WTO sets up panel to rule on EU-Russia auto row

(GENEVA) - The World Trade Organization Monday set up a panel to settle a bitter dispute between Russia and the European Union over car import duties imposed by Moscow.

Trade sources said that the Geneva-based body had approved the EU's request to set up an independent panel of trade experts tasked with deciding whether Russia was breaking global trade rules due to its controversial recycling fee, which applies only to imported vehicles.

The EU argues that Moscow is not playing fair because the recycling fee severely hampers trade, has been imposed in a discriminatory fashion, and flies in the face of Russia's commitments on tariffs, which are supposed to give all 159 WTO economies a level playing field.

Russia amended its legislation last month to apply the recycling fee to all vehicles, and questioned why the EU was challenging something that would no longer exist from January 1, 2014.

But the EU countered that it was awaiting clarification of the changes and how they would be implemented.

Russia and the EU had spent months trying to resolve the wrangling in direct talks, before Brussels in October decided to up the ante by requesting the creation of a panel.

Under WTO regulations, member economies have one shot at stopping a dispute settlement process in its tracks, and Russia blocked an initial EU panel request on October 22, leading Brussels to try again Monday.

The dispute over Russia's car duties is the first since the country joined the global trade bloc in August 2012.

The EU made its initial complaint in early July this year, followed weeks later by Japan, though Tokyo has yet to request a panel.

Both Brussels and Tokyo charge that Russia has dressed up anti-competitive trade barriers as environmental protection.

The contested law levied a recycling fee on imported and Russian-made vehicles alike, but exempted companies which committed to ensure that waste is safely handled.

The EU and Japan say the waiver has only applied to companies which are legal entities registered in Russia and which pledge to produce vehicles or parts in Russia, Belarus or Kazakhstan.

Russia underlines that the amended legislation applies the recycling fee to all vehicles, but the EU and Japan say they still need convincing.

Disputes at the WTO are often highly complex and technical.

While the panel has to issue a decision within six months, disputes can last for several years amid appeals and assessments of compliance with its rulings.