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The Dispute With an Eye to Moscow: Importance of Ukraine’s Complaint to WTO Against the Countries of Eurasian Union

Date of publication: 6 November 2018

Olena Omelchenko, Head of International Trade Practice

Oleksiy Gorbatyuk, Lawyer

Source: European Pravda

Last week, within the framework of the WTO dispute settlement procedure Ukraine lodged an enquiry for holding consultations with Armenia and Kyrgyzstan on their anti-dumping duties imposed onto the imports of certain types of steel pipes originating in Ukraine.

At first sight this news does not seem to be important – Ukrainian trade interests in Kyrgyzstan, much less in Armenia, are meager.

However, in reality, the Ukrainian complaint is directed against the restriction of exports to the entire customs territory of the Eurasian Economic Union (EAEU). And it means that the trade dispute is primarily aimed against the Russian Federation – and this this is why it is of importance.

Why WTO?

Antidumping measures regarding the imports of steel pipes from Ukraine have been applied by the Russian Federation since 2006, and already in 2011, when Customs Union was established, subject to the initiative of that same Russia, the validity of anti-dumping duties was extended onto the customs territory of other member countries – Belarus and Kazakhstan.

Prior to Russia’s accession to the WTO, Ukraine and the countries of the Customs Union had a valid Agreement about the regulation of supplies of certain types of steel pipes, which allowed to make deliveries free of anti-dumping duties. However, from the second half of 2013 the collection of anti-dumping duties in the amount from 18.09 to 19.9% was resumed depending on the type of the steel pipes – for the Interpipe group of companies, and 37.8% – for other Ukrainian companies.

Further to accession in 2015 to the Eurasian Economic Union of Armenia and Kyrgyzstan the anti-dumping duties were also extended to the territory of these countries.

In October 2016, the Interpipe Group initiated a repeated anti-dumping investigation regarding certain types of steel pipes originating from Ukraine due to the new circumstances. Further to the results of the investigation, the Department of the Internal Market of the Eurasian Economic Commission published a report in which it recommended the Collegium of the Eurasian Economic Commission to reduce the amount of anti-dumping duty to 9.98% -12.23%, depending on the type of the steel pipes.

However, as of today the Collegium of the Eurasian Economic Commission has not taken any decision and the Ukrainian producers are forced to supply the steel pipes subject to the increased anti-dumping duty which contradicts the Agreement on Implementation of Article VI of GATT 1994 (WTO anti-dumping agreement).

For a number of reasons, it is impossible to challenge the inaction of the Collegium of the Eurasian Economic Commission through the dispute settlement mechanism stipulated by the CIS Free Trade Agreement. Therefore, Ukraine has initiated consideration through the WTO dispute settlement body.

What does Ukraine challenge?

In its complaint Ukraine claims that in the course of the repeated anti-dumping investigation the EAEU violated several provisions of the General Agreement on Tariffs and Trade (GATT) of 1994 and of the Agreement on Implementation of Article VI of GATT 1994 (WTO Antidumping Agreement), namely: Articles 9.1 and 9.3 (the applicable duty rate exceeds the level necessary to eliminate the damage, and is larger than the dumping margin), Articles 11.1 and 11.2 (the applicable duty rate is valid longer than necessary for counteracting dumping), Article 11.4 (repeated review lasts more than 12 months) and Article 12.2.2 (EAEU did not publish its decision), which is more than sufficient reason to initiate a dispute within the WTO.

Ukraine also claims that “the current effective anti-dumping duties are higher than necessary, wrongful and are based on the insufficient decisions, procedures and provisions related to the Agreement on Implementation of Article VI of GATT 1994”.

It should be noted that Armenia and Kyrgyzstan are not the only countries of the EAEU concerning which Ukraine has initiated a dispute over this matter. As far back as in 2017, Ukraine sought consultations with Kazakhstan after which it expanded the subject matter of its claims. Thus, in this case, Ukraine initiated a dispute with three out of five EAEU countries. Belarus and Russia remained unengaged. In the future, Russia may join the requested consultations as a third party or, theoretically, Ukraine may initiate a separate dispute against Russia.

Belarus is not a WTO member, so the only way to find support for its representatives in the EAEU Collegium is to enter into the negotiation process with it. It is possible to create a working group on a bilateral level to clear the anti-dumping restrictions, announced by President Poroshenko during the recent Regional Forum held in Gomel.

What is to be expected?

Active steps of Ukraine within the WTO framework may accelerate the decision-making process by the EAEU Collegium subject to the results of the repeated anti-dumping review and result in reduction of the anti-dumping duty. However, it should be admitted: options when the Eurasian Union will voluntarily make concessions to Kyiv are scarce.

A more realistic scenario is that the parties will not be able to resolve the differences, and Ukraine will have the opportunity to file a request for setting up an expert group to consider the dispute in the WTO. This path is longer – for several years. Moreover, even if Ukraine wins this case in the WTO, the problem with the implementation of such a decision by the EAEU may arise. However, WTO mechanisms provide for the possibility of introducing compensatory restrictions by the injured party if the losing party refuses to comply with the outcome of the dispute. And contrary to the difficulties, this is still the most realistic way to make the Eurasian Commission play according to the rules.