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EU says Russia breaking WTO rules ahead of entry
June 6, 2012 / 1:20 PM / 5 years ago

EU says Russia breaking WTO rules ahead of entry

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* Commission concerned by Moscow's rising trade barriers

* Russia due to join trade body later this year

* EU says protectionism growing, especially in Argentina

By Sebastian Moffett

BRUSSELS, June 6 (Reuters) - Russia will probably be in breach of global trade rules when it joins the World Trade Organisation this year, the EU executive said on Wednesday, signalling Brussels would feel justified in filing a case against the club's newest member.

Russia is set to join the WTO once its parliament rubber-stamps its application. But the European Commission said in a report that Moscow will be in breach of its obligations in several areas if it does not take steps to dismantle the trade barriers it has put up.

"Russia, as an imminent WTO member, still deserves close scrutiny as one of the most frequent users of trade-restrictive measures," the Commission said. "Russia is not currently fully living up to its future obligations as it has undertaken, and extended numerous, potentially trade-restrictive measures."

These include safety regulations on alcoholic drinks, a ban imposed on the import of live animals from the European Union, and legislation under preparation that contains preferences for domestic car producers in public procurement, the report said.

Russia and the EU are deeply intertwined, with Europe relying heavily on Russian energy exports and Russians hungry for EU products and access to its 500 million consumers. But the two sides argue over issues ranging from energy supplies, trade and market access to human rights.

Bilateral corporate ties have also frayed in places, with BP embroiled in a row over its plans to sell a stake in its Russian venture TNK-BP.

The UK oil major's billionaire partners are threatening to block a deal that would help the Kremlin tighten its grip on the country's vast energy sector.

Negotiations between Russia and the EU towards a comprehensive economic and political agreement have also stalled, and Brussels is concerned by President Vladimir Putin's plan to develop a "Eurasian union" of ex-Soviet states, including Kazakhstan and Belarus.

At a summit with EU leaders in St Petersburg on Monday, Putin told them they would have to deal with this new economic alliance.

Wednesday's report - one of a series launched by the Commission to monitor trade protectionism in the recent, harsh global economic environment - said other governments were also resorting to protectionism.

Worldwide, only 89 protectionist measures have been removed since October 2008, whereas 534 new ones are in place, said the Commission, which negotiates trade agreements on behalf of the EU's 27 countries.

Scaring Off Investment

Healthy trade flows are crucial for Europe at a time when its economy has stagnated and the debt crisis is eating away at business confidence at home. Fast-growing emerging economies in Asia provide European businesses with an opportunity to boost exports, such as those of German machinery to China.

But trade also makes Europe vulnerable to any rises in protectionism in overseas markets.

Argentina, under President Cristina Fernandez' centre-left government, has resorted the most to trade-restrictive measures since October 2008, with 119, according to the report.

In April, Buenos Aires seized control of energy company YPF from Spain's Repsol.

Last month, the EU filed a suit against Argentina with the WTO, citing an import licensing regime and an obligation on companies to balance imports with exports.

"Ad-hoc measures such as those taken by Argentina or Bolivia substantially impact the investment climate for EU investors, increasing its unpredictability," the Commission said.

On May 1, Bolivia nationalised a local unit of Spain's Red Electrica Espanola.

The Commission called on the Group of 20 world leaders' summit in Los Cabos, Mexico, on 19 and 19 June to keep a pledge "not to resort to trade restrictive measures during the economic and financial crisis".

Brussels is currently revamping its trade defence mechanisms against what it sees as unfair practices in countries - such as China, Russia and Vietnam - that it says practise state capitalism. (Additional reporting by Robin Emmott; Editing by John Stonestreet)

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