Russian Trade Policy

Achievements, Challenges and Prospects

Sergei Sutyrin, Olga Y. Trofimenko, Alexandra Koval

• Publisher: Routledge
• Year: 2019
• eBook ISBN: 9780429874444
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This book reveals the key trends in the modern Russian trade policy to provide a deeper understanding of the main challenges and barriers, possible paths and opportunities in its development.

An international team of authors investigates specific factors influencing the Russian trade policy evolution; recent trends in Russia's international trade development; and the impact of Russia's participation in the World Trade Organization on the domestic economy. Particular attention is paid to regional integration processes that involve Russia and their outcomes; as well as challenges in the remaining and building commercial relations with Russia's traditional and 'new' trade partners, taking into consideration those alienating the West and economic sanctions regimes. The analysis of key trends is combined with a special focus on selected industries and economic partners of Russia. The book contains a variety of case studies investigating the ways in which political and business actors adapt to the transformation of Russian trade policy, how Russia participates in the WTO dispute settlement mechanism, and what the driving forces and outputs are for the national economic agents. Finally, the authors consider what the reasonable expectations might be regarding the future prospects of Russian trade policy.

The book presents a unique, comprehensive and multidimensional analysis of modern Russian trade policy. Filling an important gap in the existing literature, this book will be of value to all those interested in Russia's economic development path.

1
Trade monitoring – a global perspective on trade policy trends

Peter Pedersen and Antonia Diakantoni¹

Introduction

In October 2008, during the immediate aftermath of the outbreak of the global financial crisis and amidst widespread fears of a protectionist spiral akin to the Great Depression of the 1930s, the Director-General of the WTO established a Secretariat Task Force to monitor the trade-related developments associated with the crisis. Although trade was not at the root of the crisis, the significance of this rapid institutional response by the multilateral trading system was evident as two Trade Monitoring Reports in early 2009 confirmed that international trade had fallen dramatically.

In early April, the G20 Leaders meeting in London called on the WTO, together with other international bodies, to monitor and report publicly on the G20 adherence to resisting protectionism and promoting global trade and investment. This call followed up on an earlier commitment by the G20 to reject protectionism, refrain from raising new barriers to trade and investment or implement measures inconsistent with the WTO.

Since 2009, the WTO trade monitoring exercise has continued to provide G20 economies, in addition to all WTO Members, with regular updates on the latest trends in the implementation of trade measures as well as important developments in trade policy-making more generally. On some levels the news has not been good. Annual growth of international trade since 2008 has been subdued and has underlined a weakening in the relationship between trade and GDP growth. While trade has typically grown in recent decades at 1.5 times faster than GDP, latterly the ratio has slipped towards 1:1. Conversely, a protectionist backlash failed to materialize even during the most difficult years of the crisis. Nevertheless, and perhaps somewhat ironic given the evidence of a steadily recovering world economy, the tone of the trade debate has turned increasingly negative more recently with hostile protectionist rhetoric and the strategic application of trade policy dominating the headlines.

This chapter aims to provide the reader with an introduction to the WTO trade monitoring exercise and to the origins of the transparency platform upon which it rests. The chapter will also seek to provide an overview of selected trends and developments identified by the monitoring exercise since 2009, including trade measures taken by the Russian Federation. Finally, the chapter will address some of the challenges facing the WTO monitoring exercise as an institutional platform for transparency and accountability as it enters its tenth year.

Theoretical background and methodology

At the heart of the WTO trade monitoring exercise and the Trade Policies Review (TPR) Mechanism mandate to which it is anchored, lies the notion of transparency and the idea that an international intergovernmental organization can provide a constructive platform for a peer review amongst the membership of trade issues in general and trade policies in particular. In providing the WTO, and prior to that the GATT, with the mandate to create a peer review platform Members implicitly acknowledged the usefulness of such an exercise to ensure their accountability with respect to WTO rules. The G20 Declarations at the end of 2008 and in early 2009 were explicit examples of this. Collins-Williams and Wolfe (2010), Wolfe and Halle (2011), and Najam and Halle (2010) provide important perspectives and examples of the accountability issues facing international organizations. In a Member-driven organization such as the WTO, holding the membership accountable represents a particular set of challenges, especially in the context of a Secretariat-led exercise such as the regular trade monitoring. Collins-Williams and Wolfe (2010) points to the sensitivity among Members surrounding an activist Secretariat at the very beginning of the monitoring exercise. Interestingly, although this sensitivity did not initially result in the imposition of constraints on the Secretariat, since 2011 the pendulum has swung decisively in the direction of greater Member scrutiny of the trade monitoring exercise. Pendulum swings between Members and the WTO Secretariat are not uncommon and have happened on several occasions and in several areas over the past two decades, including on issues such as the relationship with non-governmental organizations and on institutional coherence with other intergovernmental organizations.

The benefits of market openness and the cost of protectionism have been widely studied and there is general agreement that going from a situation of trade to no trade reduces welfare overall. Irwin (2011) provides an interesting perspective on the import drop and income loss in the United States as a result of the 1930 Smoot-Hawley Law. In the context of the 2008 global financial crisis, most commentators referenced the Great Depression and the beggar-thy-neighbour policies, which sent the world economy tumbling. At the outset of the crisis, therefore, many considered that there was a real possibility that countries would resort to protectionist policies as a result of domestic pressures. However, although the WTO trade monitoring exercise has not detected such a turn of events when it comes to the implementation of trade-restrictive policies, other observers of the global trading system have. For example, Evenett and Fritz (2015) report significant increases in protectionist trade policies, in particular in 2009 and again since 2012. The variations in the numbers and conclusions of various monitoring exercises are generally a result of different methodologies. This discussion is, however, beyond the scope of this chapter. Collins-Williams and Wolfe (2010) and the Swedish National Board of Trade (2016) both provide important insights into the use and merits of different methodologies in trade surveillance.

The methodology behind the trade monitoring mechanism in general, and the Trade Monitoring Reports in particular, reflects not only the Secretariat mandate to collect and present information, but also the close involvement of WTO Members in the exercise. The WTO Secretariat prepares four Trade Monitoring Reports per year, i.e. two for the full WTO membership and two for the G20 economies. The report on G20 trade measures is circulated together with a report on G20 investment measures prepared by the OECD and UNCTAD. The data collection and analysis for the WTO-wide reports constitute the basis for the G20 Trade Monitoring Reports and methodologically both reports are now almost identical.

There are two major approaches to collecting information for the reports: by requesting information from WTO Members and through an independent Secretariat research process. These approaches are complementary and are characterized by a close collaboration between the Secretariat and WTO Members. In March and in September, the Director-General makes a formal request to all Members and Observers for information on measures that have been implemented and have an impact on the international trading environment. The request specifies the precise period and the types of measures covered by the forthcoming monitoring report. It also provides an illustrative list of measures affecting trade in goods, services, intellectual property and general economic support; and expected deadlines for submissions. Members are given one month to reply. In parallel, an ongoing process of data collection is conducted by the Trade Monitoring Section of the Trade Policies Review Division (TPRD). The Secretariat screens a range of public sources for information, including national laws, agreements, resolutions, decrees, amendments, executive orders published on Government websites such as ministries, customs offices, central banks, regional secretariats, or through other international organizations’ websites or reports. Customs notices, press websites or press reports and releases are also screened for relevant information. Notifications to the WTO are used together with measures directly received from Members and Observers.

Information and measures obtained are then returned to the relevant Members and Observers for verification. Subsequently, the Secretariat collates a final list of measures for further analysis and interpretation. The data on trade in goods are divided and analyzed by three categories, i.e. measures facilitating trade, trade remedy actions, and other trade and trade-related measures (with possible trade-restrictive effect). The number of newly implemented measures and their trade coverage are then compared to previous periods. Services measures are categorized according to sector and mode of supply in a separate annex and analyzed in-depth in the Report. Measures that have not been verified by the respective Member are included in the reports as “recorded, but non-confirmed information”. The intellectual property section of the reports has so far focused on the analysis of the principal trends affecting trade in intellectual property. Publication of the Trade Monitoring Reports takes place in June and November, respectively, and the reports are then discussed by delegations at dedicated Trade Policy Review Body (TPRB) meetings. The current procedure establishes an annual formal meeting in December and an informal meeting in July. The reports as well as the meetings attract considerable attention from Members, Observers, and the media. The G20 Reports are generally circulated ahead of important meetings of that group, e.g. trade ministers’ meetings or Leaders’ Summits.

Trade surveillance in the GATT

The internal trade monitoring Task Force established by the Director-General (DG) in October 2008 (WTO 2008) was by no means the first time that the Secretariat had responded to a specific trade surveillance challenge. For example, in the uncertain global economic environment in the late 1970s and early 1980s, the GATT Contracting Parties discussed the need to seek enhanced adherence to existing trade rules. In November 1979, as part of the Tokyo Round of trade negotiations, these talks resulted in the adoption of the Understanding Regarding Notification, Consultation, Dispute Settlement and Surveillance (Further – Understanding). Included in this document, was a decision “to conduct a regular and systematic review of developments in the trading system” (GATT 1979), which formally marked the beginning of periodic reviews of trade policy changes. It was subsequently agreed that a Secretariat background note would facilitate such discussions.

The first Secretariat note, circulated in October 1980 (GATT 1980), covered developments in trade policies and related matters over a six-month period and reviewed compliance by Contracting Parties with notification obligations. However, merely listing submissions of notifications failed to provide much insight into actual compliance and to correct for this, the Secretariat’s notes from 1983 also included information that was not based on notifications. Importantly, the Secretariat’s notes deliberately refrained from suggesting whether particular actions conformed to GATT obligations, reserving those judgements for the GATT Contracting Parties (GATT 1983).

Discussions among the Contracting Parties on further improvements to the functioning of the GATT continued throughout this period and the issues of enhanced surveillance, more publicity and peer reviews gained traction as necessary tools to contribute to better adherence to the rules. In 1985, a central proposal by the Leutwiler Group (Trade Policies for a Better Future: The Leutwiler Report, GATT, and the Uruguay 1987)² to work towards greater transparency of trade policies related to the idea that all Contracting Parties should be subject to regular reviews. This notion of enhanced surveillance was subsequently brought into the GATT framework by the creation of the negotiating Group on the Functioning of the GATT system (FOGS) at the launch of the Uruguay Round in 1986 (Pedersen 2011).

Amongst the FOGS Group significant outcomes was the emergence of the Trade Policy Review Mechanism (TPRM). Provisionally introduced in 1989, the TPRM was confirmed by Annex 3 of the Marrakesh Agreement Establishing the WTO. The TPRM also incorporated an annual overview by the DG of recent trade policy developments, which would become the vehicle for the WTO Trade Monitoring Reports from 2009 onwards.

Trade monitoring in the WTO

The onset of the global financial crisis in September 2008 triggered the search for a trade monitoring mechanism within the multilateral trading system. Less than one month later, in October, DG Pascal Lamy established a Secretariat Task Force to advise him on the trade implications of the financial crisis and on the trade measures that were implemented in this context. The work of the Task Force was initially meant to be purely internal, but a number of delegations encouraged DG Lamy to report in writing to the membership.

The first WTO monitoring reports were circulated to WTO Members in January and April of 2009 and contained the first stock-takes with respect to trade-related developments since the outbreak of the financial crisis (WTO 2009b). Introducing the reports and responding to concerns regarding the initiative, DG Lamy reiterated the need for it to be Member-driven and “carried out by, and for the benefit of the whole membership” (WTO 2009a). At the core of this reference was the participation of delegations both in providing information to the Secretariat and in the verification of measures found through other sources.

The trade monitoring exercise has featured in several consultative processes since 2009, including as part of the regular TPRM Appraisals, and there has been consistent support for its continuation and strengthening. At the Eighth Ministerial Conference in December 2011 Ministers provided an unambiguous endorsement of the trade monitoring mechanism (WTO 2011a, 2011b).

In 2012, a series of informal consultations by the Chairman of the TPRB took place to follow up on the 2011 Ministerial Decision on trade monitoring “to continue discussing the strengthening of the monitoring exercise of trade and trade-related measures on the basis of Members’ inputs”. During these consultations it became clear that while no Member questioned the importance of the monitoring initiative from a transparency point of view, there was a general view that the exercise could be further improved and that Members were best placed to take the lead in that endeavour. The informal consultations as well as the sixth TPRM Appraisal in 2016 demonstrated that Members were in no mood to provide the Secretariat with additional flexibility on trade monitoring and were, on the contrary, seeking to rein in the exercise. While the Secretariat has tried to push for specific improvements to the exercise, many of which arguably would have fallen squarely within the existing mandate, such efforts have been pushed back by Members.

Trends and developments since 2009 – proliferation of protectionism?

The WTO trade monitoring mechanism is first and foremost a transparency exercise, which aims to shed light on the latest trends in the implementation of a broad range of policy measures that facilitate as well as restrict the flow of trade. Although the exercis...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Contents
• List of figures
• List of tables
• List of contributors
• Introduction
• 1 Trade monitoring – a global perspective on trade policy trends
• 2 Transformation of the Russian trade policy facing the geopolitical challenges
• 3 States and dirigisme versus markets: hydrocarbons, agriculture, and Russia’s trade policy, 1991–2017
• 4 The theory and practice of economic sanctions
• 5 Impact of the WTO accession on acceding countries: analysis of key macroeconomic indicators
• 6 Eurasian economic union: the first successful Russian regional trade agreement?
• 7 The European context of Russian trade policy
• 8 Adaptation of Finnish food exporters to Russia’s food import restrictions
• 9 Russia’s trade with China: in the face of sanctions a search for new market opportunities
• 10 Trade cooperation between Russia and Korea during the period of sanctions 2014–2017: implications for trade policy
• 11 Contemporary Russian–Brazilian trade relations
• 12 Russian automotive industry: beyond import substitution and export-led industrialization
• 13 GATS Mode 4 in Russia’s migration policy: liberalization and its limitation
• 14 Russian Federation in the WTO dispute settlement: first steps
• 15 Conclusion
• Index