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Russia’s invasion of Ukraine turns WTO meeting on its head

by WOOWinvest
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Russia's invasion of Ukraine turns WTO meeting on its head

On February 23, World Trade Organization (WTO) members agreed to reschedule a key meeting, the 12th Ministerial Conference (MC12), which was postponed due to COVID-19. The next day, Russia invaded Ukraine.

Before the invasion, MC12, now scheduled for the week of June 13, aims to focus on how the WTO remains relevant. After the invasion, MC12 has the potential to turn into a debate about whether the WTO is merely an obstacle to trade. Not only with Russia in wartime, but with a wider range of adversaries.

The meeting aims to achieve some victories, for example in fisheries and trade facilitation. Now, trade officials will discuss the benefits of revoking Russia’s most-favored-nation (MFN) status and whether to suspend or even expel Russia from the WTO.

Canada was the first country to revoke Russia’s MFN status on March 3. This means that Canada will not give Russian imports the same tariff treatment as imports from other member states. The United States and Europe have also vowed to do the same, adding targeted import and export bans. Other countries will surely follow.

The MC12 talk will not stop at revoking Russia’s MFN status. There have been widespread calls for a moratorium or even expulsion from Russia. These threats are not credible, which means the WTO will come under political pressure for having no mechanism to expel Russia. Critics will say this is yet another institutional flaw. Proponents will insist that, like other international institutions, the WTO is designed to expand, not contract. In the court of public opinion, critics win.

The biggest risk is that the snowball goes beyond punishing Russia. As Rufus Yerxa and Wendy Cutler explain, “Similar action against China is not unthinkable.” Not because of the war, mind you, but because of China’s state-led economy, poor human rights record, and bullying against Lithuania. They warn that “market-oriented democracies” may choose to go it alone, with or without the help of the WTO.

The WTO is not meant to separate friends from enemies. That’s why it sets out the national security exception used during “emergencies” in international relations.

There is a long-standing debate about whether trade follows the flag, or whether the flag follows trade. The authors of the General Agreement on Tariffs and Trade (GATT), the predecessor of the WTO, bet that flags follow trade. Russia’s invasion of Ukraine proved otherwise. Friends trade more than foes, but even during the Cold War, the United States imported key materials from the Soviet Union, just as it imports most rare earths from China today.

To be clear, the United States and its allies can and should punish Russia. It is important to do so in WTO legal fashion, just as it is important to provide a clear path for Russia to withdraw MFN status when it withdraws from Ukraine.

The MC12 needs to achieve the victory it is aiming for before Russia invades Ukraine. If trade officials focus only on how to make it easier for the WTO to block trade rather than create it, the meeting will fail. Russia should be sanctioned for its gross violation of Ukraine’s sovereignty. But it would be wrong to conclude from this tragedy that trade can only take place between friends, not enemies, and only in good times and not in adversity.

Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at Georgetown University’s Walsh School of Diplomacy. Follow him on Twitter @marclbusch.

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