The European Union has officially granted Russia market economy status and simultaneously enacted amendments that could negate some of the benefits.
Recognition has been looming since May, when European Commission President Romano Prodi kicked off the EU-Russia summit in Moscow with a surprise promise to grant Russia market status. The EU formalized the commission's Aug. 19 approval of relevant trade law amendments. The new rules apply to all anti-dumping and anti-subsidy cases initiated after Nov. 8, 2002.
The key amendment to the anti-dumping law struck Russia from the list of countries with nonmarket economy status Thursday.
But at the same time, the commission introduced a number of changes to anti-dumping and anti-subsidy legislation, which some say could counteract the main benefit of market status, namely the use of exporters' own costs and prices -- rather than proxy costs and prices from a third country -- in dumping cases.
The Russian government has estimated that anti-dumping cases cost producers about $300 million per year. Eleven products from Russia are subject to anti-dumping measures. Four cases, affecting about 50 million euros ($50 million) worth of goods, were filed this year, three of them since Prodi made his promise in May.
"It's very likely that whatever the commission gives as a political gesture, it might take back on the technical side," said Richard Luff, a lawyer with the Brussels office of Van Bael & Bellis, which represents a number of Russian companies in anti-dumping cases.
In particular, the amendment to the anti-dumping law allows the commission to use information from another producer in the same country, or even a third country, if it decides a company does not reasonably reflect its production and sales cost in its records.
It also allows the commission to increase the cost of production of an exporting company by "a reasonable amount" under a "particular market situation" such as "when prices are artificially low or when there is significant barter trade, or when there are noncommercial processing arrangements."
The amendment to the anti-subsidy law also gives the commission the right to adjust costs and prices for goods or services if it decides the country has no benchmark prices, either by an "appropriate amount that reflects normal market terms and conditions" or based on information from a third country.
"In cases where the costs of imported goods are artificially low, we retain the right to compare prices with producer prices in other markets," Interfax quoted Fritz-Harald Wenig, head of the European Commission's Trade Defense Directorate, as saying.
Russia remains worried that the commission will take Russia's low energy prices as grounds for applying the amendments to exporters.
"The big advantage of the new status is that the onus of proof will no longer be on the side of the exporter," Luff said. "It will be on the commission, which has to demonstrate that certain exporters do not meet market standards."
However, Luff said that in practice he expects little to change for Russia after gaining market economy status. "It really gives the commission the possibility to disregard production costs," Luff said.
The commission has been quick to justify the changes as merely formalizing existing practices, not as steps to emasculate Russia's market status.
A number of companies hope market economy status will allow them to challenge the anti-dumping sanctions against them.
Eurochim, a chemical holding within MDM-Group, plans to request a reappraisal of the measures limiting exports of mineral fertilizers from Russia. Eurochim is affected by three anti-dumping cases brought by EU companies.
"We hope it will help us return to the European market," said Eurochim president Nikolai Levitsky, praising the decision to give Russia market status.
"The amendments are open to interpretation. If they compare us to other companies in Russia, that's fair," Levitsky said. "But if they use the amendments to compare us to other countries, that's not appropriate. We are rich in gas and other natural resources. That's Russia's advantage."
"It's a question of practice," he added.
The next EU-Russia summit gets under way in Brussels on Monday.
Recognition has been looming since May, when European Commission President Romano Prodi kicked off the EU-Russia summit in Moscow with a surprise promise to grant Russia market status. The EU formalized the commission's Aug. 19 approval of relevant trade law amendments. The new rules apply to all anti-dumping and anti-subsidy cases initiated after Nov. 8, 2002.
The key amendment to the anti-dumping law struck Russia from the list of countries with nonmarket economy status Thursday.
But at the same time, the commission introduced a number of changes to anti-dumping and anti-subsidy legislation, which some say could counteract the main benefit of market status, namely the use of exporters' own costs and prices -- rather than proxy costs and prices from a third country -- in dumping cases.
The Russian government has estimated that anti-dumping cases cost producers about $300 million per year. Eleven products from Russia are subject to anti-dumping measures. Four cases, affecting about 50 million euros ($50 million) worth of goods, were filed this year, three of them since Prodi made his promise in May.
"It's very likely that whatever the commission gives as a political gesture, it might take back on the technical side," said Richard Luff, a lawyer with the Brussels office of Van Bael & Bellis, which represents a number of Russian companies in anti-dumping cases.
In particular, the amendment to the anti-dumping law allows the commission to use information from another producer in the same country, or even a third country, if it decides a company does not reasonably reflect its production and sales cost in its records.
It also allows the commission to increase the cost of production of an exporting company by "a reasonable amount" under a "particular market situation" such as "when prices are artificially low or when there is significant barter trade, or when there are noncommercial processing arrangements."
The amendment to the anti-subsidy law also gives the commission the right to adjust costs and prices for goods or services if it decides the country has no benchmark prices, either by an "appropriate amount that reflects normal market terms and conditions" or based on information from a third country.
"In cases where the costs of imported goods are artificially low, we retain the right to compare prices with producer prices in other markets," Interfax quoted Fritz-Harald Wenig, head of the European Commission's Trade Defense Directorate, as saying.
Russia remains worried that the commission will take Russia's low energy prices as grounds for applying the amendments to exporters.
"The big advantage of the new status is that the onus of proof will no longer be on the side of the exporter," Luff said. "It will be on the commission, which has to demonstrate that certain exporters do not meet market standards."
However, Luff said that in practice he expects little to change for Russia after gaining market economy status. "It really gives the commission the possibility to disregard production costs," Luff said.
The commission has been quick to justify the changes as merely formalizing existing practices, not as steps to emasculate Russia's market status.
A number of companies hope market economy status will allow them to challenge the anti-dumping sanctions against them.
Eurochim, a chemical holding within MDM-Group, plans to request a reappraisal of the measures limiting exports of mineral fertilizers from Russia. Eurochim is affected by three anti-dumping cases brought by EU companies.
"We hope it will help us return to the European market," said Eurochim president Nikolai Levitsky, praising the decision to give Russia market status.
"The amendments are open to interpretation. If they compare us to other companies in Russia, that's fair," Levitsky said. "But if they use the amendments to compare us to other countries, that's not appropriate. We are rich in gas and other natural resources. That's Russia's advantage."
"It's a question of practice," he added.
The next EU-Russia summit gets under way in Brussels on Monday.
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