITC report (pages 7-13) is copied below and identifies the importance of addressing censorship practices. The countries focused on in the report are China, the Russian Federation, India, Indonesia, Turkey and Vietnam. However, as recognized in the report, censorship is practiced by many more WTO Members.

“Executive Summary

“This report identifies and describes various foreign government censorship policies and practices,
including examples that U.S. businesses consider impediments to trade and investment. It is the first of
two reports requested by the U.S. Senate Committee on Finance (Committee) in its letter to the U.S.
International Trade Commission (Commission) dated April 7, 2021. The Committee stated that censorship
and its impact on the flow of information and services are critical issues for the digital economy and
requested that this first report include detailed information on the following:

“1. Identification and descriptions of various foreign censorship practices, in particular any
examples that U.S. businesses consider to impede trade or investment in key foreign markets.
The description should include to the extent practicable:

“a. the evolution of censorship policies and practices over the past five years in key
foreign markets;

“b. any elements that entail extraterritorial censorship; and

:c. the roles of governmental and nongovernmental actors in implementation and
enforcement of the practices.

“In response to the Committee’s request, this report identifies and describes censorship and censorship enabling policies and practices and the evolution of these policies and practices over the past five years in
six key foreign markets: China (including Hong Kong), Russia, Turkey, Vietnam, India, and Indonesia. For
these key markets, the report also describes elements that entail extraterritorial censorship and the roles
of governmental and nongovernmental actors in implementation and enforcement of censorship policies
and practices.

“In preparing this report, the Commission relied on information provided by a review of relevant
literature, a public hearing, written submissions, interviews with representatives from industry,
academia, the U.S. government, and nongovernmental organizations (NGOs), and publicly available data.
The Commission held a public hearing on July 1, 2021, and participants included representatives of
academic institutions, NGOs, and trade associations. The Commission also received written submissions
for that hearing from a similar cross section of interested parties.

“Defining Censorship

“Censorship can be defined in various ways. For the purposes of this investigation, based on the request
letter from the Committee to the Commission dated January 4, 2021, censorship is defined as the
prohibition or suppression of speech or other forms of communication. This report addresses foreign
government censorship policies and practices, including laws, regulations, and other measures that either
directly target the suppression of speech or may be used to enable or facilitate its suppression. For
purposes of this report, we refer to these measures generally as “censorship-related policies and
practices” or simply “policies and practices.” This investigation focuses on foreign government
censorship-related policies and practices that impede trade and investment by U.S. businesses in key
markets.1 Industries commonly subject to censorship include digital and non-digital media (such as
newspapers, journals, and magazines); producers and distributors of audiovisual content (such as movies
and online video, television, books, and music); and social media and internet search providers, as well as
computer services more generally. The broad trend toward online publication and communication in the
global media and audiovisual services sectors and the heavy reliance on digital distribution for the crossborder provision of news, information, and audiovisual content imply that foreign censorship of the flow of information over digital platforms is having a significant impact on the digital economy. Given this and consistent with the Committee’s request, this report focuses on censorship in the online environment.

“This report in chapter 1 briefly describes how international human rights law has sought to distinguish
between measures that are and are not censorship and whether an instance of censorship may represent
a legitimate exception to freedom of expression. For example, international human rights law considers
such factors as whether a law provides clear direction and is not vague or ambiguous. However, it is
beyond the scope of this report to determine whether a given law may be appropriate or inappropriate
under international human rights law or other legal frameworks.

“Key Markets Where Foreign Censorship Affects U.S. Businesses

“In response to the Committee’s request for information about foreign censorship policies and practices in key markets, the Commission identified six markets: China, Russia, Turkey, Vietnam, India, and Indonesia.

“These six key markets were selected because they meet two broad criteria. First, governments in these
markets have introduced a wide range of censorship policies and practices, in particular with respect to
digital content, that involve restrictions on firms, including U.S. businesses. Second, for the digital and
media services most likely affected by censorship, demand in each of these markets is large enough to
represent a significant market opportunity for U.S. firms. In identifying key markets, the Commission
considered a range of potential foreign censorship policies and practices, noting that these may affect
U.S. businesses either by restricting their existing access or limiting new access to a foreign market.

“While the Commission relied on a variety of sources to inform its identification of key markets, an
important starting point was information from Freedom House, a well-known human rights advocacy
NGO, and its annual Freedom on the Net reports, which provide internet freedom scores related to
obstacles to access, limits on content, and violations of internet user rights, as well as data on
governments’ use of nine ‘key internet controls’ in regulating online platforms, content, and users. To
assist in identifying the key markets with relevant censorship policies and practices, the Commission also
reviewed data on the incidence of internet shutdowns, government requests for moderation of content,
legal guarantees of freedom of expression, and the degree of freedom afforded the press in various
countries around the world. To identify markets where demand is large enough to represent a significant
market opportunity for U.S. businesses, the Commission looked at indicators of demand for digital media
and audiovisual content. These included demographic indicators of consumer demand such as population
and gross domestic product (GDP) per capita, as well as indicators of the size of a market’s digital
economy, including the percentage of the population with access to the internet and the United Nations
Conference on Trade and Development Readiness for Frontier Technologies Index, which assesses
countries’ rate of adoption of important internet technologies.

“Overview of Censorship-Related Policies and Practices

“To get a full picture of foreign government censorship regimes in the key markets, it is useful to
understand the ‘who,’ ‘what,’ and ‘how’ of these policies and practices, as well as their evolution, and
the concepts of extraterritoriality and self-censorship. Many different governmental agencies and actors
have a role in censorship-related policies and practices in the key markets—the ‘who’ of censorship.
Also, governments in the key markets often require the cooperation of nongovernmental actors, such as
U.S. internet companies, to carry out censorship, given the growing importance of the internet for
communication and speech.

“Governments in the key markets censor a wide variety of content—the ‘what’ of censorship. This
content includes political, social, and national security-related topics as well as internet tools that can be
used to circumvent censorship (such as virtual private networks). For example, based on an empirical
analysis conducted by researchers at Harvard University’s Berkman Klein Center for Internet & Society, 26
of 45 countries engaged in state-sponsored filtering of internet content through technical means in
2015–17 and before.2 In particular, all of the key markets engaged in “pervasive” or “substantial” filtering
of political content as well as other topics (figure ES.1).

“Governments in the key markets operationalize censorship—the “how” of censorship—through policies
and practices that can be broadly grouped into two categories: those that directly target speech for
suppression and those that can in some circumstances operate to enable government censorship.

“Government policies and practices in the first category include laws that prohibit particular categories of
speech, as well as the premarket review of audiovisual and other creative works by censors. They also
include, in the online environment, government policies and practices that shut down the internet, block
entire websites, filter access to particular content on sites, or make it more difficult to access websites
(e.g., throttling).

“By contrast, censorship-enabling policies and practices facilitate governments’ ability to suppress speech.
Such measures may include, for example, internet intermediary rules, data localization or local presence
requirements, and foreign investment and market access restrictions. However, whether such measures
should be considered censorship enabling depends on context and the end to which such measures are
used. As detailed in chapters 3 and 4, in the key markets various measures work together, or may work
together, to facilitate government censorship. For example, broad definitions of prohibited content are
often combined with short deadlines for internet companies to identify and takedown prohibited content
and substantial penalties for noncompliance. Or, for example, internet intermediaries are required to
keep data and personnel in the jurisdiction, which can make it easier for governments to ensure
compliance with content prohibitions. In addition, whether a policy or practice should be considered
direct censorship or censorship enabling can be difficult to determine. This is particularly the case in the
key markets where, for example, the same law may combine direct elements (such as banning specific
categories of content) with censorship-enabling elements (such as data localization and local presence
requirements). Table ES.1 provides examples of different types of censorship-related policies and
practices (both direct censorship and censorship enabling) in the key markets. It also highlights some of
the industries particularly affected by these policies and practices. (See chapters 3 and 4 for details of the
examples listed in table ES.1.

“The evolution of censorship policies and practices in the past five years in the key markets has largely
been driven by the growing importance of the internet. U.S. internet companies report ever-growing
numbers of government requests for the takedown of online content. Moreover, governments are using
multiple levers—from data and personnel localization requirements to threats of retaliation—to pressure
compliance with censorship policies. Technological developments, such as the growing reliance on
artificial intelligence by governments and internet companies to identify and suppress large quantities of
online content, also present substantial challenges.

“Foreign governments’ censorship policies and practices may be augmented by extraterritoriality and self-censorship. Extraterritorial censorship occurs when governments seek to suppress speech outside of
their borders. In some cases, a law or policy will expressly state that its prohibition on certain content
applies to companies or persons outside the jurisdiction. A recent example of this would be the Hong
Kong National Security Law, which criminalizes broad categories of offenses (including speech in favor of
Hong Kong independence) and states that it applies regardless of where the crime is committed or who
commits it. In other cases, which arise most notably in China, economic coercion is used to advance
censorship goals even when the targeted speech is legal in the jurisdiction where it occurred. A well- known example involves the Houston Rockets of the National Basketball Association (NBA), whose
general manager posted images on Twitter supportive of Hong Kong independence. The Chinese
government responded by, among other actions, stopping the broadcast of NBA games on Chinese state-owned television stations for more than a year.

“Self-censorship involves censoring or suppressing one’s own speech to avoid offending government
censors or to facilitate market access. It is reportedly present in all of the key markets. Moreover, self-censorship can also occur extraterritorially; for example, movie studios reportedly have removed images
from the master version of films, rather than just the China-specific version, that they believe may offend
the Chinese government. Another example is Bloomberg reportedly not publishing a follow-up story on
the wealth of Chinese officials in order to protect its financial markets terminal business in China.
Additionally, in Turkey, almost two-thirds of Turkish citizens responding to a survey in 2018 reported that
the fear of being jailed for posting political views or opinions on the internet contributed to self-censorship in the country.”

Conclusion

Developing multilateral rules at the WTO or plurilaterally through the Joint Statement Initiative to address e-commerce is of great importance to global trade and prosperity. Failure to come to grips with rules on censorship would greatly reduce the utility of an agreement and permit those who engage in widespread censorship to deprive trading partners of the benefits of an e-commerce agreement. And this is just a reflection of challenges on the trade front, ignoring human rights and other international concerns.

The Russian Federation’s compliance with WTO obligations — the recent USTR Report

Terence P. Stewart · January 5, 2022 · Uncategorized · China, European Union, Russian Federation, United States, WTO Trade Policy Reviews; · No Comments

The Russian Federation became the 156th Member of the WTO on August 22, 2012. Since the accession of the Russian Federation, eight other countries have acceded, the last on July 29, 2016 with 23 additional countries in the queue at the WTO. Like other WTO Members, the Russian Federation goes through periodic Trade Policy Reviews (“TPR”) as part of the WTO’s effort to ensure transparency in Member policies and to permit Members to raise questions on policies and practices of each other. The first TPR for the Russian Federation was conducted in 2016. See TRADE POLICY REVIEW, REPORT BY THE SECRETARIAT, RUSSIAN FEDERATION, 24 August 2016, WT/TPR/S/345; TRADE POLICY REVIEW, REPORT BY
RUSSIAN FEDERATION, 24 August 2016, WT/TPR/G/345; TRADE POLICY REVIEW, REPORT BY THE SECRETARIAT, RUSSIAN FEDERATION Revision, 6 December 2016, WT/TPR/S/345/Rev.1; TRADE POLICY REVIEW, RUSSIAN FEDERATION, MINUTES OF THE MEETING, 25 November 2016, WT/TPR/M/345; TRADE POLICY REVIEW, RUSSIAN FEDERATION, MINUTES OF THE MEETING, Addendum (written questions and replies), 19 December 2016, WT/TPR/M/345/Add.1; TRADE POLICY REVIEW: RUSSIAN FEDERATION, 28 AND 30 SEPTEMBER 2016, Concluding remarks by the Chairperson, https://www.wto.org/english/tratop_e/tpr_e/tp445_crc_e.htm.

The second TPR was conducted in 2021 with the two day meeting with Members happening on October 27 and 29, 2021. See TRADE POLICY REVIEW, REPORT BY THE SECRETARIAT, RUSSIAN FEDERATION, 22 September 2021, WT/TPR/S/416; TRADE POLICY REVIEW, REPORT BY RUSSIAN FEDERATION, 22 September 2021, WT/TPR/G/416; TRADE POLICY REVIEW MECHANISM, COMMUNICATION FROM THE CHAIRPERSON OF THE TRADE POLICY REVIEW BODY, RUSSIAN FEDERATION, Arrangements for Review Meeting, 6 October 2021, WT/TPR/466; TRADE POLICY REVIEW: RUSSIAN FEDERATION, Concluding remarks by the Chairperson, 27 and 29 October 2021, https://www.wto.org/english/tratop_e/tpr_e/tp516_crc_e.htm; EU Statement at the Trade Policy Review of the Russian Federation, 27 October 2021, https://eeas.europa.eu/delegations/world-trade-organization-wto/106279/eu-statement-trade-policy-review-russian-federation-27-october-2021_en; Statement by H.E. Ambassador LI Chenggang at the 2nd Trade Policy Review of Russia, http://wto.mofcom.gov.cn/article/meetingsandstatements/202111/20211103214021.shtml.

While the Russian Federation is not an important trading partner of the United States, because of the geopolitical relationship for the last many decades, the U.S. Congress has required an annual report on the Russian Federation’s compliance with WTO obligations since Russia’s accession in 2012. The ninth such report was released by the Office of the U.S. Trade Representative on December 21, 2021. See USTR Press Release, USTR Announces 2021 Report on the Implementation and Enforcement of Russia’s WTO Commitments, December 21, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/december/ustr-announces-2021-report-implementation-and-enforcement-russias-wto-commitments; United States Trade Representative, 2021 Report on the Implementation and Enforcement of Russia’s WTO Commitments, December 2021, https://ustr.gov/sites/default/files/enforcement/WTO/2021%20Report%20on%20Russia’s%20WTO%20Compliance.pdf.

Today’s post reviews some of the USTR findings but starts with some background information on the Russian Federation and a look at the recent Trade Policy Review for the country.

Background information on the Russian Federation

The CIA World Factbook provides a lot of information on countries. The entry for the Russian Federation was last updated on December 17, 2021. See CIA, World Factbook, Russia, https://www.cia.gov/the-world-factbook/countries/russia/. According to the CIA World Factbook, the Russian Federation:

o is the largest country by land area (and roughly 1.8 times as large as the USA);

o has borders with fourteen countries (Azerbaijan, Belarus, China, Estonia, Finland, Georgia, Kazakhstan, North Korea, Latvia, Lithuania, Mongolia, Norway, Poland and Ukraine);

o has a coastline of 3,653 km;

o has the ninth largest population in the world (142,320,790 as of July 2021 est.);

o had a negative population growth rate in 2021 (-0.2%, placing it 207th on population growth);

o has a low birth rate (9.71 births per 1000 population, or 193rd in the world)

o has a high literacy rate (99.7% of those 15 years of age or older);

o had relatively low GDP growth in 2017-2019 (1.34% – 2.54%) or 160th in the world

o has low public debt (15.5% of GDP in 2017);

o has large foreign exchange reserves and gold (6th largest);

o is the world’s second largest producer and exporter of crude oil;

o is the world’s 3rd largest producer of refined petroleum products and 2nd largest exporter;

o is the world’s 2nd largest natural gas producer and largest exporter.

The CIA World Factbook has a great deal more information but the above are some examples of data on the Russian Federation.

Despite the Russian Federation’s high levels of education and abundant natural resources, the country in 2022 is rated by the World Bank as only an upper middle-income country (2020 GNI per capita of between $4,096 and $12,695). See World Bank Country and Lending Groups, Country Classification, July 1, 2021, https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groups. Russia in 2020 had a per capita GNI in current U.S. dollars of $10,690 which ranked the Russian Federation 74th. See World Bank, GNI per capita, Atlas method (current US$) – Russian Federation, https://data.worldbank.org/indicator/NY.GNP.PCAP.CD?locations=RU

Because so much of the economy is driven by the gas and oil sectors, increasing prices for both in 2021 led to strong growth in GDP in the Russian Federation, although growth is expected to moderate in 2022 and 2023. See World Bank, Amidst Strong Economic Rebound in Russia, Risks Stemming from COVID-19 and Inflation Build, Says World Bank Report, December 1, 2021,https://www.worldbank.org/en/news/press-release/2021/12/01/amidst-strong-economic-rebound-in-russia-risks-stemming-from-covid-19-and-inflation-build-says-world-bank-report.

The World Trade Organization provides useful information on each Member in various publications including its annual Trade Profiles. The 2021 publication shows that in 2020, the Russian Federation accounted for 1.89% of world merchandise exports and 1.35% of world merchandise imports. Total Russian Federation exports were $332.227 billion and its total imports were $240.380 billion. Its five largest export markets were the European Union (41.3%), China (13.4%), Belarus (5.1%), Turkey (5%) and the Republic of Korea (3.8%). The Russian Federation’s five largest trading partners for imports into the Russian Federation were the European Union (34.2%), China (21.9%), Belarus (5.5%), the United States (5.4%) and Japan (3.6%).

As noted, fuels and mining products are the largest exports — 59.1% of total Russian exports in 2020 with petoleum oils (crude and refined) accounting for$189.176 billion (49.49%). Coal ($15.987 billion) and natural gas ($9.501 billion) are the next largest export products.

The Russian Federation accounts for a smaller shares of the export trade in commercial services — 0.95% of global exports and a slightly larger share of imports of commercial services, 1.38%. The European Union accounts for the largest share of commercial service exports from the Russian Federation (35.9%) and 47.5% of the Russian Federation’s imports of commercial services. The U.S. accounts for 6.5% of Russia’s exports of commercial services and 4% of imports of such services into the Russian Federation. China is the third largest importer of Russian commercial services (6.2% of Russia’s exports) and 3.7% of Russia’s imports.

See World Trade Organization Trade Profiles 2021 at 298-299, October 2021,https://www.wto.org/english/res_e/booksp_e/trade_profiles21_e.pdf.

WTO Trade Policy Review of the Russian Federation in 2021

While the minutes to the 2021 TPR of the Russian Federation and the written questions and replies are not yet available, the Secretariat review along with the Russian Federation write-up are available as is the concluding statement of the chairman of the review on the Russian Federation. Both the EU and China’s statements on October 27 at the review are also available.

For brevity, the Chair’s concluding comments and the statement of the European Union (as the largest trading partner for the Russian Federation) are copied below. Both follow norms for the WTO by identifying areas where the Member being reviewed has made contributions to the system and then follows with particular concerns of some other Members. First the concluding remarks by the Chairperson on 29 October 2021. TRADE POLICY REVIEW: RUSSIAN FEDERATION, Concluding remarks by the Chairperson, 27 and 29 October 2021, https://www.wto.org/english/tratop_e/tpr_e/tp516_crc_e.htm

“Concluding remarks by the Chairperson

“The second Trade Policy Review of the Russian Federation has allowed us to better understand and discuss recent developments regarding trade, economic, and investment policies in the Russian Federation. 57 delegations took the floor, which demonstrates the importance Members attach to the review of the policies and practices of the Russian Federation. 1,017 advance written questions were submitted by Members, with additional questions submitted during and following the first day of our meeting.

“I would like to thank the delegation of the Russian Federation, headed by Ms Ekaterina MAYOROVA, Director of the Department of Trade Negotiations, Ministry of Economic Development, for their constructive participation in this exercise.

“I would like to express my gratitude to our discussant, His Excellency Ambassador Didier CHAMBOVEY of Switzerland, for his insightful remarks touching on macroeconomic and other developments, remaining trade and trade-related challenges, and the role the TPRM can play in overcoming these.

“I would like to thank the delegations that took the floor for their valuable contributions to this Review. Members commended the Russian Federation for its stable and resilient economic performance since the previous Review in 2016, including measures taken to stabilize the banking sector. They particularly stressed the effective macroeconomic and monetary policies undertaken, and the demonstrated resilience to the economic consequences of the COVID-19 pandemic, as well as to volatile energy markets. Some Members commented on policies aimed at diversifying the economy and addressing structural impediments to economic growth.

“Members also positively noted a number of policy reforms undertaken by the Russian Federation affecting, among others, trade facilitation, import tariffs and export duties, competition policy, protection of IPRs, and supporting MSMEs. Regarding trade facilitation, Members highlighted reforms to improve customs procedures and requirements in areas such as risk management, automation, electronic documents, and reducing clearance times.

“While Members appreciated the overall reduction in MFN tariffs, they nevertheless encouraged the Russian Federation to further simplify the tariff structure. Members expressed the hope that the Russian Federation would continue to deepen the reforms and to ensure that any new policies, regulations, and reforms would be in line with its WTO commitments.

“Many Members stressed the Russian Federation’s strong involvement in, and support of, the multilateral trading system. They highlighted the constructive engagement of the Russian Federation in the discussions around WTO reform, preparations for MC12, fisheries subsidies negotiations, the four Joint Statement Initiatives, and trade and gender.

“Regarding the JSI on Services Domestic Regulations, some Members encouraged the Russian Federation to swiftly submit its draft schedule of commitments. Members also encouraged the Russian Federation to complete its process of accession to the Agreement on Government Procurement in the near future.

“Members expressed their desire for the Russian Federation to continue its leadership role at the WTO. In this regard, they welcomed the stated commitment by the Russian Federation to the rules-based multilateral trading system with the WTO at its core.

“Some Members also commended the Russian Federation for its support to developing countries, for example, through the delivery of COVID-19 vaccines. In this regard, Members also emphasized the importance of trade preferences under the Generalized System of Preferences.

“Import substitution, localization policies, and local content requirements, especially in the context of public procurement, were issues raised by many Members. They were particularly interested in the impact such policies can have on trade, FDI, productivity, and the integration of the Russian Federation into global value chains. Members encouraged the Russian Federation to review such policies in light of WTO principles and the process of its accession to the Agreement on Government Procurement. For some Members, these policies were representative of a broader set of policies that they perceived as discriminatory and reducing predictability, transparency, and competition.

“Members commended the Russian Federation for the reforms undertaken to improve the business and investment environment, for example, the introduction of a “regulatory guillotine” mechanism, and the establishment of key conditions for electronic commerce. Members also expressed concerns regarding the remaining challenges in this area.

“Thus, in addition to the recent increase in restrictions on FDI, Members identified several factors as potentially having a negative effect on the conditions of doing business in the Russian Federation. These include governance and other rule-of-law issues, the dominant position of the State in key sectors of the economy and the lack of transparency regarding state-owned enterprises, the existence of a high degree of concentration in certain sectors, and the use of various subsidies in favour of domestic firms. Concerns were voiced in relation to developments in specific services sectors, including financial services and maritime transport.

“While many Members expressed appreciation for the numerous notifications submitted, they nevertheless encouraged the Russian Federation to further improve the timeliness and completeness of its notification record, mentioning in particular notifications related to state trading enterprises, licensing procedures, agriculture, and technical regulations applied at the national level.

“Sanitary and phytosanitary measures and technical regulations have also received much attention in this Review. Thus, for example, several Members raised issues regarding inspection procedures for meat imports and the ‘Track and Trace’ regime. Some Members expressed concerns regarding the application of measures that they consider were not based on international standards, unsupported by scientific evidence, and without adequate transparency. Some Members stressed the need for more clarity regarding the relationship between EAEU rules and rules applied at the national level.

“Other issues of interest for some Members included the introduction of export bans on agricultural and wood products, the imposition of temporary export restrictions and the increased use of export tariff rate quotas since the beginning of the pandemic, and measures relating to transit.

“This Trade Policy Review was characterized by open and constructive discussions around the Russian Federation’s trade and trade-related policies. As highlighted by the Russian Head of Delegation, the discussant, and many Members, the TPRM represents an opportunity to improve policies going forward.

“I therefore hope that the authorities will find the questions, comments, and experiences shared during this Review useful in their efforts to review and design their policies. Members look forward to receiving the answers to outstanding questions from the Russian Federation within one month, at which point the Review will be successfully concluded.”

A number of the concerns raised were also raised in the 2016 review, indicating limited if any improvement on important issues (e.g., import substitution, localization policies, and local content requirements). Others reflect actions by the Russian Federation following the start of the pandemic (“the introduction of export bans on agricultural and wood products, the imposition of temporary export restrictions and the increased use of export tariff rate quotas since the beginning of the pandemic, and measures relating to transit.”).

The European Union raised many of these same issues in its statement at the TPR meeting on October 27, 2021. As the largest trading partner of the Russian Federation, the concerns raised likely reflect the broadest understanding of problems with the Russian Federation’s compliance with WTO obligations. EU Statement at the Trade Policy Review of the Russian Federation, 27 October 2021, https://eeas.europa.eu/delegations/world-trade-organization-wto/106279/eu-statement-trade-policy-review-russian-federation-27-october-2021_en

“Statement delivered by Ambassador João Aguiar Machado

“The EU welcomes this second Trade Policy Review of the Russian Federation, almost a decade since itsaccession to the WTO. We welcome the delegation of Russia, led by Ms. Ekaterina Mayorova (Director of theDepartment of trade negotiations, Ministry of Economic Development) and thank the Discussant, Ambassadorof Switzerland H.E. Didier Chambovey, for his remarks.

“The EU is the main trade partner of the Russian Federation, both for goods and for services, and its main source of foreign direct investment, with some 75% of total inward FDI. Bilateral trade in 2020 represented some 4.8%of EU foreign trade in goods, down from 6% at the time of the previous TPR.

“Back in 2016, at its first Trade Policy Review, the EU had emphasized that Russia’s WTO accession represented an opportunity for its modernisation. A chance to diversify its economy and reduce its reliance on raw materials and commodities, but equally to adjust its judicial and legal framework to bring in a more dynamic and responsive market. The European Union continues to hold that belief.

“Over the last few years, Russia’s efforts to play a constructive role in various areas in the WTO have not gone unnoticed – be it in its involvement in the Joint Statement Initiatives, or in its general support to achieve a meaningful MC12 including through its openness towards WTO reform in order for the organization to remain strong and credible. The EU looks forward in making progress in the different Joint Statement Initiatives, and in particular concluding the Domestic Regulation JSI in the margins of MC12. We hope that Russia will be in the position to submit their schedule of specific commitments as soon as possible, noting that the schedules of all participants are an essential component for a successful conclusion of this negotiation.

“However, the Russian Federation needs to redouble its commitment to the WTO. Today, we regret to
note that since its accession the Russian authorities have expanded, rather than reduced, the scope of its import substitution policy without any realistic furthering their pretended aim of localisation. This not only has a negative effect on trade with the EU but is done in most cases to the direct detriment of Russian consumers.

“In addition, the arguments used by the Russian authorities to justify protectionist policies namely that they are a direct consequence of the sanctions of individual economies on the Russian Federation – are questionable in our view. These Russian policies started immediately after Russia’s WTO accession and predate the political tensions that Russia highlights.

“Some of the specific questions tabled by the EU better explain the underlying concerns that we have. Allow me to highlight some:

“Several questions target the contradiction between the aspiration of the Russian Federation to become a member of the Government Procurement Agreement, and the reality of its practice. The ability of foreign bidders to participate in government procurement has been obstructed or effectively denied through
a growing body of regulations granting advantages to domestic products via price preferences, quotas, or exclusion of foreign goods and services.

“A large part of the Russian state’s presence in the economy – up to 20% of Russian GDP — corresponds to state-owned enterprises providing products and services in a commercial context. Despite the applicable WTO rules in this area, the Russian Federation has introduced such a growing body of restrictions as to make the participation of foreign bidders in tenders uneconomic, or a practical impossibility.

“As to export restrictions – under the rationale of preventing illegal logging and supporting domestic forest-based industries – the Russian Federation has announced a ban on the export of unprocessed wood from 2022. It remains unclear how the Russian Federation intends to reconcile these measures
with the schedule of its concessions, which include export tariff-rate quotas in some of the categories of wood covered by the announced ban.

“One primary mission of the WTO is to facilitate transparency. For this, a reliable notification practice is
imperative. The Russian Federation’s performance in this area leaves much to be desired. For example,
Russian Federation notifications in the area of technical barriers to trade have concerned only
Eurasian Economic Union-level measures. A number of Russian Federation national measures falling within the scope of the TBT Agreement entered into force without any notification whatsoever to the WTO, including those regarding the wines and spirits sector. Not a single measure adopted at the national level has been notified to the WTO.

“The same can be said about the exclusive rights in the area of foreign trade granted to certain entities
in the Russian Federation including, for example, for the export of natural gas. The Russian Federation
has failed, since its accession, to notify a single state-trading enterprise to the WTO. At the same time, around 50% of the EU’s imports from the Russian Federation are sold by a single export monopoly of natural gas. Let me also remark that, beyond its non-notification, this fact sits uneasily with the overall principles of the WTO, and in our view also with the long-term interests of Russia.

“To conclude, the EU welcomes the Russian Federation’s commitment in its report to an open, non-discriminatory and transparent multilateral trading system, and for a reform aimed at preserving the WTO’s role in maintaining and developing new trade rules. We commend this as a good foundation for the necessary efforts that Russia should undertake to abide by the spirit and the letter of its WTO commitments, and to build a more open, transparent and non-discriminatory business environment.

“Thank you.”

USTR’s 9th Report to Congress on the Russian Federation’s Compliance with WTO obligations

USTR Katherine Tai’s press release on the latest USTR report on the Russian Federation’s compliance with WTO obligations summarizes concerns that the U.S. has more than nine years after the Russian Federation became a WTO Member.

“USTR Announces 2021 Report on the Implementation and Enforcement of Russia’s WTO Commitments

“December 21, 2021

“WASHINGTON – The Office of the United States Trade Representative today released its ‘2021 Report on the Implementation and Enforcement of Russia’s World Trade Organization (WTO) Commitments.’

“‘This Report provides an overview of Russia’s continued departure from the guiding principles of the World Trade Organization, such as non-discriminatory practices, more open trade, predictability, transparency, and fair competition,’ said Ambassador Katherine Tai. ‘Failure to follow WTO norms, rules, and commitments puts American workers and businesses at an economic disadvantage and prevents them from competing on a level playing field. USTR will continue to work with like-minded partners and use the tools of the WTO to hold Russia accountable for its behavior in the multilateral trading system.’

“The Report highlights areas in which USTR has raised concerns about Russia’s compliance with its WTO
commitments, including:

“‘Russia continues to adopt and implement localization measures to provide preferential treatment to both domestically produced goods and services.’

“‘In the agriculture sector, Russia maintains non-science-based import restrictions and refuses to recognize other countries’ guarantees on exporting facilities.’

“‘Russia’s import substitution strategies for the IT sector, such as the ‘Digital Economy of the Russian Federation,’ also raise additional national treatment and import substitution concerns.’

“‘As economies around the world were forced to retract and retrench in response to the COVID-19 pandemic, the government of Russia exacerbated those trends by extending its control over the Russian economy and tightening restrictions on trade.’

“Background

“This report was prepared pursuant to section 201 of the Russia and Moldova Jackson-Vanik Repeal and Sergei Magnitsky Rule of Law Accountability Act of 2012 (P.L. 112-208), which requires the U.S. Trade Representative to submit a report to the Committee on Finance of the U.S. Senate and the Committee on Ways and Means of the U.S. House of Representatives describing the commitments that Russia made upon entering the World Trade Organization on August 12, 2012, and assessing the extent to which Russia has implemented those commitments after 9 years of WTO membership.”

The USTR report is 62 pages in length and reviews an array of areas where the Russian Federation undertook commitments on acceding to the WTO and provides the USTR evaluation of whether there has been implementation to date. See 2021 Report on the Implementation and Enforcement of Russia’s WTO Commitments, December 2021, https://ustr.gov/sites/default/files/enforcement/WTO/2021%20Report%20on%20Russia’s%20WTO%20Compliance.pdf. The table of contents (pages i-ii) reviews the topics reviewed and is copied below.

Implementation and Enforcement of Russia’s WTO Commitments
Contents
I. Introduction ………………………………………………………………………………………………………….. 1
II. Executive Summary ………………………………………………………………………………………………. 2
III. Russia and the Customs Union/Eurasian Economic Union ………………………………… . 5
IV. Russia in the World Trade Organization ………………………………………………………………. 6
V. Import Regulation ………………………………………………………………………………………………… 7
A. Tariffs and Border Fees ………………………………………………………………………………………. 7
B. Customs Fees…………………………………………………………………………………………………….. 9
C. Customs Valuation …………………………………………………………………………………………….. 9
D. Trade Facilitation …………………………………………………………………………………………….. 10
E. Trading Rights …………………………………………………………………………………………………. 11
F. Quantitative Restrictions …………………………………………………………………………………… 12
G. Import Licensing ……………………………………………………………………………………………… 13
H. Trade Remedies ……………………………………………………………………………………………….. 15
VI. Export Regulation ……………………………………………………………………………………………….. 16
VII. Agriculture …………………………………………………………………………………………………………. 18
A. Sanitary and Phytosanitary Measures …………………………………………………………………. 18
B. Domestic Supports and Export Subsidies ……………………………………………………………. 24
VIII. Internal Policies Affecting Trade ……………………………………………………………………….. 26
A. Non-Discrimination ………………………………………………………………………………………….. 26
B. Industrial Policy, Including Subsidies …………………………………………………………………. 29
C. State-Owned, -Controlled, and -Trading Enterprises …………………………………………….. 31
D. Pricing Policies ………………………………………………………………………………………………… 33
E. Standards, Technical Regulations and Conformity Assessments ……………………………. 34
F. Government Procurement ………………………………………………………………………………….. 37
IX. Services ……………………………………………………………………………………………………………… 39
A. Financial Services ……………………………………………………………………………………………. 40
B. Telecommunications ………………………………………………………………………………………… 41
C. Computer and Related Services …………………………………………………………………………. 41
D. Distribution Services ………………………………………………………………………………………… 43
E. Audio-Visual and Media Services ………………………………………………………………………. 43
X. Intellectual Property Rights ………………………………………………………………………………….. 44
A. Legal Framework …………………………………………………………………………………………….. 44
B. Enforcement ……………………………………………………………………………………………………. 47
XI. Investment ………………………………………………………………………………………………………….. 50
A. Trade-Related Investment Measures …………………………………………………………………… 50
B. Special Economic Zones …………………………………………………………………………………… 53
XII. Rule of Law………………………………………………………………………………………………………… 53
A. Eurasian Economic Union …………………………………………………………………………………. 53
B. Transparency …………………………………………………………………………………………………… 54
C. Judicial Review ……………………………………………………………………………………………….. 56
XIII. Conclusion ………………………………………………………………………………………………………… 57

A portion of the Executive Summary section reveals U.S. concerns with Russia’s implementation of obligations. The excerpt (from pages 3-5) is copied below.

” Over the past year, Russia has continued its trajectory of an economy moving away from the guiding principles of the WTO: non-discrimination, freer trade, predictability, transparency, and fair competition. Rather, Russia maintains restrictive at-the-border measures, institutes behind-the-border measures to inhibit trade, and implements an industrial policy seemingly driven by the guiding principles of import substitution and forced localization.

“Russia maintains tariffs ranging from 25 percent to 40 percent on various industrial products imported from the United States in retaliation against tariffs imposed on U.S. imports of steel and aluminum articles under Section 232 of the Trade Expansion Act of 1962, as amended. Russia also maintains a near complete ban on imports of agricultural goods from the United States and other WTO Members. Russia also continues to apply quantitative restrictions or outright bans on certain agricultural exports.

“In addition to these border measures, Russia maintains various behind-the-border measures that interrupt the smooth flow of global trade, such as outmoded import licensing requirements and a mandatory labeling regime. In 2021, Russia introduced yet another regime to monitor products, a traceability regime, that requires tracking consignments of goods (as opposed to individual goods subject to the mandatory labeling regime) through the chain of commerce in Russia. In the agriculture sector, Russia maintains non-science-based import restrictions and refuses to recognize other countries’ guarantees on exporting facilities.

“Compounding these at-the-border and behind-the-border restrictions, Russia continues to adopt and implement localization measures to provide preferential treatment to both domestically produced goods and services. In response, the United States, often working with other WTO Members, has raised concerns about Russia’s import substitution plans, subsidies (including those contingent on use of domestic over imported content), preferential taxes, preferential pricing mandates, prohibitions on purchasing imported goods and services, and domestic purchasing requirements, among others.

“The United States has also continued to raise concerns about Russia’s lack of transparency, manifested, for example, in its refusal to notify a single state trading enterprise and its delay (or complete refusal) to provide written answers to questions about its import substitution policies. The United States, joined by other WTO Members, will continue to remind Russia of its transparency obligations.

“The United States has urged Russia to meet its commitments with regard to the protection and enforcement of intellectual property rights. In particular, the United States has reviewed Russia’s implementation of WTO commitments on data exclusivity, pharmaceutical patent protection, and collective management organizations. Moreover, Russia’s record on enforcement remains weak.

“Since early 2014, the U.S. Government has curtailed its bilateral engagement with Russia in response to Russia’s actions in Ukraine, limiting USTR’s ability to raise directly with Russia our concerns about the trajectory of its trade policies. The sequestration resulting from the COVID-19 pandemic further limited engagement with Russian officials. Nevertheless, the interagency team of Russia specialists in the U.S. Government continued to monitor and evaluate Russia’s trade and investment policies and practices, and where and when possible, USTR continues to raise concerns in WTO meetings and on the margins of committee and council meetings to hold Russia accountable for its actions. As it has to date, if the United States finds that Russia’s actions appear to be inconsistent with its WTO commitments. The United States will investigate and use all appropriate means to resolve the matter and keep Russia’s markets open to U.S. exports.”

The Russian Federation’s reaction to U.S. report

The Russian Federation has rejected U.S. claims of non-implementation and calls attention to sanctions imposed on the Russian Federation by the U.S. and EU. See Tass Russian News Agency, ‘Beyond absurdity’: Diplomat slams US claims about Russia’s import substitution, December 24, 2021, https://tass.com/economy/1380631.

The Road Forward

Most of the concerns raised by the United States in its latest report on the Russian Federation’s implementation of WTO commitments mirror concerns that have been raised by the European Union and presumably others in the latest TPR of the Russian Federation. Moreover, some of the concerns have persisted since the Russian Federation first joined the WTO in 2012 as reflected in the first TPR from 2016 and earlier USTR reports to Congress on the Russian Federation’s implementation of WTO commitments. It is unclear whether the Russian Federation has any intention of addressing these longstanding and more current concerns.

The Chairman of the TPR for the Russian Federation in his concluding remarks and the EU Ambassador in his statement during the TPR highlighted areas where the Russian Federation has made positive contributions to the WTO such as in the fisheries negotiations and a number of the Joint Statement Initiatives and in supporting WTO reform. Thus, the Russian Federation has the potential to make some meaningful contributions in the areas where it is contributing. Such contributions will hopefully continue in 2022.

While Russia is treated as a market economy by the U.S. and the EU in trade remedy cases, the reality is that a large portion of Russia’s economy remains state owned or state directed. Such state ownership and direction are fundamentally at odds with the multilateral trading system and the concept of a level playing field. WTO reform is likely critical to address distortions caused by state ownership and control. While the Russian Federation is supportive of reform, it is unlikely to support meaningful reform on the state-owned/directed sector.

In addition, the many behind the border restrictions reviewed above simply contribute to the lack of meaningful access to the market of the Russian Federation for many WTO Members and have led to the size of the Russian Federation’s trade surplus. There does not appear any likelihood that the Russian Federation will meaningfully address these issues.

Perhaps the biggest unknown in 2022 is whether potential actions by the Russian Federation vis-a-vis one of its neighbors (Ukraine) will be implemented. The U.S., EU and others will certainly impose expanded sanctions against the Russian Federation if there is further encroachment by the Russian Federation into Ukraine. A souring of political relations would also likely cause a broader fallout for the trading system.

Whether the Russian Federation will be a meaningful contributor to supporting the global trading system is solely in the hands of the Russian Federation. 2022 is likely to be a year where the Russian Federation has some positive contributions but fails to address the longstanding concerns.

Conclusion of Joint Statement Initiative on Services Domestic Regulation — a win for the WTO and services trade

Terence P. Stewart · December 6, 2021 · Declaration on the Conclusion of Negotiations on Services Domestic Regulation · Albania, Amb. Aguiar Machado (EU), Argentina, Australia, Bahrain, Brazil, Canada, Chile, China, Colombia, Costa Rica, El Salvador, European Union, Hong Kong, Iceland, India, Israel, Japan, Joint Statement Initiaitves, Kazakhstan, Liechtenstein, Mauritius, Mexico, Moldova, Montenegro, New Zealand, Nigeria, North Macedonia, Norway, OECD, Paraguay, Peru, Philippines, Republic of Korea, Russian Federation, Saudi Arabia, Singapore, South Africa, Switzerland, Taiwan, Thailand, Turkey, Ukraine, UNCTAD, United Kingdom, United States, Uruguay, WTO · No Comments

For an organization seeking to regain relevance and facing continued delays in holding its 12th Ministerial Conference because of restrictions on travel from increased COVID-19 cases, the conclusion of the Joint Statement Initiative (JSI) on Services Domestic Regulation through the issuance of a declaration on December 2 was an important accomplishment. Sixty-seven WTO Members agreed to a reference paper and a process for amending services schedules for the participants over the next months with benefits accruing to all WTO Members and with transition periods for developing and least developed countries. See Declaration on the Conclusion of Negotiations on Services Domestic Regulation, 2 Deember 2021,WT/L/1129 (includes Annex 1, Reference Paper on Services Domestic Regulation, 26 November 2021, INF/SDR/2 and Annex 2S, Schedules of Specific Commitments, 2 December 2021, INF/SDR/3/Rev.1). The 67 WTO Members participating the JSI reportedly account for 90% of services trade. The 67 countries are Albania, Argentina, Australia, Kingdom of Bahrain, Brazil, Canada, Chile, China, Colombia, Costa Rica, El Salvador, European Union (and member states), Hong Kong, Iceland, Israel, Japan, Kazakhstan, Republic of Korea, Liechtenstein, Mauritius, Mexico, Republic of Moldova, Montenegro, New Zealand, Nigeria, North Macedonia, Norway, Paraguay, Peru, Philippines, Russian Federation, Kingdom of Saudi Arabia, Singapore, Switzerland, Taiwan, Thailand, Turkey, Ukraine, United Kingdom, United States and Uruguay.

According to the WTO press release on the completion of negotiations, the aim of the JSI was “slashing administrative costs and creating a more transparent operating environment for service providers hoping to do business in foreign markets.” WTO Press Release, Negotiations on services domestic regulation conclude successfully in Geneva, 2 December 2021, https://www.wto.org/english/news_e/news21_e/jssdr_02dec21_e.htm.

It is the first agreement at the WTO barring discrimination between men and women. WT/L/1129 at 10 (Annex I, para. 22(d), development of measures — “such measures do not discriminate between men and women.”).

The WTO and OECD released a short paper looking at the benefits to global services trade through a successful conclusion to the JSI on services domestic regulation. The study estimated that savings to service providers and their customers would be around $150 billion/year. See World Trade Organization and OECD, Services Domestic Regulation in the WTO: Cutting Red Tape, Slashing Trade Costs and Facilitating Services Trade, 19 November 2021, https://www.wto.org/english/news_e/news21_e/jssdr_26nov21_e.pdf. The four “key messages” in the study (page 1) are copied below.

“Key messages

“• Improving business climate: At the 12th WTO Ministerial Conference, the Joint Initiative on Services
Domestic Regulation will conclude negotiations on a set of good regulatory practices with a focus on procedural aspects of licensing and authorization procedures for services suppliers. By enhancing the transparency, efficiency, and predictability of regulatory systems, the disciplines on services domestic regulation that the Joint Initiative has negotiated will address the practical challenges that affect the ability of businesses and suppliers to operate.

“• Facilitating services trade: Building on efforts to identify and disseminate good regulatory practice, an
increasing number of “new generation” trade agreements have moved beyond the removal of quantitative restrictions and discriminatory measures to include a comprehensive set of disciplines largely equivalent to those developed by the Joint Initiative. At the same time, economies at all levels of income have also implemented reforms with a view to making their regulatory environment more trade facilitative for services businesses.

“• Lowering trade costs and generating broader trade benefits: Through the full implementation of the
disciplines on services domestic regulation, economies can lower trade costs and reap substantial trade
benefits: annual trade cost savings could be in the range of USD 150 billion, with important gains in financial services, business services, communications and transport services. Moreover, a positive correlation between the implementation of services domestic regulation measures and services trade by all four modes of supply, as well as a more active engagement of economies in global value chains, hints to even broader economic benefits.

“• Widespread gains beyond participants: Exporters from all WTO members will benefit from the improved regulatory conditions when they trade with participants of the Joint Initiative. However, significantly larger benefits will accrue to WTO members that are implementing the disciplines themselves in their internal regulatory frameworks.”

The study provides a summary of improved disciplines the 67 WTO Members have identified in the reference paper. The improved disciplines are grouped under transparency, legal certainty and predictability, regulatory quality and facilitation. See id at 2.

While the estimated savings once fully implemented is small in comparison to global services trade ($150 billion of 2019 estimated trade of $6.1 trillion (2.6%)(UNCTAD, 2020 Handbook of Statistics, page 33, data for 2019, https://unctad.org/system/files/official-document/tdstat45_en.pdf) as noted in the WTO press release, it is the first update of WTO rules on services in more than a quarter century. The negotiations had three co-chairs — Costa Rica, Australia and the European Union. Part of the EU’s statement by Ambassador Aguiar Machado from the December 2 meeting and announcement of the declaration is provided below. See Services Domestic Regulation Joint Initiative Meeting to conclude the negotiations (co-hosted by Costa Rica, the European Union and Australia), 2 December 2021, Geneva, https://eeas.europa.eu/delegations/brazil/108266/services-domestic-regulation-joint-initiative-meeting-conclude-negotiations-co-hosted-costa_en.

“Today, we are following up on a joint commitment we collectively took two years ago in Paris to finalize the negotiations that had started with the Joint Statement of Buenos Aires in 2017. Since then, several new Members have joined the group and a tremendous amount of work has been done by our negotiators under the valued Chairmanship of Costa Rica. In particular, warm welcome to the Philippines and Bahrain who joined our negotiations most recently.

“We are here today to conclude our negotiations in this JSI and on the Reference Paper with domestic regulation disciplines. This step will allow us to commence our respective domestic procedures required for the certification of our improved schedules of commitments, which will give legal effect to the negotiated disciplines.

“The work on services domestic regulation is of critical importance. It is the first WTO deliverable in the area of trade in services since a very long time. Our additional commitments for domestic regulation will benefit all other WTO Members by giving them the reassurance that we will apply good regulatory and administrative practices also to their service suppliers.

“Good regulatory practices are crucial for the well-functioning of today’s economy. I believe that the clear rules on transparency and authorisation in the area of services – that were agreed as part of this initiative – will facilitate trade in services significantly. Especially for micro, small and medium-sized enterprises who do not have the same resources and experience to cope with complex processes as their larger competitors.

“The services sector has been hit hard by the pandemic – as other parts of our economy. The adoption and implementation of the disciplines of the reference paper will reduce trade costs for service suppliers substantially and thus help the sector in its recovery. It is a sector where women entrepreneurs often play an important role. The reference paper recognises this role by ensuring non-discrimination between men and women in authorisation processes. This is the first rule of this kind in the WTO.

“Delivering on the WTO services agenda is a long overdue objective we all have. Since Buenos Aires, we have collectively developed a pragmatic approach to negotiations. We have allowed groups of interested Members to advance negotiations on some important issues – through open, inclusive and transparent processes.

“Today, we prove that this plurilateral approach can lead to tangible results. This demonstrates that the Joint Initiative model is a viable one. A large and diverse group of WTO Members can work together towards a common objective, overcome their differences, show flexibility and agree on tangible results that are important for businesses and consumers.

“I believe that this Joint Initiative can be a source of inspiration for work in other areas, allowing interested Members to move ahead while ensuring that the outcome, in its substance and its form, remains supportive of and strengthens the multilateral trading system.”

Since the collapse of the Doha Development talks in 2008, the reality has been that most progress on trade talks have taken place in bilateral, and plurilateral settings. The sole meaningful exception was the completion of the Trade Facilitation Agreement which hopefully will be supplemented by a completion to the Fisheries Subsidies negotiations in the near future. Stating at the WTO’s 11th Ministerial, many WTO Members have started Joint Statement Initiatives to seek progress on important issues facing the trading system.

As noted in earlier posts, India and South Africa (WTO Members who are not participating in any of the Joint Statement Initiatives) have raised objections to the use of JSIs to update rules claiming such approaches are inconsistent with existing WTO requirements. See, e.g., November 17, 2021: The role of plurilaterals in the WTO’s future, https://currentthoughtsontrade.com/2021/11/17/the-role-of-plurilaterals-in-the-wtos-future/.

The view of the participants in the services domestic regulation JSI is that existing WTO provisions permit the updating of service schedules by Members. The reference paper will apply to those who have participated or who later accept the reference paper. New obligations taken on by the 67 Members are applied by them on an MFN basis to all WTO trading partners.

The Declaration on Services Domestic Regulation and actions to implement it will be an early test of whether the WTO can proceed to update rules through open plurilaterals. While one can expect continued objections from India and South Africa, the path to renewed relevancy for the WTO will almost certainly run through finding room for open plurilaterals.

WTO-IMF COVID-19 Vaccine Trade Tracker provides useful information in analyzing vaccine equity

Terence P. Stewart · November 23, 2021 · COVID-19 vaccinations · Cameroon, China, European Union, IMF, India, Japan, Morocco, Republic of Korea, Russian Federation, South Africa, UNICEF, United States, WTO, Zimbabwe · No Comments

On November 22, 2021, the WTO and IMF announced and released their COVID-19 Vaccine Trade Tracker. See WTO News Release, WTO, IMF launch Vaccine Trade Tracker, 22 November 2021, https://www.wto.org/english/news_e/news21_e/covid_22nov21_e.htm. While the data on access to vaccines is not as granular as the UNICEF COVID Vaccine Dashboard, the new tracker provides data under six topics: summary, exports (options being by producing economy or by supply arrangement type), imports (options being by income group or by continent), total supply (options being by producing economy or by vaccine type), supply to continents (Africa, Asia, Europe, North America, Oceania, South America) and vaccination status (options being by income group and by continent). Data in the initial release are through October 31, 2021. Income groups are the World Bank’s groupings — Low income, lower-middle income, upper middle income and high income.

In recent posts I have noted that much of the discussion on vaccine equity focuses on access and affordability but doesn’t necessarily help understand widely different outcomes for countries or territories that are at the same stage of economic development. See November 22, 2021: Trade and Health at the WTO’s 12th Ministerial Conference, https://currentthoughtsontrade.com/2021/11/22/trade-and-health-at-the-wtos-12th-ministerial-conference/. The WTO-IMF Tracker doesn’t include the identification of countries/territories within income groups but rather reports on the entire grouping. The World Bank’s 2020 listing is the most recent. See World Bank, GNI per capita, Atlas method (current US$), https://data.worldbank.org/indicator/NY.GNP.PCAP.CD; November 15, 2021: The folly of self-selection as a developing country at the WTO, https://currentthoughtsontrade.com/2021/11/15/the-folly-of-self-selection-as-a-developing-country-at-the-wto/.

Of the listed producing countries involved in exports of COVID-19 vaccines all are WTO Members. The EU, USA, Japan and Republic of Korea are listed as high income countries by the World Bank though Korea has treated itself as a developing country at the WTO. China, the Russian Federation and South Africa are included as upper middle income countries by the World Bank based on per capita GNI, though both China and South Africa claim developing country status at the WTO. India is listed as a lower-middle income country by the World Bank and claims developing country status at the WTO. There is a small amount of exports from other countries not broken out by individual country n the WTO-IMF tracker.

On total supply (“Total supply contains both exported and domestically delivered doses), China is the largest producing country with a total supply of 4.0811 billion doses of which 1.3294 billion doses have been exported. The European Union is the second largest producer with a total supply of 1.7077 billion doses producers of which 876.5 million have been exported. India is the third largest producers with total supply of 1.3608 billion doses of which just 66.0 million doses have been exported. The United States is fourth with total supply of 941.1 million doses and exports of 300.8 million doses. Others have much smaller total supplies and exports.

The vast majority of exports have been through bilateral deals (77.5%). The second largest source of exports has been doses contracted via COVAX (8.1%). Because of several major problems COVAX experienced from suppliers — the largest being the shut down of exports from India for much of 2021 — COVAX has been unable to supply the large volume of vaccine doses in 2021 to low income and lower middle income countries that had been planned on. The third largest source of exports was donations via COVAX (7.5%), followed by direct donations from producing countries to receiving countries (6.1%) and supply via the African Vaccine Acquisition Trust (“AVAT”)(0.8%).

The vaccination status data (item six in the Tracker) is helpful in identifying regions with the greatest needs as well as the breakout by World Bank income level. However, because of the lack of granularity to the individual country or territory, the data don’t help understand the large differences between members in the same continent or in the same income grouping.

By continent, all continents except Africa have received more than 50 courses of doses per 100 people (with North America the highest at 81.4 and Europe at 76.2). Africa was just 11.2 courses per 100 people. All but Africa have more than 50% of the population with at least one dose administered. Africa was just 8.7%. And all but Africa have more than 40% of the population fully vaccinated. Africa was only 5.8%. Thus, there is a need to expand availability of vaccine doses to most African countries

When vaccination status is examined by income level, high income and upper middle income countries and territories have much larger vaccination rates than lower middle income and low income. On courses of vaccines per 100 people, high income countries were at 89.5, upper middle income countries averaged 74.8, lower middle income countries were at just 34.8 and low income countries were at just 7.0. Similar discrepancies exist on percent with at least one dose administered and percent fully vaccinated. The inability of COVAX to receive the volumes of doses contracted for in 2021 and the slowness of donations for richer countries are certainly core reasons for the differences in doses for lower middle income and low income countries.

Yet there are major discrepancies among countries or territories in the same continent or same income grouping. I identified a few in yesterday’s post. See November 22, 2021: Trade and Health at the WTO’s 12th Ministerial Conference, https://currentthoughtsontrade.com/2021/11/22/trade-and-health-at-the-wtos-12th-ministerial-conference/. For example, Morocco is classified as a lower middle income country by the WTO but had the highest level of administered vaccines/100 people in Africa (136.5 (assumed to be 68.25 courses of doses/100 people)) while South Africa, classified as an upper middle income country had a rate of administered vaccine doses less than 1/3 that of Morocco (41.4 (assumed to be 20.7 courses of doses/100 people). Similarly, two low income countries as classified by the World Bank have drastically different administered doses despite nearly identical per capita GNIs and both being countries in Africa. Specifically, Zimbabwe’s per capital GNI in 2020 was $1,090 and yet they had administered 42.3 COVID vaccine doses/100 people. Cameroon, with a per capita GNI in 2020 of $1,100, had COVID vaccines administered of only 2.4/100 people.

Conclusion

The WTO-IMF COVID-19 Vaccine Trade Tracker provides very useful information, although much is at a continent or income group level. It appears likely that the tracker will be updated only monthly. If not being considered, the designers of the new tracker should provide a link to a data base that provides the type of data shown in the aggregate for each country or territory. Such data would permit a better understanding of differences within continents and within income groups and potentially improve the ability to improve vaccine equity moving forward. It is also possible to update the tracker more frequently than once a month, though some charts, etc. are fine with monthly updates. .