July 29, 2014

Drazek and Johnson: Want a Spot in WTO? Enforce the Rules First

Talks between U.S. and Russian trade negotiators over Russia’s bid to join the World Trade Organization have resumed in Geneva, and the American agriculture and business communities are hoping for commitments from Moscow to respect all WTO rules.

Russia is the largest economy in the world to not be a member of the WTO. But there’s a reason its bid to join has been held up for almost 20 years. Russia has yet to show the other members of the 153-nation organization that it understands its responsibilities under the rules-based trading system and that it would adhere to the rules once it became a member.

Russian Prime Minister Vladimir Putin has said his country should not implement WTO rules until it becomes a member. In fact, Russia has implemented arbitrary and protectionist measures against imports with distressing frequency.

What it should be doing is accepting an open and transparent trade regime that would open markets, prompting lower-priced inputs for Russian businesses and consumers, access to new products and ideas, and competition that sharpens domestic companies.

If it begins now to implement WTO rules, Russia will give other countries confidence to make it a member of the WTO, thereby enabling it to protect trade benefits while also giving it a seal of approval for those interested in investing and doing business in Russia.

Some argue that it would be better to have Russia under the WTO umbrella, where the dispute resolution process can be brought to bear to settle trade issues. With Russia on the outside, the argument goes, there is no process available to resolve disputes.

This turns the WTO accession process on its head. It is through this process that aspiring nations demonstrate they have brought their laws and regulations into conformity with WTO rules — prior to membership. It was never the intent to have the dispute settlement process serve this purpose.

Disputes will occur, but they should not be over matters that should have been resolved prior to WTO entry. Why sign a contract just for the right to have a lengthy and costly legal fight?

Even with Russia outside the WTO, the United States has leverage in disputes if it would choose to use it. The United States is not obliged to provide trade benefits to non-WTO members, which it currently provides to Russia. Also, the United States gives Russia unilateral preferential access to the American market for certain products under the Generalized System of Preferences for developing countries.

The Obama administration is working hard to help Russia implement open and predictable trade rules so that it may join the WTO this year. The European Union and others, likewise, are trying to do what they can to ease Russia’s path to membership, but many of them also have serious trade concerns that have slowed the accession process.

For example, Russia has imposed protectionist import barriers, using specious health or safety concerns. That’s a clear violation of the WTO agreement on sanitary and phytosanitary measures. As a result, some key U.S. food and agricultural exports to Russia have plummeted in recent years.

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