Bridges Daily Update #3 | After Eighteen Year "Marathon," Russia Crosses WTO Finish Line

17 December 2011

Trade ministers formally welcomed Russia into the WTO on Friday afternoon, putting the finishing touches on a nearly two-decade long process fraught with disagreements and setbacks. Meanwhile, negotiators also spent the day debating the role of the global trade body in the multilateral trading system, and revisiting thorny trade topics such as cotton and fish subsidies.

Friday's ceremony marked the entry of the world's largest non-WTO economy into the institution, an event that was widely anticipated to be one of the main highlights of the three-day ministerial conference. Thursday's finalising of the Government Procurement Agreement negotiations and Friday's accession ceremony are primarily "what this ministerial will be remembered for," one source said.

The approval by consensus of Russia's accession protocol drew wide applause from trade officials.

"This is clearly a historic moment for the Russian Federation and for the rules-based multilateral trading system, after an 18-year marathon," WTO Director-General Pascal Lamy told the audience.

"What you have to know about marathons is that the last mile is the worst, and the toughest, and the best moment in the marathon is when you cross the finishing line," he continued.

While the conference's approval marks the end of a long and often uncertain process, Russian Minister of Economic Development Elvira Nabiullina emphasised that, for Russia, "the conclusion of the accession negotiations is not a finishing line, but a starting point."

The role of the Swiss government in meditating between Russia and Georgia was credited for making Friday's accession possible - a task that Swiss President Micheline Calmy-Rey admitted had "seemed like mission impossible."

The disagreements between the two countries had threatened to keep the accession process on hold, with Moscow and Tbilisi only agreeing to a Swiss-brokered compromise in early November.

The benefits of the accession to Russia are expected to be numerous, Nabiullina told reporters. These include improved quality of goods and a signal to investors of a better business climate, she added. Russian Deputy Prime Minister Igor Shuvalov reaffirmed this assessment, adding that the majority of Russian national industries will benefit.

Having access to the WTO's dispute settlement system was another benefit that Nabiullina highlighted, adding that Russia is currently losing US$2 billion per year due to trade restrictions in chemicals and transportation, among others.

The Russian minister also told reporters that, during the accession process, Russia had changed 300 legal acts and brought them into conformity with international trade rules.

Echoing the general sentiment amongst speakers, US Trade Representative Ron Kirk told the audience that the accession is "a development that will truly make us a world trade organisation."

With the ministerial conference also set to approve Saturday three draft decisions on issues of great importance for least developed countries (LDCs), Bangladeshi Commerce Minister Muhammad Faruk Khan underlined the "useful lessons" that the Russian story could provide for streamlining the LDC accession process.

The difficulties of joining the global trade body were also underscored by Cuba, which added that 30 developing countries still remain on the accession waiting list.

Kazakh Minister of Economic Integration Zhanar Aitzhanova explained to the audience that the commitments being undertaken by Russia will be incorporated into the regulatory framework of all members of the Russia-Belarus-Kazakhstan customs union, which will in turn have an immediate impact on Astana's trade regime. The approval of the Russian bid will also "accelerate Kazakhstan's accession to the WTO," she added.

Russian officials also stressed that Moscow has no plans of being an obstacle to the ongoing Doha talks. According to Deputy Prime Minister Shuvalov, Russia is already monitoring the negotiations, and intends to play a positive role.

With China celebrating the tenth year since its accession to the global trade body, many observers have drawn parallels between the bids of the two emerging economies. However, Lamy, speaking at a separate civil society event on Friday, underscored that Russia's trade patterns are completely different from those of China, adding that there was no chance of the sort of turbulence seen when China acceded.

The accession package still needs to be ratified by the Russian Parliament before coming into force. Thirty days after ratification, Russia will officially be a full member. The ministerial conference is also set to welcome three other countries into the global trade body before the end of the weekend: Montenegro, Samoa, and Vanuatu.

Differing views on protectionism

On Friday morning, trade officials held an informal working session on the future of the multilateral trading system.

The session largely saw members restating well-known positions, one delegate noted.

"There's no discussion," the official continued, while another observed that few ministers were actually in attendance.

One delegate who witnessed the discussions commented that, although members reiterated their opposition to protectionism, several had different interpretations of what this meant in practice. While some members called for tariffs to be kept at low applied levels, others pointed to non-tariff barriers and subsidies in the developed world as a worrying gap between rhetoric and action.

Another said that the issue of non-tariff barriers appeared to be an emerging challenge, which current market access negotiations were ill-equipped to deal with.

Friday's discussions, along with two other working sessions set for Saturday, are expected to inform the ministerial chair's statement, which will be presented at the end of the conference.

Davies: "Let's wait for the right time"

In parallel, the future of the multilateral trading system was also discussed at the civil society trade and development symposium taking place down the road from the ministerial.

At the symposium, which is being hosted by ICTSD - the publisher of Bridges - various trade ministers concurred that the institution's rule-making role had served the membership well. The ministers, from Indonesia, Peru, South Africa, and Sweden, argued that the global trade body has provided a bulwark against protectionism, but - in the words of Switzerland's Marie-Gabrielle Ineichen-Fleish - was currently "under strain as a negotiating body: we don't really know how to go forward."

South African trade minister Rob Davies said that his country did notsubscribe to the view that, without further opening of trade, the whole system would fall apart. "If the world is not at this moment able to take up the particular task of negotiating the development mandate, then let's wait for the right time," he concluded.

Several high-level participants evoked the importance of taking up major new challenges, such as trade and climate change. Nearly all agreed that bilateral and/or regional trade agreements could promote rather than hamper multilateral agreements.

On the way forward, WTO Director-General Pascal Lamy noted that a multilateral trading system could not function without the US and China agreeing somewhere, and that neither country had a political majority in favour of a Doha deal.

This ministerial, he said, was all about exploring the small spaces left on the margins as a result of the blockage between the two trading powers. He expressed hope, however, that both would eventually realise that multilateral co-operation offers "more benefits, for less cost, than a piecemeal approach."

Meanwhile, Indonesia's trade minister Gita Wirjawan noted that on the opening day of the ministerial every single statement had contained the word ‘impasse.' Nonetheless, he remained upbeat about the long term trade prospects for countries at the WTO and regionally. Swedish Ambassador Joakim Reiter warned: "The WTO's negotiating pillar runs the risk of decreasing in relevance, especially in relation to bilateral and regional avenues, unless it delivers results. This risk is not the fault of the WTO, its design or external circumstances, but is the result of the actions or inactions of its Members. Hence, members need to provide the solution. This requires intensified efforts on the DDA through more pragmatic approaches and greater coherence between what members are ready to do outside WTO and inside WTO, allowing the finalisation of mature parts of the DDA like trade facilitation and LDC issues, as well as, for example, modernising the ITA and strengthening the work of WTO bodies to genuinely address trade concerns."

Friends of Fish

Trade ministers from the Friends of Fish group - Argentina, Australia, Chile, Colombia, Ecuador, New Zealand, Norway, Peru, and the US - released a statement on Friday, reaffirming their continued commitment to seek strong new rules aimed at eliminating subsidies that contribute to fleet overcapacity, which in turn leads to overfishing and the depletion of stocks. They underlined that the consequences would not be merely environmental, but also threatened livelihoods and food security, particularly in developing countries.

Some 85 percent of the world's oceans are fully exploited, over-exploited, depleted or recovering from depletion, up 10 percent from four years ago. Harmful subsidies are estimated at US$16 billion annually, with Japan, China, the EU, the US, and Russia topping the list.

Cotton: C-4 urge subsidy reform

New proposals for development aid and market access need to be accompanied by reform of trade-distorting cotton subsidies if they are to contribute to the fight against poverty, trade ministers from West-African cotton-producing countries said on Friday.

Mahamat Allaou Taher, Minister of Trade and Industry for Chad, told a press conference that the C-4 cotton producing countries - Benin, Burkina Faso, Chad, and Mali - were still considering a new US proposal (see Bridges Weekly, 16 November 2011) for development assistance and enhanced market access, after discussing it with US Trade Representative Ron Kirk.

However, the minister emphasised that development assistance represented only one part of a two-pronged approach to the problem. "We are also committed to the trade track," he said.

Subsidy reform - and not just market access - was needed, Allaou Taher argued. He pointed out that only around two percent of his country's cotton was actually exported to the US, which is a net cotton exporter.

Two days prior, the C-4 had also been offered development assistance by China, the minister explained.

The US has argued that Beijing's support to the cotton sector should also be reduced under any eventual Doha deal.

However, Allaou Taher argued that US support remained the main target of the group's initiative. "The United States is not alone, but their subsidies are the greatest," the minister said.

Food security and trade sparks heated debate

UN human rights expert Olivier De Schutter argued on Friday that the WTO is "defending an outdated version of food security," in a press release responding to comments that Lamy had made publicly available before the ministerial conference.

In a letter to De Schutter, the UN Special Rapporteur on the Right to Food, Lamy stated that he "fundamentally" disagreed "with the assertion that countries need to limit reliance on international trade to achieve food security objectives."

His comments sought to critique a report that De Schutter had published one month ago, in which the rapporteur reiterated earlier conclusions encouraging states "to avoid excessive reliance on international trade in the pursuit of food security."

"Trade is very much part of the food security equation," said Clem Boonekamp, director of the WTO's agriculture division at a press briefing on Friday. "It's something my Director-General keeps saying, and he's perfectly right to say it."

ICTSD reporting.

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