When, after almost two decades of negotiations, Russia became in 2012 the last major economy to join the World Trade Organisation it did so to great acclaim. Business groups hailed the opening up of an important emerging market. The World Bank predicted a boost to Russian national income. Karel De Gucht, the EU trade official, declared it a “major step for Russia’s further integration into the world economy”.
Two years on, however, Russia has become the subject of a confrontation echoing through the WTO’s marbled halls in Geneva. “Russia is moving increasingly to build walls around its economy,” Michael Punke, US ambassador, complained this week to the WTO’s General Council, during a session on Russia’s membership that amounted to a rare public dressing-down of a member country.
The battle reflects the way relations between Russia and its trading partners in the west have deteriorated because of the crisis in Ukraine. But its origins predate the stand-off and raise questions about Russia’s engagement in international bodies such as the WTO as Moscow becomes isolated.
Russia is the subject of several disputes in the WTO. The EU has filed complaints over Russian policies that it says amount to illegal barriers to European cars and pork products. Officials in Brussels say they are preparing other cases, including a broader challenge to Russia’s import duties regime.
But the WTO dispute has gone beyond that. The EU, US and other prominent members have raised a list of concerns. These range from Moscow’s decision to raise tariffs it had promised to lower, to the opacity of its plans to turn its customs union with former Soviet states such as Kazakhstan and Belarus into a broader Eurasian Union.
More broadly, they argue, Russia has wilfully failed to embrace the point of joining the WTO – to encourage more open economies and increase trade with fellow members.
Russia denies doing anything of the sort. Officials and analysts in Moscow insist that Russia intends to live by its obligations. They claim the WTO disputes are a routine consequence of membership.
“Many people bring complaints against other people in the WTO. That is normal politics,” said Alexei Portansky, a former spokesman for Moscow’s WTO accession bid now at Russia’s National Research University.
Russian officials have also fired back by threatening to use the WTO to challenge EU and US sanctions levied as a result of the crisis in Ukraine.
No one is threatening to push for Russia’s expulsion from the WTO. Such a move would be unprecedented and almost impossible, unless Moscow quit on its own volition. Trade officials also argue that having a forum to air disputes with Russia is exactly why keeping it as a member is important.
But the fight risks highlighting the WTO’s institutional weakness. Even when it finds against a member in a dispute there is little it can do to enforce a ruling other than give another member the right to impose punitive trade measures.
Angelos Pangratis, the EU’s ambassador to the WTO, warned this week that Moscow’s repeated ignoring of its commitments posed a risk to the credibility of the organisation as a whole.
“This is an issue of systemic importance,” Mr Pangratis told the general council. “A WTO member cannot serially fail to respect its obligations without undermining the rules-based multilateral system we all believe in.”
Just how big a risk that represents is unclear. Russia would not be the first WTO member to ignore its rulings. But if Moscow persisted in routinely doing so, it would add to the uneasiness in Geneva, where the WTO is fighting for relevance as a venue for negotiating trade agreements.
Fredrik Erixon, a trade analyst at the European Centre for International Political Economy, argues that the current dispute illustrates the “naivety” with which European and US officials embraced the idea of Russian membership in the first place.
“The perception in the western world since the collapse of the Soviet Union was that Russia would eventually turn into a democratic market economy,” he said. “That’s been a false assumption, a completely misguided narrative, ever since the Soviet Union collapsed.”