13 November 2002 00:00
CONCERNING THE RECOGNITION OF RUSSIA AS A MARKET ECONOMY
On November 7 the European Union conclusively recognized Russia as a market economy, making appropriate changes to European antidumping legislation.
As is stated in a EU press release, the recognition of the new status of Russia reflects the progress achieved by the country "in the area of respect for market economy principles."
Based on the EU decision, the same procedures will now be applied to Russia in antidumping investigation as are applied to all other market economies.
Until now, when determining a case of dumping, European authorities could base themselves on the prices of any countries comparable with Russia in level of economic development because Russia's internal prices were not recognized as market prices, this making it possible to apply to Russian producers a variety of sanctions and restrictions.
Over the last 15 years the EU imposed 12 antidumping measures against Russian goods, among which urea (since 1987), silicon carbide (since 1988), potassium chloride (since 1992), ammonium nitrate (since 1995), and broad transformer steel (since 1996), and in the last few years restrictions were imposed on zinc, seamless pipes, wallboards, and aluminum foil; antidumping investigations are now being conducted with regard to cable and steel rope, narrow transformer steel, industrial carbon and hollow steel sections.
The total yearly losses from these measures for Russian industry are estimated at $230-240 million, taking into account lost opportunities.
It is expected that the granting of market status will enable Russian exporters to challenge a number of existing antidumping measures. Thus, metallurgists believe that the EU decision will greatly strengthen the positions of Russian metal exporters in external markets, in particular the European, as well as simplifying antidumping investigation procedures.
"This is certainly a gratifying fact for us, because earlier in antidumping investigations we had to prove every time that we were working in market conditions," says Andrei Petrosyan, deputy general director of the Novolipetsk Metallurgical Plant for strategic external market studies.
Furthermore, the very procedure of considering and reviewing antidumping investigations can become simpler, primarily thanks to a reduction in the period of consideration of cases as a consequence of the abolition of the "quasi-market" status of Russia. Since 1995 the EU considered Russia a "quasi-market" state and accepted from Russian exporters applications for a review of antidumping procedures if each of them could prove that it was a market enterprise.
Yet under consideration in the EU Council of Ministers are other amendments which, in the opinion of Maxim Medvedkov, Deputy Minister of Economic Development and Trade, may substantially reduce the advantages of Russia from its market status.
Those are amendments to the EU legislation on subsidies. They are introducing the notion of a "certain situation" in which the EU in the course of an antidumping investigation may refuse to take into account the producer prices. Such cases comprise the existence of an artificial competitive advantage - for example, too low energy prices. The amendments are to be applied to all third countries, including Russia.
If the low energy prices can be regarded as a natural competitive advantages, the prices in antidumping investigations will be established on the basis of the information submitted by the producer itself.
"If in your country a hydropower plant sits next to the enterprise, the low cost of electricity will not be regarded as an artificially understated price," F.-H. Venig asserts. Neither the lower labor costs of Russian enterprises will be considered an artificial competitive advantage, according to him. "Lower wages in Russia are a natural competitive advantage which helps to achieve lower labor costs. We shall agree with this and will accept such conditions," says the head of the directorate.
The upcoming recognition of Russia as a market economy was first announced in May this year.
Market economy status is granted to Russia by the adoption of amendments to the antidumping legislation of the European Union that exclude it from the list of countries with non-market economy. Earlier those amendments had already been approved by the European Commission. After the endorsement on November 7 of the amendments by the EU Council of Ministers, they have acquired the force of a law of the European Union.
___________________________________________________________
© Publication of the Ministry of Foreign Affairs of the Russian Federation.
| 
RUSSIA IN FACTS