The multilateral conflicts of trade agreement among Ukraine, Russia and EU

In April 2014, the European Union try to take Russia to the World Trade Organization (WTO) to urge Russia to lift its ban on pork exports from EU pork exporters, notably from Denmark, the Netherlands and Germany.

pork

source: http://avoice4animals.blogspot.com/2010/07/rockstar-piglet-gets-lucky-brake-after.html

Russia, the biggest importer of pork from the bloc, halted purchases in January afterthe EU found African swine fever in four wild boars in Lithuania and Poland. Russia says it is concerned that African Swine Fever could spread from Lithuania to farmed pigs in Poland and across Eastern Europe, insisting that the entire EU territory should be quarantined until it can be deemed free from the disease.

“This is not a trade problem, it’s a security problem,” a Russian official said.

Lately an official in EU said that Russia has reacted disproportionately to an outbreak of African swine fever in Lithuania, a viral disease for which there is no vaccine and is deadly for pigs and harmless for humans.

Meanwhile, the EU officials mentioned that Russia intended to retaliate Ukraine by pushing Ukraine to sign a free-trade deal with the European Union, instead of joining a Russia’s customs union. Additionally, the EU blamed Russia on a string of restrictive trade practices, including policies to protect the Russian car industry.

In fact, in 2010 Russia launched the customs union, which Putin sees as a first step that would eventually include most of the post-Soviet Union countries

Economically, Russia’s customs union is not as appealing as the vast EU market. The combined gross domestic product of Russia, Belarus and Kazakhstan is only about one eighth as large as the EU’s GDP and Russia’s average per capita income is less than half that in the EU. But Russia is a major supplier of gas to Ukraine and a major purchaser of its grain.

One major obstacle to Ukraine’s joining Russia’s customs union is possibility of violation in the rules of WTO. Ukraine joined the WTO in 2008 and according to WTO its average bound tariff rate is 5.8 percent and actual applied rate is 4.5 percent. Russia joined the WTO in 2012 and its bound rate is 7.8 percent. If Ukraine joins the customs union, it will have to adopt the Russian tariff schedule, which will violate its WTO commitments. Ukraine might have to compensate trade partners hurt by the rise in tariffs or face retaliation.

Ukraine has been stuck in a dilemma between the EU and Russia. Entering the customs union would be incompatible with a potential EU free trade agreement. On the other side, Russia also says Ukraine cannot be a member of the customs union and have a free trade agreement with the EU. Nevertheless, Russia cannot try to intrude into Ukraine with any excuse.

Ukraine’s negotiations with the European Union for a free trade agreement, the Russian customs union, and the World Trade Organization all play key roles in the current Russian-Ukrainian conflict that has set the world’s nerves on edge. Each of them needs to play by global trade rules as a member of the World Trade Organization, collaborate with each other and create a peaceful world.

 

Reference:

http://online.wsj.com/news/articles/SB10001424052702304819004579489501828157092

http://en.wikipedia.org/wiki/2014_Crimean_crisis

 

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