World Trade Organization (WTO)

Members of the WTO as of July 2019 are 164 countries. After the accession of Russia, the WTO regulates 95% -97.1% of world trade (according to various estimates).

For 2019

WTO is headquartered in Geneva, Switzerland.

WTO Director General - Pascal Lamy (January 2013).

The budget of the organization is about 163 million euros as of 2012.

The WTO employs 640 people (January 2013).

Official languages: English, French, Spanish.

WTO Principles and Functions

WTO Fundamental Principles and Rules:

• reciprocal provision of most-favoured-nation treatment in trade;
• reciprocal provision of national treatment to goods and services of foreign origin;
• regulation of trade mainly by tariff methods;
• non-use of quantitative and other restrictions;
• transparency of trade policies;
• settlement of trade disputes through consultations and negotiations, etc.

The most important functions of WTO:

• promoting trade liberalization and removing barriers to trade among member countries;
• multilateral trade negotiations among interested member countries;
• resolving trade disputes;
• monitoring national trade policies of member countries;
• Technical assistance to developing States within the competence of WTO.

Russia and WTO

2022: The State Duma introduced a bill on the denunciation of the protocol on the accession of the Russian Federation to the WTO

In March 2022, against the backdrop of sanctions imposed by the United States and its allies against Russia during the special operation of the Russian Armed Forces in Ukraine, a bill was submitted to the State Duma to denounce the protocol on the accession of the Russian Federation to the agreement on the establishment of the World Trade Organization (WTO).

2021: US complains to WTO about measures to support IT industry in Russia

Import substitution in Russia violates the norms of the World Trade Organization (WTO), said on December 21, 2021, US Trade Representative Catherine Tye. She believes that non-compliance with WTO rules and obligations puts US workers and enterprises at a disadvantage, preventing them from competing on equal terms with other USTR^[1].

A report on the implementation of Russia WTO commitments was prepared by Ty for Congress and published on December 21^[2]document says "Russia's departure from the WTO guidelines," including non-discrimination, open trade, predictability, transparency and fair competition.

IT has a special place in the report

An extensive part of the document is devoted to the IT sector and preferences established in Russia for domestic IT companies and products. The United States still continues to study Russian policies in the field of import substitution of IT, it follows from the report, but many points that they are unhappy with have already been highlighted. The authors of the report say that the United States "will not hesitate to take the necessary actions in the WTO if the WTO determines that Russia has not fulfilled its transparency obligations or provides preferences incompatible with the WTO to its producers."

The document states that Russia has designated the IT sector for itself as a priority, with a focus on the digital transformation of the economy. And in 2021, a package of 62 measures to support the domestic IT industry was adopted in the country. This is part of a broader import substitution program.

The authors point out that there are various tax incentives for local IT companies in Russia and note that for foreign companies it is actually impossible to meet the requirements for which a company or products may be called "Russian" and receive tax benefits. Accordingly, tax conditions for foreign companies are less favorable.

Dissatisfied in America and the requirement adopted in Russia in 2021, according to which IT companies with a daily Russian audience of more than 500 thousand people must ensure their presence in the country. And those who do not do this are planned to prohibit receiving electronic payments.

US officials raised issues in the WTO and will continue to press Russia to maintain an open market for services in the field of computer and related services, the report says. - The United States will continue to carefully study Russia's IT policies and its compliance with its obligations in this area, so that there is no negative effect on US interests.

American complaints are caused by preferences on public procurement established in Russia for domestic IT products as part of import substitution, and separately by the requirement to transfer critical information infrastructure (CII) facilities to domestic IT solutions and services.

Some requirements affect, among other things, foreign cloud service providers. Russia indicated its commitment to not restricting the market and ensuring the possibility of using IT services, including on a cross-border basis, the report says. The latter is especially important in view of the growth of the cloud services market. The authors of the document express concern about how these obligations are affected by local laws on data protection, in particular the requirement that personal data of Russians should be stored on servers located in Russia.

In 2019, a law was also passed requiring the pre-installation of domestic software on some consumer devices sold in the country, including PCs, smartphones, tablets and smart TVs. Moreover, the list of such software tends to expand.

American stakeholders are concerned about the operational aspects of such requirements: for example, who determines whether a specific mandatory application is compatible with the operating system on the device, and whether there are obligations to eliminate such incompatibilities.

In addition, American stakeholders are concerned about the obvious competitive advantages that such measures provide to local software, as well as plans to change the list of mandatory software annually. US representatives raised questions in the WTO about this and expect written answers from Russia to these questions, the report says.

2011-2012: Russia's accession to the WTO

By the fall of 2011, the Russian Federation received consent to join the organization from all its participants, except Georgia. In early November 2012, Moscow and Tbilisi, with the mediation of Switzerland, were able to agree on a bilateral agreement on the WTO, and then signed it.

Russia became a full member of the WTO on August 22, 2012. Negotiations on the accession of Russia lasted a record 18 years from June 1993 to December 2011.

Russia is the last member of the twenty largest national economies and the EU (G20), as well as the last of the five rapidly developing countries of the BRICS group, which became 156 members of the organization since August 22, 2012. Over the years, the working group has held 29 regular sessions to agree on modalities for accession.

Some consequences for Russia:

• Non-discriminatory access to the economies of 156 countries.
• Gradual reduction of the average rate of Russian customs tariffs from 10% to 7.8%. In certain sectors, such as engineering, import customs duties should be reduced from the current average level of 25% (January 2013) to 15%. Reduction of import customs duties on 1/3 of goods since 2012, on 1/3 of goods since 2015, on the remaining 1/3 of goods since 2018. These reductions are expected to significantly increase imports of goods. The European Union, as the main trading partner of Russia, estimates that a reduction in tariffs will save on import duties for European exporters 2.5 billion euros per year. This will allow the European Union alone to export additional goods to Russia in the amount of 3.9 billion euros per year
• Up to 11% of GDP growth in the long term (World Bank estimate).
• Elimination of export restrictions on 2 billion US dollars per year (estimate of the Ministry of Economic Development of Russia).

Russia's obligations to WTO members are recorded in the Protocol, the List of Obligations on Goods, the List of Obligations on Services that are part of the Protocol, as well as the Report of the Working Group on Russia's Accession to the WTO.

The rights and obligations to WTO members will affect Russia in three main directions (forecasts of January 2013):

• First, membership will affect the import and export of products.
• Secondly, obligations will affect the service market. Russia assumed obligations on 116 types of services out of 155 provided for by the WTO service classifier. Types of services include: banking and services in the securities market; insurance; accounting and auditing; telecommunications and others. The World Bank estimates that as a result of accession to the WTO, service consumption in Russia will increase by 5.3%
• Thirdly, it will affect the areas of investment and intellectual property.

In the framework of accession to the WTO, Russia assumes obligations that guarantee foreign companies access to the national regime, that is, the same rules will apply for foreign persons as for Russian ones. As well as access to the most-favored-nation (RNB) regime, which means that if Russia provides a favorable legal regime for foreign individuals from one WTO member, then it should act for individuals from any other WTO member.

The WTO is based on systems of agreements in six areas (the current status for them for Russia is presented below):

• By merchandise trade (governed by the Commodity Agreement).
• On trade in services (governed by the Services Agreement).
• On investment measures (regulated by the Agreement on Trade-Related Investment Measures (TRIMs). In terms of obligations on investment programs in the automotive industry, Russia retained the possibility of applying measures temporarily contrary to the WTO.
• Intellectual Property Agreement (TRIPS - Agreement on Trade-Related Aspects of Intellectual Property Rights). Defines the conditions for extending the GATT 1994 regime to the results of intellectual activity, defines the rights and obligations of Russia, as a member of the WTO, in the field of protection of intellectual property rights in trade in goods.
• Dispute resolution mechanisms (governed by the Agreement on Rules and Procedures for the Settlement of Disputes (DSU)). Trade disputes are resolved in various ways within the WTO. It was preferable to settle disputes through consultation and negotiation, and the procedure was mandatory at the initial stage of disputes but not always effective. Access to WTO dispute resolution mechanisms provides an opportunity to protect Russian interests if they are violated by other WTO members. * On public procurement (regulated by the Agreement on Public Procurement (TPRM - Trade Policy Review Mechanism) - (not yet signed). Regulates the rules and procedures relating to tenders for public procurement of goods and services. Public authorities will conclude treaties on the basis of the principle of transparency, in accordance with published laws, rules and recommendations. Russia sent a request for observer status under this Agreement after joining the WTO and began relevant negotiations on participation in the Agreement.

In the commitments made, Russia stipulated some restrictions on foreign partners. Restrictions will affect:

• pricing (transition period for harmonization of railway tariffs that discriminate against imports of goods);
• special economic zones (transitional periods for the Kaliningrad and Magadan SEZs);
• technical regulation (the possibility of maintaining GOST contrary to WTO, if they are not disputed by WTO members);
• agriculture (an opportunity to increase support for agriculture);
• investment regulation (Investment Agreement (TRIMs) (in terms of obligations on investment programs in the automotive industry, Russia retained the possibility of temporary application of measures contrary to the WTO).

After Russia became a member of the WTO, Russian companies gained the right to enter foreign markets, taking into account the obligations assumed by the relevant WTO members. And such obligations may be more favorable for Russian companies than the regime that applied to them before Russia joined the WTO.

Service Agreement

Russia assumed obligations on 116 types of services out of 155 provided for by the WTO service classifier. On www Russia-WTO.ru Legal reviews are available for 16 types of services, including:

• Banking and securities market services;
• Insurance;
• Telecommunications;
• Accounting and auditing, tax consulting;
• Consulting services in the field of management, market research services;
• Services of news agencies , etc.

As follows from the analysis, the obligations that Russia assumes when joining the WTO in relation to various areas of services are extremely heterogeneous. Russia offers wide access to foreigners in a number of industries, such as telecommunications, while in insurance and other sectors, the arrival of foreign players, on the contrary, is limited. In the Russian-language version of Russia's obligations, there are also a number of serious legal and technical inaccuracies, in particular with regard to bank services, which can create potential risks for business.

The reviews also show how Russia's position in the negotiation process has changed towards increasing concessions to foreign individuals in individual services sectors. In addition, Russia's obligations are compared with similar obligations of the BRICS countries, which in most cases have retained more serious restrictions on the admission of foreign persons to their service markets.

History

2021: WTO led for the first time by a woman

In February 2021, a woman headed the WTO for the first time in history; Ngozi Okonjo-Iweala, an economist from Nigeria, was appointed to the post of general director of the organization.

Okonjo-Iveala has a rather rich track record.

• She was the Minister of Finance of Nigeria for two terms (2003-2006, 2011-2015), and the Minister of Foreign Affairs of Nigeria for several months.

• She was a member of the board of directors of Standard Chartered Transnational Banking Corporation, a member of the board of directors of Twitter, and a senior adviser to Lazard Investment Bank.

• She worked in senior positions at the World Bank, IMF, the African Development Bank. At this time, he is a member of the advisory board of the Asian Infrastructure Investment Bank. She worked the longest at the World Bank - 25 years.

• In 2015, Ngozi Okonjo-Iweala served as chairman of the GAVI (Global Alliance for Vaccines and Immunization, or Global Alliance for Vaccines and Immunization), which was created in 2000 by billionaire Bill Gates.

2020: US "intends to take measures against WTO" because of a decision not in their favor

The United States intends to take action on the World Trade Organization (WTO). This statement was made in September 2020 by the president, USA Donald Trump commenting on the decision of the WTO arbitration group, which declared it illegal for Washington to increase duties on Chinese goods.

"We will have to do something with the WTO, since it allows China to go dry out of the water," the American leader said in an interview with reporters at the White House before traveling to Philadelphia (PA).

The WTO Arbitration Group recognized the increase in duties on Chinese goods by the United States in 2018 and 2019 as contrary to the rules of commerce. The arbitrators published their decision on Tuesday on the WTO website. It is specified that the "measures contested by [China] do not correspond" to a number of articles of the General Agreement on Tariffs and Trade of 1994.

In turn, according to the arbitrators, "the United States could not demonstrate that these measures are justified." In this regard, the Chinese side expressed the hope that Washington will comply with this WTO regulation. The Ministry of Commerce confirmed that the PRC "agrees with the objective and fair decision of the expert group."

2014

As it became known on December 12, 2014, the signing of an agreement to reduce and eliminate customs duties on IT products for countries participating in the World Trade Organization (WTO), including Russia, has been postponed. The stumbling block was the relationship between China and South Korea.

1995: Establishment of WTO on the basis of the General Agreement on Tariffs and Trade

WTO was founded on January 1, 1995 as a result of the Uruguay Round of negotiations held from 1986 to 1994, and on the basis of the General Agreement on Tariffs and Trade, concluded in 1947.