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Brussels paves way to slap trade tariffs on Russia

EU countries on Friday began a process that could impose higher tariffs on Russian goods, ramping up the economic pressure on Moscow after its invasion of Ukraine.

Three EU diplomats said representatives of the member countries gave the green light to lift Russia’s privileges at the World Trade Organization.

Ukraine had asked WTO members on Thursday to remove Russia’s trade benefits and even consider kicking the country out of the WTO.

The WTO is founded upon the General Agreement on Tariffs and Trade (GATT), under which member countries impose baseline duties that are the same for everyone. This concept of equality is called the “most-favored-nation” treatment. Countries may suspend the most-favored-nation clause without being sued at the WTO’s international trade court if they appeal to the exemption of “essential security interests” in the GATT.

Europe’s decision to do so paves the way for Brussels to hit Russia’s exports of goods to the bloc, worth €79 billion in 2020, with either an import ban or steep tariffs, adding to Russia’s financial pain after several sanctions already imposed by the EU and other leading economies.  

The EU is Russia’s biggest trading partner, accounting for 37 percent of the country’s total trade in goods in 2020. 

A European Commission spokesperson confirmed broad support within the Council’s trade policy committee “would justify the non-application of the most-favored-nation vis-à-vis Russia.”

“There was strong support to work with like-minded countries on a joint statement and a willingness to take appropriate trade measures as an action,” the spokesperson added.

Brussels is set to make a political statement, probably later Friday, and is also coordinating with Washington. The U.S. is still considering the move internally, according to a spokesperson of the U.S. Trade Representative. 

This does not mean, however, that Russia will face the new duties overnight. The EU’s announcement follows a similar move by Canada, which was the first country to unilaterally ban Russia and Belarus from the most-favored-nation treatment on Thursday. Canada is now slapping a 35 percent blanket duty on all Russian and Belarusian imports.

In contrast to Canada however, Brussels doesn’t have an alternative tariff system to fall back on. Therefore, if the EU were to remove Russia from its preferential treatment at the WTO, this wouldn’t immediately trigger higher tariffs.

The EU is now considering options such as import bans or alternative tariffs on certain Russian goods. These would be part of an upcoming sanction package rather than a new trade law. Now that EU countries have given the political nod, the Commission will start drafting the legal texts.

Two of the diplomats warned Friday’s meeting was not a formal green light, as EU countries’ final approval still depends on what specific measures will be taken. “Politically there is more or less a green light, but there are still a lot of technical and practical questions,” said one.

Leonie Kijewski and Doug Palmer contributed reporting.

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