Home > News > There are two ways to kick Russia out of the world trade system. One is more likely to work.
191 views 9 min 0 Comment

There are two ways to kick Russia out of the world trade system. One is more likely to work.

Would WTO members change the rules?

- March 11, 2022

Ukrainian President Volodymyr Zelensky wants the world to boycott Russian goods. And he’s asked that countries suspend Russia’s participation in the World Trade Organization (WTO), which would make it far more difficult for Russian goods and services to compete in the global marketplace.

Russia has responded to Ukraine’s call for its ouster by arguing that WTO members “should refrain from discussing in the WTO … issues and events, which are out of the scope of the WTO,” and arguing that WTO rules do not permit its suspension.

This may become the newest front in the world’s unprecedented economic response to Russia’s invasion of Ukraine. There are precedents, though not within the WTO. Mercosur, the South American trading bloc, suspended Paraguay in 2012 and Venezuela in 2017 — in both cases over failure to maintain democratic order.

The U.S. House of Representatives is exploring legislation that would “take the first step to deny Russia access to the World Trade Organization.” But would such a maneuver be legal under WTO rules? It’s hard to formally expel Russia — but individual WTO members could probably break off preferential trade relations.

Ukraine wants a fast pass to E.U. membership. It’s not that easy.

WTO members could change the rules. They probably won’t.

The WTO Agreements don’t include a provision explicitly authorizing expulsion, nor do they establish criteria, such as maintaining democratic order, that might provide grounds for suspension. There is, though, a complex process that might be used to expel Russia from the WTO, according to James Bacchus, a former member of the WTO’s Appellate Body.

Article X of the WTO Agreements allows WTO members to adopt amendments that “alter the rights and obligations” of members if they are accepted by two-thirds of the WTO membership (and meet certain other criteria). Initially, these changes apply only to countries that accept them. However, by a three-fourths vote, WTO members can set a time frame for holdout members to accept the amendment, withdraw from the WTO or get the other members’ permission to remain.

Withholding that permission from a member that refused to accept an amendment would have the same result as expelling that member. This procedure could be used to expel Russia directly — or to establish specific conditions, such as the invasion of another WTO member, under which a member could be expelled or suspended.

While theoretically possible, this is unlikely to succeed. To be sure, 141 members of the United Nations voted to condemn the invasion. If that many countries in the 164-member global trading framework voted to expel Russia, it would amount to 86 percent — easily clearing both the two-thirds and three-quarters voting thresholds.

But it is unlikely that so many countries would vote to change the rules. Why? Doing so would establish a precedent that a supermajority of the WTO membership can penalize members for policy decisions they dislike, outside of the WTO’s usual dispute settlement process.

Banning Russia from SWIFT is a big deal. But the real pain comes from sanctions.

Fears like this explain why WTO members generally make decisions by consensus. Consensus decision-making means that even one objection — say, from Russia — would stop the amendment from passing. WTO members are so reluctant to break consensus that they have thus far refused to employ similar novel voting procedures to undo the deadlock on appointments to the WTO’s Appellate Body. U.S. policymakers would be especially likely to be opposed. Political scientists have argued that consensus requirements allow powerful countries to ensure they are not outvoted in international organizations.

WTO members could act on their own

Even if WTO members do not act collectively to suspend or expel Russia, they can act individually to effectively remove Russia’s WTO privileges. Indeed, Ukraine and Canada have already done so. Canada has imposed a 35 percent tariff on all Russian imports. President Biden has now prohibited the import of Russian oil and energy products, and members of Congress have suggested repealing normal trading relations with Russia. The European Union is considering similar measures.

In fact, such actions are allowed under the national security exceptions in the WTO Agreements. The General Agreement on Tariffs and Trade (GATT) — the main WTO agreement governing trade in goods — allows measures that a WTO member “considers necessary for the protection of its essential security interests . . . taken in time of war or other emergency in international relations.”

Similar exceptions appear in both the WTO’s agreement on trade in services (GATS) and its agreement on intellectual property (TRIPS). WTO dispute panels recently interpreted these provisions for the first time in two disputes — one between Russia and Ukraine arising from Russia’s 2014 invasion of Crimea and a separate case related to Saudi Arabia’s 2017 economic blockade of Qatar.

Check out all TMC’s analysis of the Russia-Ukraine crisis in our new topic guide: Russia and its neighbors

WTO adjudicators did require the countries invoking the exception to provide objective evidence that an emergency exists, explain how the emergency affects their essential security interests, and demonstrate that the measures they imposed plausibly related to the protection of those interests. Russia’s 2022 invasion of Ukraine easily meets this test — it’s a war, not a “special military operation,” as the Russian president claims. And WTO members invoking the exception do not need to be participants in the war.

Furthermore, the situation in Ukraine is sparking further emergencies in international relations. Russia’s violation of U.N. rules on the use of force except in self-defense and its use of force against its neighbors over the past 15 years provoke legitimate worries about whether Russia might invade other countries in Eastern Europe. Russia has also set its nuclear forces on alert. Because past conflicts in Eastern Europe sparked both World Wars, it is reasonable for other countries to worry that the spread of this conflict might undermine their security — and result in a staggering humanitarian crisis across Europe.

However the WTO reacts, the usual assumptions about global trade don’t work anymore. The modern WTO came into being in the 1990s, when many people thought that open trade would lead to open societies. It’s hard to make that case today. Over time, economic relations between nations are likely to depend much more directly on shared values than in the past, perhaps transforming the multilateral trading system into a patchwork of more deeply integrated regional blocs (like in North America) and transatlantic and Indo-Pacific clubs.

Don’t miss any of TMC’s smart analysis! Sign up for our newsletter.

Timothy Meyer (@Tim_L_Meyer) is a professor of law and the director of international legal studies at Vanderbilt University Law School.

Todd N. Tucker (@toddntucker) is the director of industrial policy and trade at the Roosevelt Institute.