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€27bn of trade hit by new trade barriers

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Thirty-six new trade barriers, potentially affecting up to €27.17bn of trade, were reported by EU businesses in 2016, with new barriers from Russia leading the pack.

Data from the European Commission’s (EC) latest annual report on trade barriers highlights the extent to which protectionism is affecting European businesses.

A total of six new trade barriers were reported for Russia, with India and Switzerland coming in at second and third place, with five and three new barriers respectively.

The barriers introduced by Russia are predicted to affect trade flows worth up to €12.26bn, having the greatest economic impact by some distance. This is followed by the potential impact of the new barriers put in place by Algeria (€3.75bn), China (€3.7bn), Turkey (€2.69bn), India (€2.2bn) and Egypt (€1.72bn).

The highest number of new reported barriers was recorded for wines and spirits with seven, followed by the agriculture and fisheries sector with six. For the automotive, pharmaceutical, services, medical devices, toys sectors and the iron, steel and non-ferrous metals sector, two new barriers each were recorded.

The report stressed that despite minimal new barriers, China remained among the most trade-restrictive partners of the EU with companies facing numerous longstanding barriers in the country. These range from joint venture requirements, market entry restrictions, obligations for technology transfer and unjustifiable technical regulations.

China’s production also remains the key factor in the existing and growing global overcapacity in the steel sector, as well as a number of others, including not only the traditional energy-intensive sectors but increasingly high-tech industries as well. Chinese overcapacity in some cases exceeds the size of total EU production or the total EU market.

For 2016, two new barriers were reported in the furniture and medical devices sectors. With regard to furniture, limits were introduced for the level of certain volatile organic compounds that are not in line with international standards and pose a considerable risk for EU companies of not being able to sell their products in China. For medical devices, companies with innovative products continue to be subject to clinical trials that must be conducted in China – which is not aligned with international regulatory standards and practices, the EC argues.

Russia

Among the main barriers reported for Russia were trade-distorting subsidies, with two new measures registered last year. One of the new subsidy measures targets supporting the Russian automotive and agricultural machinery sector, following a significant slowdown in local demand. The government issued two decrees providing export subsidies from the federal budget to companies in these sectors operating in Russia.

Russia also introduced specific restrictions for foreign companies participating in investment projects undertaken by state-owned enterprises (SOEs) or by private companies that are subsidised by the state. The country also introduced a 15% price preference for Russian companies participating in tenders by SOEs.

Within the cement and pharmaceutical sectors, the country has adopted two new certification-related barriers with the aim of protecting local manufacturing and encouraging further production locally. For cement, it introduced mandatory certification requirements while not issuing certificates to importing companies, except for white cement. This has resulted in the halt of EU cement exports to Russia since March 2016.

Within pharmaceuticals, the country has adopted good manufacturing practice certificate requirements for the marketing and renewal of marketing authorisations for pharmaceuticals. But failing to ensure sufficient capacities to carry out these procedures has led to undue delays for the EU pharmaceutical industry.

The EC says it has raised all new and existing barriers with Russia both at the World Trade Organisation (WTO) and bilateral level. Last year, WTO panels ruled in favour of the EU with regard to EU exports of pig meat products and Russia’s excessive tariffs for certain agricultural and manufacturing products. Russia is yet to comply with the ruling, but is still within the reasonable period of time for change implementation.

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