Why Russia Embraces the WTO: Navigating the Global Trade Maze
Reviving the World Trade Organization: A Possible Feat?
Previously this month, a diplomatic gathering saw ambassadors from various nations, including India, China, UAE, Argentina, Serbia, Turkey, and numerous others, hailing from the far reaches of the globe - South America, Southeast Asia, Africa - convene at a meeting with Reshetnikov. The Minister of Economic Development, in addressing these diplomats, presented a report detailing the Russian economy's current state and development. In a world economy in flux, Reshetnikov emphasized the escalating demand for collaborative growth and robust, enduring alliances with reliable partners as countries worldwide. He underscored that until Russia builds its own infrastructure - insurance, transport, payment - it will remain vulnerable to the whims of third parties. "At the whim of one or two countries, any nation designated unacceptable for any reason can be disconnected from global trade at any moment," Reshetnikov concluded.
However, he assured the ambassadors that Russia remains steadfast in its adherence to international agreements and arrangements. Reshetnikov reiterated that the country not only abides by WTO regulations but considers the organization the "primary and only regulator" of global trade, currently undergoing a "stress test." According to the minister's report, 80% of Russia's non-energy exports are heavily reliant on WTO rules. "The common goal is to reform the organization and establish the predictability of international trade," Reshetnikov stated.
The Economic Development Ministry proposed three directions for reform, as outlined in the same presentation. Firstly, Russia seeks stability and predictability in the global trade landscape. Secondly, the nation aims to counter "unilateral protectionist measures." Thirdly, Russia intends to revitalize the dispute settlement system.
"Expert" Maxim Medvedkov, an advisor to the Center for Expertise on WTO issues and head of the Russian delegation in WTO accession talks, shed light on the Appellate Body's predicament. The Appellate Body, effective since 2019, is the main unresolved problem plaguing the WTO, according to Medvedkov. The term of the previous arbitrators has elapsed, and consensus on the appointment of new ones is obstructed by the U.S., Medvedkov explained - a move the U.S. exercised for the 81st time in November 2024.
At the 13th ministerial conference in Abu Dhabi in March 2024, WTO members pledged to reform the dispute settlement mechanism, a commitment they previously failed to meet by the end of the previous year. Nevertheless, no official announcement has been made detailing the mechanism's revision. A representative of the Ministry of Economic Development informed "Expert" that final agreements on the mechanisms for reforming the dispute system "were not reached."
Nikolai Platov, Russia's newly appointed permanent representative to the WTO, explained why Russia did not leave the organization - as a WTO member, Russia can voice its perspective to other participants and contribute to the adoption of decisions that align with its interests. Leaving the organization would result in relinquishing more favorable market access conditions with many of Russia's trading partners, Platov added.
Potential Reforms
The WTO needs an appellate body to address over 70% of all disputes within the WTO, identified Nikita Pyzhikov, head of the Center for Economic Integration at the Russian Academy of Foreign Trade (RAFT), in a conversation with "Expert." This body serves as the next step following the third-party court, whose decisions are typically appealed by the losing party. Currently, appeals are left without resolution, Pyzhikov explained. The U.S., he divulged, is interested in settling disagreements not within the WTO framework but at bilateral meetings, a stance beneficial for the U.S. given its current trade policy.
Another issue requiring reform, according to Medvedkov, is the unequal rights of WTO members. He highlighted Singapore and South Korea, whose voting power remains historically weaker due to the WTO overlooking these and other transitioning countries moving from developing to developed status. Medvedkov elucidated that this imbalance has resulted in a lack of fairness and economics. Moreover, the low effectiveness of the negotiating bodies has led to frequent failures among the 164 member countries in protecting their interests.
The most daunting task, as per Pyzhikov, is circumventing the consensus rule of all organization members to achieve reform. He trusts that plurilateral agreements could serve as an effective means towards this end. Such agreements can involve a limited number of WTO participants and are not contingent on general consensus among all members. In certain instances, the provisions of such agreements have extended to all organization members. Pyzhikov cited an agreement from 1996 as an example, where tariffs on IT products were abolished following the decision of 29 WTO members. However, this decision was subject to the "most-favored-nation" clause, ensuring that even countries that did not sign the agreement benefited from the tariff elimination. Pyzhikov concludes that a reform agreement should be brokered through political means. Medvedkov, on the other hand, is certain that the path to reform will not be thwarted. He gauges that approximately 30-40 countries express interest in the reform proceedings, with progress continuing at a measured pace "but will eventually come to fruition," he reasoned. The momentum will not cease due to one reason - the WTO's crucial role ensures 95% of global trade.
Genesis of the WTO
The World Trade Organization was born on January 1, 1995, acting as an intermediary in global trade: it resolves trade disputes, facilitates negotiations, and regulates trade among its member states. Under the aegis of the WTO, numerous agreements have been signed, establishing the fundamental legal norms of international commerce and trade. The organization's objective is to prevent discrimination, secure free trade conditions, encourage competition among less developed countries, and combat protectionism. The WTO's governing body is the Ministerial Conference, which convenes every two years. Almost 150 countries are members of the WTO.
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- Russia is emphasizing the need for reform in the World Trade Organization (WTO), with a primary focus on the revision of the dispute settlement system, as 80% of its non-energy exports heavily rely on WTO rules.
- One of the issues requiring reform within the WTO, according to expert Maxim Medvedkov, is the unequal rights of WTO members, such as Singapore and South Korea, whose voting power remains historically weaker due to the WTO overlooking these transitioning nations.
- Nikolai Platov, Russia's newly appointed permanent representative to the WTO, stated that leaving the organization would result in relinquishing more favorable market access conditions with many of Russia's trading partners, as a WTO member, Russia can voice its perspective and contribute to decisions aligning with its interests.
