Maxim Medvedkov on Trends in Global Regulation of International Trade

On the evening of February 7, honored guest of the Institute was the head of the Department of Trade Policy at the Higher School of Economics National Research University, Maxim Yurievich Medvedkov, who until recently headed the Department of Trade Negotiations of the Ministry of Economic Development of Russia, and did so for many years. Our speaker outlined the topic of his speech as “New Trends in the Global Regulation of International Trade”. The meeting was moderated by Kirill Molodyko, Leading Researcher at the HSE-Skolkovo Institute for Law and Development, Associate Professor of the Law Department of the Higher School of Economics.

In the first part of his speech, our guest paid attention to the trade agreement between the USA and China, according to which Washington should stabilize some duties for goods from China, in response to this, Beijing will increase purchases of American goods and services in the upcoming years. The agreement entails China's obligations in the field of veterinary and phytosanitary regulation, as Beijing agreed that certain types of American products will be delivered based on certificates issued by the relevant US services. In practice, this means that China has agreed to recognize the equivalence of the US control system for certain types of products. This can potentially lead to negative consequences for other market participants (Russia, in particular) since it can mean a drift of the country's actual requirements for control systems in the direction of American standards, the ideology of which is very different in terms of comparison to the Russian one. China's consent to increase US imports of specific goods by an agreement-defined amount essentially discriminates against all other exporters of goods to China. According to Maxim Medvedkov, a solution to the problem is theoretically possible via the WTO. However, the time limit for resolving such a dispute would in practice exceed the two-year term of the US-China agreement. On the other hand, the present tension in relations between the USA and China may lead to non-fulfillment of the terms of the agreement by the parties. In any case, the agreement between the United States and China poses problems for the WTO and its member countries.

Answering the question about the possibility of creating effective international antitrust regulation outside the WTO, the speaker noted the following; rumors of the demise of the WTO are greatly exaggerated. In the future, global antitrust regulation is necessary, and only the WTO is able to lead the process of creating this regulation. In this aspect, much has already been done in the WTO - provisions of the WTO agreements regarding dumping, subsidies, export competition, the activities of state enterprises and monopolies, and many other matters are directly related to the rules of competition. Negotiations are underway on investments, negotiations on electronic commerce have begun. A good example is also the decision on the “Third Energy Package” of the EU. It, in essence, sets the rules of the game on the energy market and is key for our country, since Russia fought to provide the same amount of rights for market operators working with Russian gas as operators in other countries possess. According to Maxim Medvedkov, a de facto array of effective competition laws has already been created within the WTO.

One of the obvious advantages of the WTO is the existence of a law enforcement mechanism that can be used if a partner violates its obligations. It would be very difficult to create any fundamentally new mechanism for these purposes.

Maxim Medvedkov paid considerable attention to the issue of the impact of artificial intelligence on the WTO. The speaker noted that the technological level of companies will determine the future, since it is companies that will be the owners of technologies, not government. Accordingly, companies not governments will determine the conditions for access to technology, and therefore the conditions for the technological development of entire countries. The situation whereby artificial intelligence will be engaged in resolving disputes in the WTO in 50 years is quite real, since the bulk of trade will be carried out electronically, and artificial intelligence will most likely create its rules.

The speaker also paid attention to the relationship between international trade and security interests. For a considerably long period, there existed a consensus that states have the right to establish measures to protect national security so long as national security is not invoked to justify protectionism. The situation changed after the events of 2014, as a result of which Russia became the target of trade sanctions, and then it itself introduced counter-sanctions against its trading partners. Disputes of this kind have never been historically considered in the WTO, since due to various political circumstances, no WTO member wanted to initiate them. However in 2019, Russia defeated Ukraine in the WTO dispute over the transit of Ukrainian goods through Russia to Kazakhstan and Kyrgyzstan. The panel decided that Russia lawfully defended its security interests in emergency situations in international relations, which is consistent with WTO rules. The decision on this dispute is unique because the WTO has set a precedent for interpreting important provisions of WTO agreements. Its assessment suggests that the US protectionist decision to impose duties on steel and aluminum products by a number of WTO members, including Russia, citing national security interests, can hardly be considered legitimate.

As the speaker noted, Russia took part in 18 disputes over a 7-year tenure in the WTO, and analyzed in detail all successful and lost cases. Participation in the WTO obliges participants to on the one hand follow the rules, and on the other hand it ensures that partners fulfill their obligations. The current crisis of the WTO appeals body is unpleasant, but not absolutely problematic, as there is an active search for a way out of the crisis. Thus, the arbitration groups (first instance) continue to work, and a number of countries have appropriate agreements such that, in the absence of an appellate, the decision of the arbitration group will be applied as a final decision. It is also likely that a temporary appeals body will operate whose decisions will only apply to those WTO members who have declared their recognition. At the same time, certain trade partners of Russia intend to follow the path of applying sanctions to those WTO members who do not agree to alternative solutions to the problem with the appellate body.

Answering a question about the prospects of the upcoming WTO Ministerial Conference in Nur-Sultan, Maxim Medvedkov noted that most countries are interested in WTO reform, and the question is only how long countries need to agree on the appropriate reform. In any case, one should not be alarmed even if the conference does not lead to any major breakthroughs. Overall, the message remains that there is not a single country that would seriously declare that the WTO should be eliminated, nor is there any call for significant reduction to the scale of the current activity of the organization.

Our insightful guest answered numerous questions from a rapt audience. The open lecture was delivered to a full house, customary when hosting an event of this scale. Along with graduate students of the HSE Faculty of Law, the event was attended by colleagues from a number of other departments of the HSE, as well as guests from many external organizations, among which were impressive delegations of employees of the Eurasian Economic Commission and the Ministry of Economic Development of Russia.