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Lawrence Herman

Lawrence Herman

Lawrence Herman

That snap is Russia’s trade trap – biting the bear Add to ...

Lawrence L. Herman, principal at Herman and Associates, practices international trade law and is a senior fellow at the C.D. Howe Institute, Toronto.

The Russians responded to the West’s sanctions this week, with Prime Minister Dmitry Medvedev taking his marching orders from President Vladimir Putin and announcing an import ban on meat, fish, dairy products, fruit and vegetables from Western countries, including Canada.

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This is a tit-for-tat response to Western sanctions in what is an extremely high-stakes game of Russian roulette. But playing that game may hurt Russia the most. Western sanctions are already reported as having a serious negative economic impact on that country.

Russian countermeasures may cause discomfort to Canadian agri-food exporters, but will be much more painful for Russian consumers. The inefficient Russian agriculture sector is unable to meet local demand, making Russia highly dependent on food imports from the West. Russian consumers will feel the pain.

Mr. Putin weighed the internal risks and concluded that whatever domestic social unrest might result, Wednesday’s countermeasures were needed to show the West that Russia won’t be pushed around. Western countries may now be forced to ratchet up the pressure by adding to the current sanctions, leading to a cascading series of economic measures and countermeasures.

The political situation is extremely tense. It’s unclear where this crisis will head; the global consequences are impossible to calculate. Sanctions have placed serious strains on the international trading system.

This game of high-risk geopolitical diplomacy will only be resolved at the top political levels in Russia and the United States. We know that. The crisis won’t be settled in legal circles in New York or Geneva or elsewhere. That being said, there are international legal issues that need airing. It’s important to understand the extent to which Russia is offside on some of the most critical rules governing international trade relations.

At the highest level, Russian actions in Crimea and Ukraine contravene obligations under the UN Charter, disregarding universal rules of state sovereignty as enshrined in that instrument.

What makes it worse is that Russia’s betrayal of these rules violates the trust expected from a permanent member of the Security Council, entrusted with maintaining the integrity of international peace and security and the founding principles of the United Nations itself.

Together with disregarding Charter obligations, in applying retaliatory sanctions against the West, Russia is in violation of some of the most basic obligations under the World Trade Organization agreement. Sanctions are unilateral trade restrictions permitted under the WTO agreement as measures of last resort, their deployment encapsulated in the General Agreement on Tariffs and Trade (GATT), which itself is part of the WTO agreement. In this case, GATT Article XXI allows what are described as “security exceptions” to the general prohibitions against unilateral trade restrictions by WTO members.

Sanctions can be used in two situations. First, where a member considers such action “necessary for the protection of its essential security interests … taken in time of war or other emergency in international relations” and, secondly, where a WTO member employs sanctions pursuant to its obligations under the UN Charter.

It was Russian action that provoked the current crisis and resulted in the emergency situation in international relations that the WTO agreement speaks about. This allowed the West to legitimately resort to WTO-permitted sanctions, which the U.S., Canada and their allies have progressively widened as the crisis in Ukraine and Crimea continues.

Russia’s response to Western sanctions is a set of crude countermeasures, taken purely in retaliation and for no other reason. These countermeasures are not grounded in the WTO’s security exceptions but are a self-generated tactical response to Western measures that Russia itself brought about, since it was Russian disregard of the UN Charter that initiated the crisis in the first place.

In this tense game of Russian roulette, Russia is the rogue state, betraying itself as dismissive of its legal obligations under two of the most fundamental instruments governing international relations.

The Ukraine crisis will only be settled – if at all – through intense international diplomacy at the highest level. As in many of these situations, legal debate is far less important than politics. Yet in grappling with the geopolitical issues, it is helpful to understand who’s on the wrong side of the law.

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