{"id":238141,"date":"2006-05-01T22:39:00","date_gmt":"2006-05-01T22:39:00","guid":{"rendered":"http:\/\/new.moldova.org\/2006\/05\/01\/russian-trade-sanctions-against-georgia-moldova-and-ukraine-12562-eng\/"},"modified":"2006-05-01T22:39:00","modified_gmt":"2006-05-01T22:39:00","slug":"russian-trade-sanctions-against-georgia-moldova-and-ukraine-12562-eng","status":"publish","type":"post","link":"https:\/\/www.moldova.org\/en\/russian-trade-sanctions-against-georgia-moldova-and-ukraine-12562-eng\/","title":{"rendered":"Russian trade sanctions against Georgia, Moldova and Ukraine"},"content":{"rendered":"<span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Reading Time: <\/span> <span class=\"rt-time\"> 4<\/span> <span class=\"rt-label rt-postfix\">minutes<\/span><\/span><p>By Michael Emerson, Gergana Noutcheva, Marius Vahl, George Dura, Centre for European Policy Studies (CEPS)<\/p>\n<p>Artilce from the 15th Issue of the CEPS Neighbourhood Watch (http:\/\/www.ceps.be\/files\/NW\/NWatch15.pdf) <\/p>\n<p>Since March Russia has introduced wide-ranging sanctions against exports from these three CIS states. The wine industries of Georgia and Moldova have been conspicuously hit as the most important export industries of the two countries. Very severe damage at the macro-economic level are to be expected in the short-run. As a WTO candidate Russia might be expected to apply WTO rules in advance, which means in this context not using technical standards as a pretext for discriminatory trade protectionist measures, or not without offering explanations and evidence of the grounds for such restrictions. In addition Russia has forced the withdrawal from commercial circulation of the Borjomi spring water from Georgia, as well as Georgian and Moldovan cognacs. Russia has also been restricting imports of milk and meat from Ukraine on technical grounds. We give some details on Georgian and Moldovan wines since here the impacts will be greatest (1). <\/p>\n<p>Georgian Wine. About 92% of Georgian wine production is exported, valued in 2005 at $81 million. Of this 75% went to Russia, 9% to Ukraine, 6% to Kazakhstan, 4% to the US, and 3% to the EU. <\/p>\n<p>On March 27, 2006 the Russian Federation officially prohibited import of Georgian wines to the territory of Russia, for the reason that pesticide residues were allegedly found in the composition of Georgian wines thus endangering health and life of Russian citizens. <\/p>\n<p>According to the Paragraph 8 of Article 5 of the WTO Agreement on the Application of Sanitary and Phytosanitary Measures, &ldquo;When a Member has reason to believe that a specific sanitary or phytosanitary measure introduced or maintained by another Member is constraining, or has the potential to constrain, its exports and the measure is not based on the relevant international standards, guidelines or recommendations, or such standards, guidelines or recommendations do not exist, an explanation of the reasons for such sanitary or phytosanitary measure may be requested&rdquo;. <\/p>\n<p>The Georgian side has requested from the Russian Federation all the official documentation that served as the ground for their decision. The samples of wines, lab testing of which have preconditioned this decision have been also requested. However, no response from Russia has been received so far. <\/p>\n<p>Taking into account the status of Russia as a candidate for WTO accession, the ban of Georgian wine contradicts the provisions of WTO Agreement, namely &ldquo;no Member should be prevented from adopting or enforcing measures necessary to protect human, animal or plant life or health, subject to the requirement that these measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between Members where the same conditions prevail or a disguised restriction on international trade&rdquo;. <\/p>\n<p>Since 2003 Georgian wine can be imported into the EU with Georgian certificates of origin. The EU knows which laboratories are certified to issue certificates of origin. The EU is thus open to Georgia without quantitative restrictions, and without as of today non-tariff barriers such as phyto-sanitary standards. The problems alleged by Russia have not been noticed in the EU, which is hardly negligent on such matters. Georgia&rsquo;s limited penetration into the EU market reflects issues of product quality and marketing networks. <\/p>\n<p>Moldovan wine. Winemaking is one of the most important industries in Moldova, generating 25% of GDP in 2005. About 95% of wine produced in Moldova was exported in 2005, valued at $313 million. On average, wine exports are growing by 13-15% annually. Moldova is a top ten world wine exporter. <\/p>\n<p>The main export market for Moldovan wine is the CIS, with over the last four years, 97% of Moldovan wines sales, with Russia accounting for 85% of the total. There is a free trade agreement with Russia since the early 1990s. Products standards applied are GOST (former Soviet Union) standards. Moreover, on the basis of bilateral agreements signed between Moldova and CIS countries, the certificates of conformity are mutually recognized. <\/p>\n<p>The Russian ban on Moldovan wine imports has at least a three-fold impact. About 360 Moldovan wine making enterprises have been hard hit. In addition a number of industries announced losses, for example, carton\/packs enterprises (boxes, labels, corks), and glass bottle enterprises. The Government cannot further count on a forecasted 10% industrial growth for 2006. The Moldovan Ministry of Finance is concerned that about $46 million of planned budget revenues will be lost. The trade deficit will further widen to an estimated $1.5 billion. <\/p>\n<p>On Moldova-Russia relations, one of the lessons repeatedly learned by Moldovan businessmen is that Russia not a reliable trade partner. Russian business is affected at least in two ways. Russian importers and retailers stand to lose up to $700 million following the removal of Georgian and Moldovan wines from the shelves. Russian investors in Moldovan winemaking industry will not collect the expected dividends at the end of the year. <\/p>\n<p>There are no non-tariff barriers impeding Moldovan wine exports to the EU market (2). However, quality and marketing strategies so far limit the competitiveness of Moldovan wines on the EU market. The largest Moldovan wineries, with the participation of foreign investors, have begun limited exports into the European market, increasing thus exports by 44% in 2004 compared to 2000. Quality and reliability of supply aside, deeper penetration into the EU market can only be realistically achieved with a significant marketing effort to introduce Moldovan wines as low cost alternatives to wines from Bulgaria and Romania. <\/p>\n<p>The Russian ban has revived business links between producers from Moldova and Romania. As a result, a first common Romanian-Moldovan wine fair, which took place in Bucharest at the beginning of April this year, aimed at building partnerships in winning EU markets. To &ldquo;EU through Romania&rdquo; guides another initiative launched at the end of April, when a first Moldovan wine caravan will travel from city to city in Romania in a marketing effort organized by over 20 Moldovan wine producers. Some top Moldovan wine producers-exporters are investing in wineries in Romania and Bulgaria, where they benefit from EU funds to up-grade technologies and know-how. <\/p>\n<p>&#8212;&#8212;&#8212;&#8212;&#8212;<br \/>\n(1) Information supplied by Eka Avaliani in Tbilisi and Oxana Gutu in Chisinau. <br \/>\n(2) Moldovan wine and other alcoholic beverages fall outside the GSP scheme of tariff exemption The EU import of wines from third countries falls under the incidence of Title VII of the EU Council Regulation 1493\/1999 of 17 May 1999. The EU customs tariffs which vary from 10% to 33%, depending on the nature of the product with some ad valorem charges depending on the product. <\/p>\n","protected":false},"excerpt":{"rendered":"<p><span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Reading Time: <\/span> <span class=\"rt-time\"> 4<\/span> <span class=\"rt-label rt-postfix\">minutes<\/span><\/span>Since March Russia has introduced wide-ranging sanctions against exports from these three CIS states. The wine industries of Georgia and Moldova have been conspicuously hit as the most important expor<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-238141","post","type-post","status-publish","format-standard","hentry","category-economy"],"content_social_share":"<span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Reading Time: <\/span> <span class=\"rt-time\"> 4<\/span> <span class=\"rt-label rt-postfix\">minutes<\/span><\/span><p>By Michael Emerson, Gergana Noutcheva, Marius Vahl, George Dura, Centre for European Policy Studies (CEPS)<\/p>\n<p>Artilce from the 15th Issue of the CEPS Neighbourhood Watch (http:\/\/www.ceps.be\/files\/NW\/NWatch15.pdf) <\/p>\n<p>Since March Russia has introduced wide-ranging sanctions against exports from these three CIS states. The wine industries of Georgia and Moldova have been conspicuously hit as the most important export industries of the two countries. Very severe damage at the macro-economic level are to be expected in the short-run. As a WTO candidate Russia might be expected to apply WTO rules in advance, which means in this context not using technical standards as a pretext for discriminatory trade protectionist measures, or not without offering explanations and evidence of the grounds for such restrictions. In addition Russia has forced the withdrawal from commercial circulation of the Borjomi spring water from Georgia, as well as Georgian and Moldovan cognacs. Russia has also been restricting imports of milk and meat from Ukraine on technical grounds. We give some details on Georgian and Moldovan wines since here the impacts will be greatest (1). <\/p>\n<p>Georgian Wine. About 92% of Georgian wine production is exported, valued in 2005 at $81 million. Of this 75% went to Russia, 9% to Ukraine, 6% to Kazakhstan, 4% to the US, and 3% to the EU. <\/p>\n<p>On March 27, 2006 the Russian Federation officially prohibited import of Georgian wines to the territory of Russia, for the reason that pesticide residues were allegedly found in the composition of Georgian wines thus endangering health and life of Russian citizens. <\/p>\n<p>According to the Paragraph 8 of Article 5 of the WTO Agreement on the Application of Sanitary and Phytosanitary Measures, &ldquo;When a Member has reason to believe that a specific sanitary or phytosanitary measure introduced or maintained by another Member is constraining, or has the potential to constrain, its exports and the measure is not based on the relevant international standards, guidelines or recommendations, or such standards, guidelines or recommendations do not exist, an explanation of the reasons for such sanitary or phytosanitary measure may be requested&rdquo;. <\/p>\n<p>The Georgian side has requested from the Russian Federation all the official documentation that served as the ground for their decision. The samples of wines, lab testing of which have preconditioned this decision have been also requested. However, no response from Russia has been received so far. <\/p>\n<p>Taking into account the status of Russia as a candidate for WTO accession, the ban of Georgian wine contradicts the provisions of WTO Agreement, namely &ldquo;no Member should be prevented from adopting or enforcing measures necessary to protect human, animal or plant life or health, subject to the requirement that these measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between Members where the same conditions prevail or a disguised restriction on international trade&rdquo;. <\/p>\n<p>Since 2003 Georgian wine can be imported into the EU with Georgian certificates of origin. The EU knows which laboratories are certified to issue certificates of origin. The EU is thus open to Georgia without quantitative restrictions, and without as of today non-tariff barriers such as phyto-sanitary standards. The problems alleged by Russia have not been noticed in the EU, which is hardly negligent on such matters. Georgia&rsquo;s limited penetration into the EU market reflects issues of product quality and marketing networks. <\/p>\n<p>Moldovan wine. Winemaking is one of the most important industries in Moldova, generating 25% of GDP in 2005. About 95% of wine produced in Moldova was exported in 2005, valued at $313 million. On average, wine exports are growing by 13-15% annually. Moldova is a top ten world wine exporter. <\/p>\n<p>The main export market for Moldovan wine is the CIS, with over the last four years, 97% of Moldovan wines sales, with Russia accounting for 85% of the total. There is a free trade agreement with Russia since the early 1990s. Products standards applied are GOST (former Soviet Union) standards. Moreover, on the basis of bilateral agreements signed between Moldova and CIS countries, the certificates of conformity are mutually recognized. <\/p>\n<p>The Russian ban on Moldovan wine imports has at least a three-fold impact. About 360 Moldovan wine making enterprises have been hard hit. In addition a number of industries announced losses, for example, carton\/packs enterprises (boxes, labels, corks), and glass bottle enterprises. The Government cannot further count on a forecasted 10% industrial growth for 2006. The Moldovan Ministry of Finance is concerned that about $46 million of planned budget revenues will be lost. The trade deficit will further widen to an estimated $1.5 billion. <\/p>\n<p>On Moldova-Russia relations, one of the lessons repeatedly learned by Moldovan businessmen is that Russia not a reliable trade partner. Russian business is affected at least in two ways. Russian importers and retailers stand to lose up to $700 million following the removal of Georgian and Moldovan wines from the shelves. Russian investors in Moldovan winemaking industry will not collect the expected dividends at the end of the year. <\/p>\n<p>There are no non-tariff barriers impeding Moldovan wine exports to the EU market (2). However, quality and marketing strategies so far limit the competitiveness of Moldovan wines on the EU market. The largest Moldovan wineries, with the participation of foreign investors, have begun limited exports into the European market, increasing thus exports by 44% in 2004 compared to 2000. Quality and reliability of supply aside, deeper penetration into the EU market can only be realistically achieved with a significant marketing effort to introduce Moldovan wines as low cost alternatives to wines from Bulgaria and Romania. <\/p>\n<p>The Russian ban has revived business links between producers from Moldova and Romania. As a result, a first common Romanian-Moldovan wine fair, which took place in Bucharest at the beginning of April this year, aimed at building partnerships in winning EU markets. To &ldquo;EU through Romania&rdquo; guides another initiative launched at the end of April, when a first Moldovan wine caravan will travel from city to city in Romania in a marketing effort organized by over 20 Moldovan wine producers. Some top Moldovan wine producers-exporters are investing in wineries in Romania and Bulgaria, where they benefit from EU funds to up-grade technologies and know-how. <\/p>\n<p>&#8212;&#8212;&#8212;&#8212;&#8212;<br \/>\n(1) Information supplied by Eka Avaliani in Tbilisi and Oxana Gutu in Chisinau. <br \/>\n(2) Moldovan wine and other alcoholic beverages fall outside the GSP scheme of tariff exemption The EU import of wines from third countries falls under the incidence of Title VII of the EU Council Regulation 1493\/1999 of 17 May 1999. The EU customs tariffs which vary from 10% to 33%, depending on the nature of the product with some ad valorem charges depending on the product. <\/p>\n<div class='heateorSssClear'><\/div><div  class='heateor_sss_sharing_container heateor_sss_horizontal_sharing' data-heateor-sss-href='https:\/\/www.moldova.org\/en\/russian-trade-sanctions-against-georgia-moldova-and-ukraine-12562-eng\/' data-heateor-sss-no-counts=\"1\"><div class='heateor_sss_sharing_title' style=\"font-weight:bold\" ><\/div><div class=\"heateor_sss_sharing_ul\"><a aria-label=\"Facebook\" class=\"heateor_sss_facebook\" href=\"https:\/\/www.facebook.com\/sharer\/sharer.php?u=https%3A%2F%2Fwww.moldova.org%2Fen%2Frussian-trade-sanctions-against-georgia-moldova-and-ukraine-12562-eng%2F\" title=\"Facebook\" rel=\"nofollow noopener\" target=\"_blank\" style=\"font-size:32px!important;box-shadow:none;display:inline-block;vertical-align:middle\"><span class=\"heateor_sss_svg\" 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