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Russia Wins Landmark ‘National Security’ Ruling at WTO

Decision could undermine Washington’s rationale for slapping tariffs on close allies.

9 April 2019

WTO headquarters
The World Trade Organization has upheld Russia’s claim that national security justified severe restrictions it placed on Ukrainian freight transit after the conflict in eastern Ukraine broke out in 2014.

 

The 5 April decision agreed with Russia’s argument that it imposed the measures against the transit of Ukrainian goods to protect its national security after then-Ukrainian President Viktor Yanukovych fled the country and Kyiv lost control over parts of the Donbas region, the Kyiv Post reports.

 

Ukraine complained to the WTO in 2016, arguing that Russia had violated its commitments under the General Agreement on Tariffs and Trade (GATT), the global trade accord that preceded the WTO. Russian President Vladimir Putin decreed that no road or rail transport from Ukraine could be handled unless the route also went through Belarus.

 

The Russian Economy Ministry said the ruling had recognized Ukraine’s arguments to be unfounded. More importantly, Russia said the issue was of systemic importance for the WTO, Reuters writes, noting that the organization has never before issued a judgement on the right to a national security exemption from global trade rules.

 

The measures were costly to Ukraine’s economy. Its producers have been unable to ship goods through Russian territory to Kazakhstan and Kyrgyzstan since 2016. In the first year of the ban, Ukrainian exports to the two countries fell by nearly half, or about $400 million, according to the Kyiv Post. Russia also imposed transit restrictions on Ukrainian freight bound for Mongolia, Tajikistan, Turkmenistan, and Uzbekistan.

 

The Kyiv paper notes that Russia’s argument was upheld even though it was Moscow that orchestrated the takeover of Crimea and backed the Donbas separatists, thus arguably worsening security in the region.

 

The ruling could have major implications for global trade and the WTO itself.

 

As Bloomberg wrote last week, the WTO “has long avoided a politically fraught confrontation over national security disputes for fear that doing so would open a Pandora’s box of protectionist measures and tit-for-tat retaliation.”

 

“In backing Russia’s right to implement some restrictions on Ukraine,” Bloomberg continued, “the WTO could open the door to any country to implement protectionist trade measures using that justification.”

 

 

  • In its ruling, the three-member panel also confirmed the WTO’s right to review national security claims. Such claims must be “objectively” related to the provisions of Article XXI of the 1994 GATT, which sets out the conditions under which a country can take action it deems necessary “for the protection of its essential security interests.” These relate to fissionable materials, arms traffic, and measures “taken in time of war or other emergency in international relations.”

 

  • This language could undermine the national security argument the Trump administration has used to justify metal tariffs against the European Union, Canada, Mexico, and other countries, Bloomberg says.

Compiled by Ky Krauthamer

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