5th Jun 2023

WTO to decide on 'illegal' Russian car tax

  • The controversial car recycling tax has poured over €1 billion into the Kremlin's coffers (Photo: Dnevnik)

The World Trade Organisation (WTO) will decide later this month whether to set up an arbitration panel on what the EU has described as an "illegal measure" by Russia against the bloc's car industry.

Speaking with journalists in Brussels on Thursday (10 October), John Clancy, the commission's trade spokesman, said that the EU executive had "been left with no other choice but to pursue WTO arbitration" in response to a measure he described as "a clear discrimination against EU motor vehicle exports."

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The complaint, which centres on a controversial car recycling tax imposed by Moscow on foreign cars, is the first of its kind by the EU.

Russia's car recycling tax charges between €420 to €2,700 for new cars, or up to €17,200 for used cars, and is estimated to have generated €1.3 billion for the Kremlin's coffers since it was introduced in September 2012. The EU exports vehicles worth €10 billion per year, according to the commission.

For its part, the Japanese government lodged an identical complaint over the summer.

However, the tax does not apply to imports from Belarus and Kazakhstan, both of whom are members of the Russian-led eurasian Customs Union.

The WTO Dispute Settlement Body (DSB) will discuss the EU's request at its next meeting in Geneva on 22nd October.

The organisation's rulebook allows Russia to object to the panel but this would only delay the process by one month. The Swiss-based trade body has the power to force a change of policy from Moscow or to impose trade sanctions.

The EU executive had given Moscow 60 days to respond to a formal complaint filed in July, but revealed that attempts to broker a solution had broken down.

Clancy commented that the move reflected "a very clear determination by the Commission to follow through on issues that concern European businesses who are facing clear discrimination."

In a statement released earlier, trade commissioner Karel de Gucht said that the commission had "used all the possible avenues to find with Russia a mutually acceptable solution."

Although Russia joined the WTO last August, the country continues to attract criticism about its application of trade rules. Russia imposed the tax shortly after agreeing to remove similar tariff barriers as part of its successful bid to join the trade body.

The move comes amid increasingly frosty relations between Brussels and Moscow.

Last week, the EU's competition chief, Joaquin Almunia, revealed that the commission was preparing a list of formal anti-trust charges against Russian gas giant Gazprom.

The EU has also condemned Russian threats of economic sanctions against Ukraine if Kiev agrees to a trade deal with the EU over the Customs Union.

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