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Russia Continues to Move Away from WTO Principles, USTR Report Finds

Wednesday, December 28, 2016
Sandler, Travis & Rosenberg Trade Report

Russia acted as a responsible member of the World Trade Organization community in some areas in 2016, but overall its actions continued to depart from the core WTO tenets of liberal trade, transparency, and predictability in favor of measures that appear intended to build walls around its market. That is the Office of the U.S. Trade Representative’s conclusion in its annual combined report on Russia’s compliance with its WTO commitments and WTO enforcement actions against Russia.

Highlights of the 2016 report’s findings include the following.

Tariffs. Russia implemented its tariff reductions in accordance with its WTO accession protocol commitments (e.g., by reducing tariffs on certain industrial products (civil aircraft, chemicals, textiles, wood products, etc.) and agricultural products (milk, tea, sugars and sweeteners, alcoholic beverages, fruit juices, etc.)) and has now implemented final bound rates for approximately 90 percent of its tariff lines.

Non-Tariff Measures. Russia’s application of non-tariff measures (e.g., opaque customs regulations on import valuation, burdensome import licensing requirements, and the rules governing imports of alcoholic products) has often undermined benefits expected from the application of lower tariffs, although in late 2016 a safeguard measure on combine harvesters was allowed to expire on schedule.

Exports. Russia maintains a list of products “of utmost importance for the domestic market” that could be subjected to export restrictions or prohibitions.

Agricultural Goods. In some cases, Russia does not appear to have based its sanitary and phytosanitary measures on international standards or provided a science-based, objective risk assessment in those cases where it applied a more stringent standard. Russia has also delayed approval of establishments, failed to remove veterinary control measures on certain products, and disrupted or prohibited the import and transshipment of a variety of U.S. agricultural products without justification. Further, Russia has imposed a general ban on imports of most agricultural products from the U.S.

Industrial Policies. Russia is increasingly imposing domestic content requirements on purchases by state-owned and state-controlled enterprises as well as preference programs for government purchases of domestically-produced products such as automobiles, satellite navigation systems, software, medical devices, and pharmaceutical goods. Many of these preferences initially applied only to government procurement, but in 2016 Russia began to extend its domestic purchasing requirements to state-owned enterprises outside of the procurement context.

Services. Russia appears to be complying with its services commitments for the most part, but protectionist tendencies continue to arise. For example, Russia’s data localization law appears to require that companies store the personal data of Russian citizens on servers within Russia. The law is opaque and vague in many respects but may implicate certain commitments on cross-border trade in services.

IPR. Although Russia made significant improvements in its intellectual property rights regime as it negotiated to accede to the WTO, that momentum has been lost. For example, Russia amended certain IPR-related legislation but then failed to issue final regulations necessary to implement the law. Russia has improved its enforcement efforts against online piracy but IPR enforcement in general continues to remain a significant problem and appears to have decreased recently.

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