On August 22, 2012, after 19 years of negotiations, the Russian
Federation ("Russia") became the 156th member of the
World Trade Organization. This event marks the accession of the
last major world economy to the international trading regime.
Proponents, opponents, academics, and businesspeople from within
and outside Russia have commented extensively on Russia's
accession. There have been many studies, opinions, assessments, and
projections about the consequences of accession on Russia's
economy and the economy of other WTO members in the short and long
term. There have also been diverging views on the immediate impact
of WTO membership on Russia and other WTO members. It has been
suggested that it will benefit some Russian industry sectors and
disadvantage others.
Only time will tell what the exact consequences of the WTO
accession will be for the Russian economy. However, it is clear
that the regulatory framework within which Russian companies
operate in export markets and the regulatory framework governing
competition from foreign companies on the Russian domestic market
will undergo significant changes. The impact of Russia's
accession to the World Trade Organization will largely depend on
how Russian companies take advantage of this regulatory framework.
The new reality will provide Russian businesses with great
opportunities and confront them with great challenges. Whether and
how they will reap the benefits of accessing the multilateral
trading system will depend to a large extent on whether or not they
choose to seize these opportunities and will be willing to face and
overcome challenges. The decisions they make in this respect now
may strongly affect their future position vis-à-vis their
domestic and international competitors.
The New Regulatory Framework
By joining the WTO, Russia has committed to abide by its rules
and principles in accordance with its Protocol of Accession and
specific Schedules of Commitments. These rules apply on a
reciprocal basis, and other WTO members also have to observe them
in their dealings with Russia. Moreover, the WTO Dispute Settlement
Body will allow Russia to hold its WTO partners accountable for
failing to adhere to these rules. Conversely, other WTO members
will use this system to ensure Russia's compliance. The dispute
settlement mechanism enforces the obligations agreed upon within
the WTO and aims to give all WTO members confidence that the
agreements negotiated and agreed upon will be enforced.
The basic rules and principles of the multilateral trading regime
strongly favor tariff measures over non-tariff measures. These
rules prohibit the use of so-called quantitative restrictions (with
some exceptions), and trade protection through import tariffs is
allowed. However, WTO members commit not to raise tariffs above
levels agreed at the time of their accession.
A WTO member may not discriminate among its trading partners that
are also WTO members and is required to give them equal
"most-favored-nation" or MFN status. This principle
provides for nondiscriminatory treatment of imports of goods and
services. It also contemplates that the same tariffs will be
applied to all WTO members. WTO members may not discriminate
between their own and foreign products, services, or nationals, and
they are required to grant them "national treatment."
Consequently, imported and locally produced goods should be treated
equally, at least after imported goods enter the market. This
principle also applies to taxation.
The WTO imposes rules governing the imposition of anti-dumping,
anti-subsidy, and safeguard measures, or so-called "trade
defense measures" that can temporarily increase the duties in
force on imports of particular products from particular countries.
The use of health and sanitary measures and technical standards is
also strictly regulated.
The WTO rules go beyond trading and affect customs, licensing, and
certification rules and procedures; the protection of intellectual
property; and government procurement.
Challenges and Opportunities for Russian Companies Focused on the Russian Domestic Market
Russian companies are likely to be confronted with stronger
competition from non-Russian companies on their domestic market.
Russia's WTO accession will result in increased access to the
Russian market for international companies since accession will
require Russia to lower its import tariffs and to rationalize its
tariff system.
The exact changes will vary significantly depending on the sector
concerned. For some sectors, the most important change might not be
the reduction in tariffs as such but, rather, the fact that the
tariff rates will be fixed, whereas in the past tariff changes were
often used as a mechanism for shielding the Russian domestic
industry from unwanted competition.
The market access is, however, not free from limitations. There
are still legitimate ways to protect certain sectors and
industries, and there are still WTO-compliant ways for the Russian
government to support its domestic industries without violating WTO
rules. To take advantage of some of these possibilities, the
Russian companies will have to take initiative. For example, an
anti-dumping or anti-subsidy investigation that can lead to the
imposition of import duties may be initiated at the request of
domestic industry players.
The Russian government is likely to maintain certain sectoral
protection mechanisms, which may be challenged by other WTO members
at the request of their exporting companies. Russian companies will
have to support their government in demonstrating the WTO
compliance of such mechanisms. In certain cases, changes in the
wording of the relevant regulations may be sufficient to achieve
compliance.
This new challenging environment will also create opportunities
for Russian companies. Russian companies that analyze the new
regulatory framework and its consequences on their business will
more easily adapt to the new reality and will have an important
competitive advantage.
Challenges and Opportunities for Russian Export-Oriented Businesses
Russia's WTO accession provides Russian companies with
increased access to export markets. Tariffs have to be lowered, and
existing trade restrictions (including quotas) on certain products
will disappear. WTO membership ensures Russia with
nondiscriminatory treatment of its exporters in the markets of
other WTO members. Russian exporters that feel discriminated in
favor of other exporters or domestic companies can, under certain
circumstances, enforce their rights under the WTO Agreements. Since
Russian exporters already had access to most of the tariff benefits
through Russia's bilateral trade agreements with WTO members,
the reduction and/or elimination of nontariff barriers is likely to
account for most of the benefits for the Russian economy through
liberalization rather than the decrease in tariffs.
The entry into the WTO also provides Russian exporters with equal
status with other WTO members in anti-dumping, anti-subsidy, and/or
safeguard procedures and should put an end to discriminatory
measures against Russian exporters. Russian exporters that are
being confronted with trade defense measures may seek the
initiation of an investigation by the authorities of the importing
WTO member, in which these measures are reviewed, in accordance
with the WTO rules.
The biggest challenge for Russian exporters is likely to be
ensuring compliance with these and other rules and principles of
the world trading regime. The extent to which Russia's
exporters will benefit from accession to the WTO in practice
remains to be seen. It will be of utmost importance for Russian
industries to monitor compliance by other countries and to properly
address any violations.
Jones Day and its Experience in WTO/International Trade Law
Jones Day's international trade lawyers are highly
experienced in EU and WTO trade law, including trade defense
(anti-dumping, anti-subsidy, anti-circumvention) and a full range
of other trade matters. They have assisted companies and
governments in highly challenging trade-related matters. Their
well-recognized knowledge will benefit many of the Firm's
Russian clients that require assistance in this area.
Jones Day's experience and capabilities in Russia, combined
with its experience in international trade law, positions it to
assist Russian companies in dealing with the challenges and
opportunities in the new regulatory environment emerging from
Russia's accession to the WTO.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
