Brussels, 15/06/2015 (Agence Europe) - On Thursday 11 June, during a meeting of the WTO committee on balance of payments restrictions, Russia urged Ukraine to abandon the 5% surcharge on imports of industrial products and 10% surcharge on imports of agricultural products, which Ukraine has been imposing since 25 February to address the exceptional conditions affecting the its balance of payments.
The exceptionally-imposed surcharge to restore Ukraine's balance of payments was the subject of a second session of consultations with WTO member countries at a meeting of the relevant committee on 11 June - after the first session of consultations held on 28 April (see EUROPE 11306). Last week, WTO member countries did not manage to reach consensus on the issue, as Russia insisted that it could not accept this measure.
Six WTO members - Canada, Indonesia, Japan, Turkey, the US and EU - said that the Ukrainian measure could be justified by Ukraine's balance of payments situation (as provided for by the 1994 GATT arrangements on the balance of payments), on condition that Kiev puts an end to this surcharge as soon as the situation has improved - and by the end of this year at the latest. These six WTO members congratulated Ukraine on its economic reforms as part of the four-year $17.5 billion extended credit mechanism programme approved by the IMF governments in March 2015.
By contrast, Russia believed that Ukraine had failed to answer its questions in a full and comprehensive manner (especially on its plan to relax the measure) and that several factors, including the devaluation of the Ukrainian currency, have already improved Ukraine's balance of payments situation considerably. Russia added that these measures should not be taken to protect a particular industry and that trade restrictive measures should only be used as a last resort. Russia urged Ukraine to withdraw its surcharge, saying it doubted that the surcharge would have the desired effect. Russia also asked the committee to endorse its position and added that a 32% decline has been observed in Russia's exports to Ukraine.
Ukraine provided additional clarification on its economic and balance of payments situation, including answers to WTO member countries' questions on the economic justification for the measure and the criteria used to determine the two different tariff surcharges; on how the measure is helping to restore Ukraine's balance of payments situation; and on the criteria used to determine early removal of the measure. Ukraine said it envisages ending the measure as soon as the level of reserves exceeds the targets set under the IMF loan, in particular the international reserves level of nearly $18.3 billion, and in any case by the end of 2015.
During the meeting, an IMF representative gave an update on Ukraine's economic situation since April, mentioning tentative signs of stabilisation and the reduction of the bank reserves drain, and a reduction of the inflation rate to 81.5%. The representative also said the IMF programme was on the right track.
The WTO committee on balance of payments restrictions is due to adopt a report on this issue on Friday 19 June. The report will be assessed by the General Council on 27-28 July. The General Council could make recommendations. (Emmanuel Hagry)