Congress weighs WTO-legal ways to punish Russia

Congress wants to punish Russia for invading Ukraine. In the past week, several bills have been introduced that would stop the U.S. from giving Russia the tariff rates it gets as a member of the World Trade Organization (WTO), and possibly even suspend or throw it out of the institution. To enhance the credibility of these bills, the U.S. should wean itself from imports of Russian oil and gas.

Reps. Earl Blumenauer (D-Ore.) and Lloyd Doggett (D-Texas) started things off with the “No Most Favored Nation Trading with Russia Act.” The bill sets out two goals: deprive Russia of the same tariff treatment the U.S. gives other members of the WTO, and “use the voice, vote, and influence” of the U.S. to oust Russia from the institution. The latter would be no easy feat. The WTO doesn’t have a ready-made mechanism to do this. Jim Bacchus has sketched an interesting way forward, but it hinges on two improbable votes, the first one redoing the WTO in a way that Russia would reject, and the second one in favor of purging Russia for rejecting it. 

Sen. Ron Wyden (D-Ore.) followed up with a bill that is also called the “No Most Favored Nation Trading with Russia Act.” It would subject Russia to the non-most-favored nation (MFN) tariffs it faced before it joined the WTO in 2012. It would also encourage U.S. allies to follow suit. But it drops any mention of a “vote,” as per the Blumenauer-Doggett bill, instead leaving it to the U.S.’s “voice and influence” to get Russia suspended from the WTO. 

Most recently, Sen. Rob Portman (R-Ohio) has introduced his “No Trading with Invaders Act.” This bill, like Wyden’s, hits Russia with higher non-MFN tariffs, but more generically targets “aggression in violation of international law against a WTO member.” The bill also lays out a path back to normalized trade relations.

Could Russia legally challenge these non-MFN tariffs at the WTO? This is where things get especially interesting. There are typically three reactions to this question. First, the U.S. might not care if the tariffs are legal. Second, since the Appellate Body isn’t working, any verdict could be appealed into a legal void. Third, the U.S. won’t lose because it can use the WTO’s national security exception, and thus prevail even if the tariffs are found to be illegal. 

Because the bills are aimed at being WTO-legal, let’s discount the first, concede the second and focus on the third. The national security exception is not self-judging, as some commentators suggest, but the U.S. would undoubtedly clear the low bar set by Saudi Arabia — intellectual property rights. In this case, the withdrawal of Saudi diplomats convinced the WTO there was an emergency in international relations, even though armed conflict, or public disorder, didn’t hang in the balance.

This was the first step. The second was to show a “nexus” between Saudi’s trade measures and its national security. The WTO couldn’t see how keeping Qataris out of Saudi courts furthered the Kingdom’s national security. Likewise, the U.S. will have a hard time explaining why lower price imports from Russia, but not of oil and gas, pose a national security threat. 

The United Arab Emirates (UAE), originally sued by Qatar over the same trade embargo as Saudi Arabia, faced a similar problem. It, too, blocked commerce with Qatar to bolster its national security, but exempted liquified natural gas. The optics of this looked absurd. Had Qatar continued to prosecute this case, the UAE would have come up short on the nexus question, even though, like Saudi, it would have cleared the bar in establishing an emergency in international relations.

Trade sanctions are a fraught exercise. Domestic and international factors seldom line up. As Congress weighs WTO-legal ways to punish Russia for invading Ukraine, U.S. imports of Russian oil and gas are an unforced error that should be corrected.

Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Walsh School of Foreign Service at Georgetown University. Follow him on Twitter @marclbusch.