Russia Finds US Support in WTO Accession Efforts, Though Obstacles Remain

29 June 2011

The push is on for finalising negotiations for Russia's accession to the World Trade Organization by the end of this year. As an integral part of its "reset" strategy for relations with Russia, US President Barack Obama's administration is making a concerted diplomatic effort to help Russia finalise its 17-year track to the WTO. The EU, along with Russia's BRICS partners - Brazil, China, India, and South Africa - is also strongly pushing for the move.

"It's clear that Russia's ambition is to complete the accession process and become a WTO member by the end of the year," Chris Wilson, Assistant US Trade Representative for the Office of WTO and Multilateral Affairs, said last week.US Ambassador to Russia, John Beyrle assured listeners at the St. Petersburg International Economic Forum on 17 June that "we in the Obama administration are committed to seeing Russia in the WTO as soon as possible, hopefully this year."

For accession to be feasible, Russia must find compromises within the next month on industrial car assembly rules, as well as phytosanitary and veterinary controls, in order to come into compliance with its accession requirements. The US and the EU have also cited concerns over rule of law, especially regarding the Russian investment scheme and respect for intellectual property rights.

If these issues are not resolved by the end of July, then they "will not be resolved for a long time," Russian Deputy Prime Minister, Igor Shuvalov, cautioned at the St. Petersburg forum.

Cold War provisions slowing down process

Since Obama took office in 2009, Washington has been trying to find common ground with Moscow on issues such as missile defence systems in Europe and trade and investment. Russia's accession to WTO is a major component of these efforts.

Domestically, the White House is lobbying Congress for repeal of the Jackson-Vanik amendment, a legislative relic of the Cold War era that allows the US to deny most favoured nation (MFN) status to nations with limited freedom of emigration under Article XXXV of the WTO's General Agreement on Tariffs and Trade.

Washington has found Russia to be in compliance with emigration conditions since 1994.

Restoring permanent normal trade relations (PNTR) with Russia is another major issue that the US is considering. Doing so would create better market opportunities for American businesses and investors should Russia join the global trading body.

"If the Jackson-Vanik amendment remains in effect and the US is unable to extend PNTR to Russia, US companies could potentially be disadvantaged relative to countries that were able to grant immediate MFN status to Russia," Edward Verona, President and CEO of the US-Russia Business Council, a Washington-based trade association, told Bridges. "Russia would be free to decide whether or not to discriminate against US exporters."

While the US and Russia have a bilateral trade agreement dating back to 1992 that provides provisional MFN status, this agreement lacks treaty status. Verona noted that, "compared to MFN/PNTR status under the WTO, that agreement does not provide long-term predictability and robust safeguards."

A vote on PNTR for Russia is viewed by some US lawmakers as a proxy vote for Russian accession, hence the desire to hold off on the subject until action is taken at the global trading body. Other nations once subject to Jackson-Vanik provisions, such as China and Ukraine, had PNTR restored before official WTO accession.

"There are still a lot of concerns over the rule of law violations in Russia," Ariel Cohen told Bridges. Cohen is a Senior Research Fellow for Russian and Eurasian Studies and International Energy Policy at the Heritage Foundation. "Even if Jackson-Vanik is lifted by Congress, and that is a big if, other instruments of legislation are likely to be put in place instead."

International support

As Russia's largest trade partner, the EU also supports Russian accession, despite their recent trade dispute over fresh vegetables. Earlier this month, Russia placed a blanket ban on the import of all European vegetables after an E. coli outbreak led to several deaths in Europe (see Bridges Weekly Trade News Digest, 15 June 2011).

The EU argued that the ban was in direct violation of WTO rules; Russian Prime Minister Vladimir Putin contended that it was Russia's right to protect its citizens.

"The European Commission has always supported Russia's bid," John Clancy, the Commission's Trade Spokesman, told Bloomberg on 16 June. "We hope Russia can meet the very small number of remaining concerns from WTO members in a timely fashion to ensure the process can move forward with the aim for Russia to join the WTO by the end of the year."

After a BRICS summit in April, a joint declaration issued by Brazil, China, India, and South Africa extended "full support to the early accession of Russia to the WTO."

Remaining challenges: Georgia tensions, WTO compliance

Georgia is one of the remaining obstacles to Russian membership at the WTO. Disputes between the two nations over the sovereignty of Abkhazia and South Ossetia and tensions from the 2008 war between the two countries have contributed to their strained relationship. Russia also has a standing Russian import ban on various Georgian products.

US Vice President Joe Biden has been conducting talks with Georgian President Mikheil Saakashvili over Georgia's position on Russian accession, and Switzerland is currently involved in mitigating the conflicts between Russia and Georgia.

Doubts remain, however, over Russia's commitment to proper compliance with WTO law. "Yes, Russia should be a member of WTO when it is in compliance," Cohen told Bridges. "The US and other rule of law countries should insist that Russia complies."

Others believe that bringing Russia into the legal trade structure of the WTO will create more compliance within Russia. "Bringing Russia within the rules-based international trading system will improve confidence in the long-term stability and growth of the Russia economy," Verona contended.

However, Russia is having doubts of its own.

In April, responding to a complaint from Russian Deputy Economic Development Minister Andrei Klepach, Putin said that Russia is currently being forced to "sustain losses" from abiding by WTO obligations while getting "nothing out of a membership that isn't."

Medvedev echoed this concern in his address at the Forum this month. "For a long time, we have been ready to join the WTO...If our partners are not ready for Russia's fair accession to international organisations, it would be a sad scenario."

ICTSD reporting; "Russian Billionaires Criticize US, EU on WTO Delays That Slow Investment," BLOOMBERG, 17 June 2011; "Obama wants Russia trade vote before WTO deal: trade official," REUTERS, 22 June 2011; "Russia accession to WTO to be delayed if 3 issues in 3 weeks not solved," RIA NOVOSTI, 16 June 2011; "Russia can join WTO this year but only on right terms - Medvedev," RIA NOVOSTI, 17 June 2011; "Russia to ignore all WTO commitments until admitted - Putin," RIA NOVOSTI, 8 April 2011; "BRICS nations call for Russia to be admitted to WTO," RIA NOVOSTI, 14 April 2011; "Russia in WTO - reasonable compromise with Georgia is possible," TREND, 10 March 2011.

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