EconomyUkraine war compounds WTO internal issues

Ukraine war compounds WTO internal issues

Good morning and welcome to Europe Express.

Russia’s war in Ukraine is casting a long shadow not only over the global economic outlook but also the country’s continued membership of international forums including the World Trade Organization, causing tensions in an already strained body. We’ll bring you up to speed with what WTO chief Ngozi Okonjo-Iweala had to say on how her organisation seeks to plough through, even as members barely speak to each other.

Vladimir Putin, meanwhile, has said that the diplomatic efforts to resolve the conflict he started were “back to a dead end”, as western and Ukrainian intelligence continued to warn on the massive influx of weapons and troops via Belarus and Russia in preparation of what is likely to be another devastating offensive on eastern Ukraine. In the wake of the Russian troop withdrawal from the outskirts of Kyiv, over 400 bodies of civilians have been retrieved in the city of Bucha alone.

As for Hungary’s 15 minutes of fame yesterday, when EU affairs ministers discussed rule of law issues in the country, we’ll bring you the latest in what the Hungarian minister had to say and what the counter-arguments were.

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Awkward membership

It is not easy running a multilateral organisation during a war, World Trade Organization boss Ngozi Okonjo-Iweala admitted yesterday. The Geneva-based body forecast goods trade growth for 2022 of 3 per cent, down from its earlier prediction of 4.7 per cent, because of Russia’s invasion of Ukraine, writes Andy Bounds in Brussels.

Okonjo-Iweala also explained to journalists how the body was working when some members would barely talk to each other.

The EU, Canada, US, Ukraine and other countries have rescinded Russia’s most favoured nation status, meaning it must pay higher tariffs on goods in some cases. Each meeting starts with declarations by Russia or states opposed to it justifying their actions, she said.

But she denied that the WTO was “paralysed”. Talks had slowed, she admitted, but were now moving forward through bilateral consultations or small groups. “We are using that approach now in all negotiations,” she said.

It is not the best preparation for a long-delayed ministerial conference. Dubbed MC12, it has been postponed twice because of Covid-19, and it is now three years since the 164 members’ trade ministers met to hammer out solutions to pressing issues.

On the agenda for the week of June 13 is the functioning of the WTO itself. There has been no major multilateral deal since it was created in 1995 and even its role in settling disputes is threatened by the rise of unilateral actions such as US steel tariffs and China’s boycott of Lithuanian goods.

While Geneva can convene panels to hear disputes, there is no appeals body because the US refuses to co-operate. So many disputes remain unresolved.

Also on the MC12 agenda are curbs to fishing and agricultural subsidies and a plan to make it easier for developing countries to waive intellectual property rules to copy Covid-19 vaccine designs.

But Okonjo-Iweala admits she does not yet know whether all topics will be discussed and which could be concluded. “Various options are being explored as to what we could deliver. But that’s where we are,” she said.

“But we are actively meeting them, working on that and on WTO reform. This is really very, very important. Virtually every minister I’m going to know is still harping on about the need to make progress on this.”

But as evidence grows of Russian war crimes in Ukraine, so are fears that some countries may decide they do not want to attend any event where Moscow is also represented.

Chart du jour: Leftist vote

Read more here about why French president Emmanuel Macron needs to dip into the leftwing pool of voters who backed Jean-Luc Mélenchon in the first election round. Mélenchon urged his voters to reject far-right leader Marine Le Pen but he stopped short of backing Macron, and his party is due to consult members on whether to do so.

When democracy cuts both ways

Four election wins on the bounce, the longest-serving leader in the EU, and among the fastest growing economies in the bloc: Hungary’s justice minister swaggered into yesterday’s General Affairs Council expecting to be greeted with the envy of all her colleagues. But few were moved, writes Henry Foy in Brussels.

Prime minister Viktor Orban’s barnstorming re-election this month — retaining a supermajority that other EU leaders could only dream of — has in Budapest’s eyes altered the balance of power in the continuing dispute between Hungary and the European Commission over the protection of rule of law in the country.

Orban’s justice minister, Judit Varga, made that clear as the ministers arrived in Luxembourg, arguing that the “historic mandate” showed “Hungarian democracy does not share these concerns”.

But her colleagues on the council had a different concept of how democracy works, citing the supremacy of rule of law and protection for minorities, regardless of the scale of ballot box victories.

While Varga was “emboldened and vindicated” by the election result during the council, people briefed on the discussions told Europe Express, other ministers ventured that when the ruling party controls almost all of the country’s media, winning 52.5 per cent of the vote is not an astonishing outcome.

“Rule of law also means limiting the possibility for the authorities of a member state, even if supported by . . . a large majority among the population,” Didier Reynders, the EU justice commissioner, said after the meeting.

The long-running saga over Hungary’s adherence to rule of law and the EU’s efforts to tackle it will reach a milestone this month when a letter from the commission arrives on Orban’s desk informing him that it intends to activate a so-called conditionality mechanism that would curb access to some EU funds as punishment for democratic backsliding.

Hungarian officials say that they are sanguine about the situation and cannot comment on the letter’s contents and import until it arrives.

But Budapest’s likely defence will echo Varga’s pitch: a clear majority of our people have no problem with how we run our country — so why should we listen to you?

What to watch today

  1. Belgian prime minister Alexander De Croo visits Moldova

  2. A delegation of MEPs holds a press conference in Bulgaria after a fact-finding mission over allegations of corruption and misuse of EU funds

  3. Euro-Latin American parliamentary assembly takes place in Buenos Aires

Notable, Quotable

  • Steinmeier non grata: Frank-Walter Steinmeier, the German president, has abandoned plans to visit Kyiv after admitting yesterday he would not be welcome in the Ukrainian capital, in a rare snub for a western politician. Steinmeier has recently expressed regrets for his pro-Russia policy and insistence on building a second gas pipeline, Nord Stream 2.

  • ECB ‘fantasy’: The ECB’s first chief economist, Otmar Issing, told the Financial Times in an interview that the central bank was “living in a fantasy,” misdiagnosing the factors behind the current surge in prices and playing down the danger of inflation spiralling out of control. His criticism that the ECB is being too slow to raise interest rates comes ahead of tomorrow’s governing council in Frankfurt.

  • New commander: Alexandr Dvornikov, Russia’s newly appointed commander in Ukraine, developed his skills in military operations with brutal effect in Syria in 2015. He was leader of Russia’s southern military district, responsible for operations in Donbas since Russia annexed part of its territory eight years ago.

  • Le Pen anxiety: While Emmanuel Macron’s lead ahead of the April 24 run-off has eased acute concerns among officials in Brussels, the potential remains for France to elect a president who wants to pull the country out of Nato’s military structures, tear up reams of EU legislation and restore relations with Putin.

  • Boris, fined: UK prime minister Boris Johnson, his wife Carrie Johnson and chancellor Rishi Sunak have been issued with fines as part of an investigation by the Metropolitan Police into breaches of Covid-19 rules in Downing Street and Whitehall during the pandemic.

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