Russia and the EU are heading confidently towards a trade war

On September 30, the authoritative business publication Vedomosti, citing sources, reported on the proposal of the Ministry of Economic Development of the Russian Federation to raise duties on a number of goods imported from the European Union. It is planned to impose additional taxes on alcoholic beverages (wine, beer), as well as perfumes and decorative cosmetics imported from the EU.

Despite the fact that the exact size of the new duties has not yet been determined, sources "Sheets" talk about rates "up to prohibitive".



Such innovations are primarily considered as a response to the restrictions imposed by the EU on the import of metallurgical products in 2018 and extended this summer by a decision of the European Commission until June 30, 2024.

Simply put, realizing that the EU is not going to abolish the protective duties adopted three years ago in relation to, among other things, the Russian metallurgy, Moscow decided to take retaliatory measures. In essence, this means that a trade war begins between the EU and Russia.

American prerequisites for European duties

Admittedly, Moscow did not want to aggravate for a long time. Not because the EU structures are friendly and open to cooperation with Russia (especially since this is far from being the case), but because the Kremlin was well aware of what exactly caused the protectionist measures taken by Brussels in 2018. Then, in the midst of the trade wars initiated by Donald Trump, the United States unilaterally imposed protective duties on the import of metal into its country. And on the EU countries, these measures were to affect almost the most strongly. As one might expect, the natural response of the European Union was the imposition of customs duties on a number of items of American products. The mirror measure is quite logical and understandable, which was supposed to equalize the state of affairs on both sides of the Atlantic.

Still further development economic The situation showed that 25% duties on jeans, motorcycles and whiskey from the United States have absolutely no effect on the situation on the European market for rolled metal products.

As a result, the European bureaucrats quickly realized that the only way to protect their producers, who had lost a significant part of the American sales market, was to reduce metal imports into the European Union itself. It was this fact that determined the restrictions on the import of metallurgical products into the territory of the Union adopted by Brussels in 2018. As a result, the increase in customs duties on metal supplied in excess of strictly limited quotas stabilized the situation on the European market and strengthened the competitive position of local producers.

Thus, the only response that the EU could give to American protectionism was European protectionism.

Nevertheless, paradoxical as it may seem, Russian producers hardly suffered from European duties at that time. Although the quotas were strict in terms of the impossibility of bypassing them, the volumes set by them were practically not exceeded by the Russian metal suppliers.

Reasons for exacerbation

It would seem, why then Russia now, three years after the introduction of the EU barrage measures, to introduce retaliatory measures? It is obvious from common sense that this is the result of several factors.

First, the market conditions have changed. Today, demand in the ferrous and non-ferrous metallurgy sectors has reached record highs since the start of the pandemic. Prices for the same steel, for example, increased not even by tens of percent, but several times. To be more precise - about twice as compared to the average historical values.

It is obvious that the demand for rolled metal products now, including on the European market, is going through the roof. And the quotas, the sizes of which were determined earlier, are no longer enough for Russian producers. Tariffs in the amount of a quarter of the value of the supplied products kill any hope of profitable deliveries above the norm.

That is, in fact, for all three years that the new EU customs regulations will be in effect, Russian manufacturers, and therefore the budget of the Russian Federation, will lose money. And it is obvious that this is already impossible to put up with.

Secondly, the primary reason for the introduction of duties by the EU is that American protectionist measures may be canceled in the near future. At the US-EU summit held in June 2021, the parties have already agreed to freeze customs duties for five years on products totaling $ 11,5 billion a year. Moreover, Washington and Brussels have officially announced their intention to end the trade war in the supply of steel and aluminum, for which a separate working group will be created.

Thus, a paradoxical situation arises. In 2018, the EU introduced duties, including on Russian rolled metal products, due to the trade war unleashed by the United States. Today, in 2021, Americans and Europeans agree to remove "metal" duties against each other. Logically, in this case, the EU would have to abolish the import duties on metal that affect Russia. But what do we see? That's right, the extension of these same duties for three years at once - until mid-2024. Obviously, Brussels officials played with protectionism and liked it.

Thirdly, relations between Russia and the EU countries are governed not only by mutual agreements and customs legislation of each of the parties, but also by the norms of the World Trade Organization, which Russia joined in 2012.
So you can't just take and impose any duties on the EU. It is important that the response is WTO compliant, i.e. were detailed in accordance with its rules. This is also why Russia was in no hurry to introduce duties in 2018. The process was too long and the benefit was too unobvious, given that the quotas were quite enough for Russian companies at that time. Today the situation has changed radically, and it is time for Moscow to act.

Means war

Thus, the bottom line is that the Russian Federation and the EU are indeed entering a new phase of confrontation, this time not for political, but on an economic basis. This time, the root cause is not sanctions, but duties. However, what both these cases have in common is the obvious provocative influence on the part of the United States. It was Washington that set the trend for trade wars and protectionism in the 2014st century, it was Washington that convinced the EU to adopt anti-Russian sanctions in XNUMX, and, finally, it was Washington in recent years that has persistently sought to drive a wedge between Brussels and Moscow.

Alas, in this situation, Russia simply has no choice but to introduce restrictive measures itself. It is clear that the EU is more likely to follow the lead of its overseas partner, but this does not make it easier for Russian metal suppliers. In the end, it was the EU countermeasures that forced the US to sit down at the negotiating table and begin lifting tariffs. So it turns out that the most correct step for the Russian Federation in this situation will be active involvement in the trade war. It was not Russia that untied it, but let's hope that it is she who will finish it.