The EU brings its first WTO case against Russia
The EU yesterday launched a challenge to Russia’s so-called “recycling fee” on vehicles by requesting consultations in the World Trade Organisation.
The EU has repeatedly raised the issue of the fee in bilateral talks with Moscow but this has not brought any concrete solution. This leaves the EU no choice but to resort to the WTO’s dispute settlement procedures.
“The European Commission has pursued every diplomatic channel for almost one year now to find a solution with our Russian partners on this matter but to no avail. The fee is incompatible with the WTO’s most basic rule prohibiting discrimination against and among imports,” said EU Trade Commissioner Karel De Gucht. “It is severely hampering trade in a sector which is key for the European economy. We expect Russia to engage in WTO consultations with us to find a solution to this problem quickly.”
Russia introduced the fee on 1 September 2012, just days after joining the WTO. The fee is levied on cars, trucks, buses and other motor vehicles. For cars, it ranges from about €420 to €2700 for a “new” vehicle and from €2600 to €17200 for a vehicle older than three years. For some vehicles, such as certain mining trucks, the fee is as high as €147700.
While the fee is imposed on all imports from the EU, vehicles produced in Russia are exempted. An exemption is also available for vehicles imported from Kazakhstan and Belarus forming a customs union with Russia.
The fee has a severe impact on EU vehicle exports to Russia that represent €10 billion annually. It concerns almost exclusively imports and – according to Russia’s own estimates – results in an additional €1.3 billion in annual revenue flowing to the Russian government. Although Russia promised at the EU-Russia summit last year to remove the discrimination, the situation has continued until now. The EU hopes WTO consultations will result in a satisfactory solution. If no such solution can be found within 60 days, the EU may ask the WTO to set up a Panel to rule on the legality of Russia’s measures.
Trade facts and figures
Russia is the EU’s third largest trading partner and the EU is Russia’s biggest partner. In 2012, the EU exported goods worth €123 billion to Russia and imported goods worth €213 billion. While Russian exports to the EU are mainly raw materials (80%), EU exports to Russia are mostly machinery and transport equipment (50%), including vehicles.
The impact of Russia’s discriminatory measures on trade in this WTO case
In 2012, the value of EU vehicle exports to Russia topped €10 billion. The fee affects almost inclusively imports and according to Russia’s own estimates represents €1.3 billion annually in extra government revenues.
Given its level, the fee imposes an additional burden on imported vehicles and nullifies the reductions in import tariff Russia agreed to in the WTO. In some cases, the total burden is actually higher for imports than before Russia joined the WTO.
Next steps in WTO dispute settlement procedures
The request for consultations formally initiates a dispute under the WTO dispute settlement understanding. Consultations give the EU and Russia the opportunity to discuss the matter and to find a satisfactory solution without resorting to litigation.
If consultations do not reach a satisfactory solution within 60 days, the EU may request the WTO to set up a Panel to rule on the legality of Russia’s measures.
Source: European Commission
In: Growth & Competitiveness