Car levy causes Russia's first WTO dispute

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Car levy causes Russia's first WTO dispute

Car levy causes Russia's first WTO dispute
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The European Union has launched the first formal trade dispute with Russia at the World Trade Organisation.

The EU has accused Russia of illegally protecting its carmakers by levying a “recycling fee” on imported vehicles.

The dispute comes less than a year after Moscow joined the trade group, and after Brussels said it had given up trying to use diplomatic means to get Moscow to scrap the law.

“The European Commission has pursued every diplomatic channel for almost one year now to find a solution with our Russian partners on this matter but to no avail. The fee is incompatible with the WTO’s most basic rule prohibiting discrimination against and among imports,” EU Trade Commissioner Karel De Gucht said in a statement.

Currently when a car is importing into Russia a fee has to be paid at the time to cover the future cost of recycling it – a form of green tax.

Vehicles that are made in Russia are however not subject to the same charge.

The EU complained that makes it an import tax, which by Moscow’s own estimates generates 1.3 billion euros in Russian government revenues.

If Moscow does not change the recycling levy or offer a satisfactory explanation to the WTO it could face an adjudication leading to trade sanctions.

For Russia, joining the WTO brought with it the cost of signing up to tough standards. That was offset by the benefits of gaining access to a globally regulated market with guarantees against protectionism.

But Russia’s critics say it has never made good on its obligations.

Outside of Europe, other WTO members are also suspicious of Russia’s commitment.

Last month the US Congress told the US Trade Representative to report back within six months on Moscow’s WTO compliance and to keep reporting back annually. USTR said it would “use all appropriate tools,” ranging from diplomacy to litigation at the WTO.

Japan, the United States and the EU were set to jointly air concerns about Russia at a WTO meeting on Thursday.

Russia has warned the European Union in the past that it has its own concerns with EU policies, including restrictions on Gazprom’s control of its European gas pipeline assets.