US politicians call for trade action against Russia in the WTO

Kicking Russia out of the World Trade Organization is probably impossible, but other actions are available

Painting symbolising Ukraine with deep blue sky and yellow foreground, red and grey in between, and figures of two adults and a child fleeing

Painting (detail) by Chris Edmund © used with permission

See also:
List of measures announced or proposed
that come under the WTO system, periodically updated
Can a WTO member be expelled? No. But …

By Peter Ungphakorn
POSTED FEBRUARY 28, 2022 | UPDATED MARCH 4, 2022

Two senior US politicians announced on February 25, 2022 that they were introducing legislation to suspend World Trade Organization terms in US trade with Russia and to seek expelling Russia from the WTO.

Lloyd Doggett, chair of the House of Representatives Ways and Means subcommittee on health, and Earl Blumenauer, his counterpart on the subcommittee on trade, proposed the bill following Russia’s “unprovoked invasion of Ukraine”.

Since then, at least three similar bills have been proposed in the US Senate.

Meanwhile, Ukraine and Canada have actually implemented action against Russia within in the WTO system, and the EU has said it is considering its own action.

The Doggett and Blumenauer bill would make it easier for the US to impose trade sanctions against imports of Russian goods, in addition to the commercial, financial and personal sanctions the US and its allies have already initiated. That includes new EU sanctions in trade with Belarus (not a WTO member).

The bill would also “seek the suspension of the Russian Federation’s membership in the WTO”, a more difficult prospect.

Trade lawyer Simon Lester, one of the people who broke the news, has written an analysis of the bill.

He says: “The domestic law aspect of this new legislation seems pretty straightforward,” and he looks briefly at prospects in the WTO.

But what, in more detail, are the implications in the WTO?

There are two parts to this:

  • action by the US against Russian trade (next, with some educated guesswork below)
  • suspending Russia’s WTO membership (below)
Suspending WTO terms: Ukraine’s letter to the WTO General Council
Suspending WTO terms: Ukraine’s letter to the WTO General Council
Suspending ‘normal trade’Back to top

Ukraine has already suspended WTO terms in its trade with Russia, not only for goods, but also for services and intellectual property.


WTO SECURITY EXCEPTIONS

In the WTO agreements they are:
goodsArticle 21 of the General Agreement on Tariffs and Trade (GATT)
servicesArticle 14bis of the General Agreement on Trade in Services (GATS)
intellectual property rightsArticle 73 of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement

The word “national” is not used. The phrase is “its [the country’s] essential security interests”. The legal difference is nuanced. The exceptions also include “international peace and security” under the UN Charter.

It is urging other WTO members to do the same.

And, like Doggett and Blumenauer, it also calls on them to suspend Russia’s participation in the WTO, which is more of a problem (see below)

Ukraine ambassador Yevheniia Filipenko wrote on March 2 that Kyiv has invoked security exceptions to withdraw trading rights from Russia in the three areas of trade covered by the WTO.

The letter was addressed to WTO General Council chair Didier Chambovey, Switzerland’s ambassador to the WTO. It was first disclosed on Twitter by Bloomberg’s Bryce Baschuk. (The text and Russia’s reply are available here.)

Filipenko wrote:

Ukraine … decided to … no longer apply the WTO Agreements in its relations with the Russian Federation. … We strongly believe that other WTO members will stand along with Ukraine in countering Russian military invasion by taking similar measures against the aggressor state. We urge all WTO members to consider further steps with the view to suspending the Russian Federation’s participation in the WTO for its violation of the purpose and principles of this organisation.

Then on March 3, Canada announced it was withdrawing non-discrimination tariffs on imports from Russia and Belarus. The new rate would be 35% on almost all imports, putting them on the same footing as North Korea.

In the US, the Doggett and Blumenauer bill proposes returning Russian “products” (and therefore not services or intellectual property) to the US position before Russia joined the WTO in 2012.


The bottom line here is that if the US decides to act against imports from Russia because of the invasion, it is likely to go ahead anyway whatever the legal position

The bottom line here is that if the US decides to act against imports from Russia because of the invasion, it is likely to go ahead anyway whatever the legal position in the WTO, not least because the worst repercussions — Russian retaliation — would be limited.

Nevertheless, the legal position is worth examining. What is it?

Technically the bill would withdraw “(permanent) normal trade relations treatment” from Russia.

In the US, similar proposals have been made in the Senate. One is almost identical to the Doggett and Blumenauer bill — from Senators Sherrod Brown and Bill Cassidy.

Another is from Senate Finance Committee chair Ron Wyden, as Inside US Trade reported on March 1, 2022. Lester discusses Wyden’s bill here. Senators Rob Portman, a former US Trade Representative, and Ben Cardin are also proposing legislation. Again see Lester’s report and analysis here and here, including comments from his readers.

Normal trading relations” is the more accurate US version of “most-favoured-nation (MFN) treatment” in the WTO, which protects members against discrimination (with exceptions). It means each country treating its WTO trading partners equally. It is the most fundamental principle of the WTO system.

> See this on why announcing MFN suspension is usually political
but is also needed legally in the US

The bill would make it easier for the US to discriminate against Russia, which is what trade sanctions would do, although the US government probably has other weapons in US law allowing it to do that.

Lester says a bill like this might even raise some tariffs to what have been called the “bad boy” discriminatory rates that the US charges on imports from, for example, Cuba and North Korea, because pre-2012 normal trading relations with Russia has expired.

Even if the US decided to apply pre-2012 (non-permanent) normal trading relations to Russia, this would have to be renewed every six months or annually (depending on the conditions). It would create uncertainty for Russian trade and allow the US government to discriminate against Russia more easily under US law.

In the WTO, the problem with this is that the bill, if enacted, would violate non-discrimination under Article 1 — most-favoured-nation treatment — of the General Agreement on Tariffs and Trade (GATT, which governs trade in goods).

One possible escape clause for the US would be GATT’s exception for security, Article 21. This would apply to

  • actions the US “considers necessary for the protection of its essential security interests […] taken in time of war or other emergency in international relations” (subparagraph b)
  • action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace of security” (subparagraph c)

The security exception would be the most likely US defence if Russia challenged the move in the WTO’s system for settling legal disputes.

One precedent for this is India withdrawing most-favoured-nation treatment from Pakistan in 2019. India also cited the security exception. Pakistan has not challenged the decision. The two have a long history of withdrawing or applying non-discrimination with each other. Their security interests are clearer, however, because they are neighbours fighting over disputed territory.

Educated guessingBack to top

Trying to predict the outcome of a WTO dispute settlement case is always risky. We can only make educated guesses. For a defence based on security, the guesswork is about what any ruling would take into account, which is not the same as a clear-cut defence.

What subparagraph b means is complicated, as the jurisprudence from WTO dispute rulings shows. It depends on interpreting what the US “considers necessary”, its “essential security interests”, and “in time of war or other emergency in international relations”. Trade lawyers debate at length and in great detail their meaning, and to what extent they would apply to a country that is not close to the area of conflict.

Subparagraph c also relies on interpreting “obligations under the United Nations Charter”.

One question is whether a non-binding UN General Assembly resolution condemning the invasion, with or without calling for sanctions, would add weight.

One trade lawyer, Geraldo Vidigal of the University of Amsterdam, suggests a resolution in the UN General Assembly would at least provide evidence of “war or other emergency in international relations” (subparagraph b).


It’s also important to remember that WTO dispute settlement is not really about enforcement, a point that is often misunderstood

It could also provide evidence that the “vast majority of [WTO] members consider territorial integrity of states anywhere as within their essential security interests,” he adds.

Whether this would work for a defence under subparagraph c (obligations under the UN Charter) is debated.

One precedent might be the General Assembly resolution on November 6, 1962, which allowed sanctions against apartheid South Africa without any challenge under GATT.

It’s also important to remember that WTO dispute settlement is not really about enforcement, a point that is often misunderstood.

Instead, it encourages litigants to settle their disputes through agreement — the key word is “settlement”. And it authorises retaliation if a ruling is not implemented. Several disputes have been unresolved for years, including two rulings that the US has failed to implement for two decades (DS160 and DS184).

On top of that, right now WTO dispute settlement is seriously handicapped. If the US lost a legal challenge it could appeal, which would sling the case into “the void” because there are no adjudicators to hear appeals. The US itself has blocked appointments to replace those whose terms expired and now there are none left.

The WTO does have narrow rules allowing countries not to apply WTO rules and commitments to each other (WTO Agreement Article 13 on “non-application of multilateral trade agreements between particular members”), but they would not apply in this case — the US would have to have acted in 2012 when Russia joined the WTO.

Suspending membershipBack to top

This section has now been replaced by a newer and more comprehensive blog post: “Can a WTO member be expelled? No. But … — The response from almost all legal experts is simple: there are no provisions in the WTO agreements allowing expulsion or suspension


See also The West Can Make Russia a Trade Pariah with a Page from Moscow’s Playbook by Susan Ariel Aaronson, Barron’s, Feb 28, 2022


Developed from this Twitter thread

Updates:

March 24, 2022 — replacing the final section on “Suspending membership” with a link to the newer blog post
March 2–4, 2022 — adding Ukraine’s letter, Canada’s announcement, Inside US Trade’s and Simon Lester’s reports on various other US proposals and reference to “bad boy” tariffs, the quote from James Bacchus in the Wall Street Journal, and India-Pakistan on MFN, removing “national” from “security” and adding an explanation in the sidebar box

Image credits:
Main image: detail of a painting by Chris Edmund © used with permission

Author: Peter Ungphakorn

I used to work at the WTO Secretariat (1996–2015), and am now an occasional freelance journalist, focusing mainly on international trade rules, agreements and institutions. (Previously, analysis for AgraEurope.) Trade β Blog is for trialling ideas on trade and any other subject, hence “β”. You can respond by using the contact form on the blog or tweeting @CoppetainPU

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