Russia to be Catalyst for WTO Reform

Posted by Blogactiv Team on 22/01/13

By Abigail Hunter

Not even a year into membership and, already, the Russian Federation is illustrating how its accession will serve as the final nail in the coffin for the World Trade Organization (WTO) in its’ original role. Energy, agriculture, and compliance are longstanding, contentious issues between Russia and the European Union (EU) and now that both are members of the WTO, it appears – after standing “eyeball to eyeball” at a two day December summit in Brussels [FT.com] – they intend to raise their quarrels to the new platform.

As the Russia, EU feud plays out at the WTO, a serious reassessment of the institution’s prerogatives will ensue. After which, the role of the WTO will be redefined more as a regulator and moderator for international trade than a body that works on opening borders and negotiating new commitments.

Dispute settlement to climb to the top of WTO priorities
Created in 1994 as an institution for facilitating the General Agreement on Tariffs and Trade (GATT), the WTO was intended to be a “forum for negotiating agreements aimed at reducing obstacles to international trade” [WTO Website]. But, with zero completed multinational trade agreements since its inception and no negotiations currently on-going for the Doha Development Round, the WTO is obviously failing in its intended primary function.

A secondary function, the Dispute Settlement Body (DSB), operated as an arm of the WTO with the sole purpose of adjudicating trade disagreements. Alternatively, the DSB has been extremely active, as bringing up formal charges against other nations for perceived violations has become hugely popular. Since its creation, the DSB has addressed four times more disputes than were heard under the GATT, in one third of the time [See chart]. Moreover, the activities of the DSB are basically the only noteworthy ones of the WTO in recent years.

All information from the WTO website.

The WTO’s floundering attempt to stay relevant as a negotiating platform will be ended by the advent of a new series of long, exhaustive tit-for-tat cases between Russia and the EU over everything from pigs and cars to transit of gas [Radio Free Europe]. The lack of resources alone will make it impossible for the WTO to continue to prioritize negotiations while trying to meet the growing needs at the DSB. Thus, the WTO will be forced to reassess its prerogatives because of the additional strain Russia’s membership will place on the DSB.

Energy, traditional and nontraditional, to be put on the table
Additionally, as the heart of the conflict between the EU and Russia is over natural gas, the WTO will be forced to address the role of energy in the trade system and establish that which the GATT did not: specific rules designed for trade in energy.

With Russia’s accession, every major energy producer and consumer is now a member of the WTO. Coupled with skyrocketing energy prices and political policies encouraging alternative sources, conflicts between members over energy sourcing have already begun to arise. Five cases regarding energy have already surfaced at the DSB in the past three years but the addition of Russia – with its monopolistic gas agency, Gazprom, and tripartite conflict with its WTO neighbors, the EU and Ukraine – will cause energy to be laid directly on the table.

Russia’s controversial trade practices for natural gas, the popularity of filing disputes, the larger scope of WTO memberstates, and growing sensitivity over energy will, together, motivate the passage of new regulations specifically designed for energy issues. These new rules will define how to govern cross-border trade in energy – both traditional and nontraditional, a feat that will expand the WTO’s sphere of influence as a global regulator.

The need for reassessment and new regulation is well timed, for it will fall under the auspices of a new Director General (DG) at the WTO who is not overly attached to a Doha Round success. The new DG will have the opportunity to restructure the institution’s priorities and allocate resources to better meet the demands of its memberstates and the modern trade climate. By doing so, the WTO will transition from a house for building global trade to an international body for regulation and mediation of trade disputes and Russia will have been the catalyst.

Abigail Hunter is an Alfa Fellow in Moscow, Russia, studying the impact of WTO accession on energy services trade. As a trade and development specialist, she have completed contracts at the WTO, UNEP Economics and Trade Branch, and the International Centre for Trade and Sustainable Development (ICTSD). She has a BA in Political Science from the University of Rochester, NY, and a MSc in International Trade from the International University in Geneva, Switzerland.

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