By Tom Miles and Robin Emmott
GENEVA/BRUSSELS, July 9 The European Union
launched the first formal trade dispute with Russia at the World
Trade Organization on Tuesday, less than a year after Moscow
joined the trading club.
The EU has told the WTO it held that Russia was illegally
protecting its carmakers with a recycling fee levied on imported
cars, and had given up waiting for Moscow to change the law.
"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," EU Trade Commissioner
Karel De Gucht said in a statement.
The dispute follows repeated warnings from Brussels about
what it sees as Russia's non-compliance and loud dissent within
Moscow about the merits of being in the WTO at all.
Joining the WTO is a compact, with the cost of signing up to
tough standards offset by the benefits of gaining access to a
globally regulated market with guarantees against protectionism.
But Russia's critics say it has never made good on its
obligations, and the car levy, introduced nine days after Russia
became a member, is one of a slew of non-compliant policies on
goods ranging from alcoholic drinks to combine harvesters.
Importing a car to Russia involves paying a fee to cover the
future cost of recycling it, a form of green tax.
Russian-produced cars, however, are not subject to the same
charge, making it, in the EU's eyes, in effect an import tax.
Cutting import tariffs on cars was a major sticking point in
Russia's 18-year negotiation to join the WTO. Moscow agreed to
do so, but the EU says the recycling fee, collected up-front
when a car is imported, effectively cancels out the tariff cut.
JAPANESE, U.S. CONCERNS
The EU says the fee has a severe impact on 10 billion euros
($12.9 billion) of annual exports, and says Russia's own
estimates show it generates 1.3 billion euros in Russian
"We would have hoped that things could have been solved
differently," said Frank Schauff, head of the Association of
European Businesses in Russia. "We have no illusions about the
WTO disputes procedure, which can take years."
Russia's Economy Ministry said it had been warned to expect
the EU trade action after the Russian parliament failed to pass
amendments to the recycling levy before it went into summer
recess last week.
Under WTO rules, Russia has 60 days to satisfy EU concerns
about the recycling levy, by changing or explaining its policy.
After that the EU could ask the WTO to adjudicate, which could
force Moscow to change the rules or face trade sanctions.
Other members of the trading club are also suspicious of
Russia's commitment to the WTO, where it has yet to appoint an
Last month the U.S. Congress told the U.S. Trade
Representative to report back within six months on Moscow's WTO
compliance and to keep reporting back annually. USTR said it
would "use all appropriate tools," ranging from diplomacy to
litigation at the WTO.
Japan, the United States and the EU are set to jointly air
concerns about Russia at a WTO meeting on Thursday.
The souring of the mood in Geneva contrasts with optimism at
the time of Russia's WTO entry last August, when the potential
benefits of bringing in the biggest economy still outside the
club attracted comparisons with China's entry in 2001.
But China, which enjoyed a huge trade boom after it signed
up to the WTO rules, took more than two years to attract its
first trade dispute. Russia took less than 11 months.
Russia has warned the European Union in the past that it has
its own concerns with EU policies, including restrictions on
Gazprom's control of its European gas pipeline assets.