Russia Quickly Closes in on WTO Entry

16 November 2011

After an 18-year process, Russia now appears set to join the WTO, with the Formal Working Party finishing its negotiations on 10 November. Negotiators have forwarded the Russian accession accord to the upcoming December ministerial conference, where trade ministers will vote on the package.

The completion of negotiations drew praise from WTO Director-General Pascal Lamy. "In acceding to the WTO, Russia embraces a series of rules and commitments that are the foundation of an open, transparent, and non-discriminatory global trading system," he said.

The potential benefits of WTO accession for Russia's business and investment climate was reiterated by many members, along with Maxim Medvedkov, Russia's chief negotiator for its WTO bid.

After the Working Party meeting, Medvedkov stressed that "the agreement as negotiated brings [Russia] into the system of multilateral trading rules, creating new opportunities for our traders and investors and enabling us to protect their commercial interests even more effectively than before."

With the Doha Round of trade talks currently at an impasse, and WTO members still struggling to reach consensus on non-Doha items to include on the ministerial agenda, bringing Russia's US$1.48 trillion economy into the WTO system has been touted as one of the major potential achievements of the December meet (see Bridges Weekly, 9 November 2011).

"This win-win result... comes as a most welcome deliverable for the upcoming WTO Ministerial Conference and signals anew the relevance and vibrancy of the WTO as an instrument for international co-operation," Lamy noted.

Eighteen year process

"It is gratifying to see that after 18 years of sometimes uneasy negotiations the process of WTO accession is completed today," Medvedkov stated after the Working Party concluded its talks.

Last week's formal meeting of the Working Party was the first since 2006, when disagreements with current WTO member and Russian neighbour Georgia put the formal talks on hold (see Bridges Weekly, 25 October 2006). However, negotiators have met several times informally since.

After years of stop-and-go negotiations, the past few months have seen talks move forward at a breakneck pace, with Russia gaining strong backing from the US and EU.

An agreement between Brussels and Moscow on outstanding bilateral issues was struck this past October. The agreement addressed Russian incentives to domestic automobile producers, rules on exporting agricultural products and foodstuffs to Russia, and changes to Russia's practice of taxing European flights over Siberia, (see Bridges Weekly, 26 October 2011).

The administration of US President Barack Obama, meanwhile, has been supporting the accession bid as part of a larger effort to "reset" its relations with Russia (see Bridges Weekly, 29 June 2011).

Upon the Working Party's announcement last week, US Assistant Trade Representative Chris Wilson called the moment "an important milestone in our relationship with the Russian Federation, and advances President [Barack] Obama's determination to expand the economic dimensions of a bilateral relationship traditionally dominated by political and security affairs."

European Commissioner for Trade Karel De Gucht echoed this sentiment, calling the event an "important step for Russia's economic development and for the multilateral trading system." He added that the EU played a "crucial role" toward achieving this goal.

Despite having the EU's and US' support, the major question had been whether or not Georgia - a WTO member - would withhold its support for its neighbour's accession bid.

That concern was put to rest after an announcement on 2 November that Russia and Georgia had reached a Swiss-brokered compromise resolving their differences over trade-monitoring in the disputed regions of Abkhazia and South Ossetia (see Bridges Weekly, 2 November 2011).

‘Unprecedentedly detailed' commitments

The nearly-700 page accession package includes a range of detailed commitments; trade sources note that the accession is the WTO's most complicated to date, with one Geneva-based trade expert calling the commitments "unprecedentedly detailed."

Russia has committed to fully apply all WTO provisions, and will be provided with a few transitional periods in some areas. The accession package includes 30 bilateral agreements on market access for services and 57 on market access for goods.

Export duties have been bound for over 700 tariff lines, including certain products in sectors of fish and crustaceans, mineral fuels and oils, raw hides and skins, wood, pulp and paper, and base metals.

Regarding agriculture, the accord states that all agricultural export subsidies will be reduced to zero. In addition, total trade-distorting agricultural support cannot exceed US$9 billion in 2012; this number will be gradually reduced to US$4.4 billion by 2018. One Geneva trade expert noted to Bridges that these particular terms have prompted some negative responses within the Russian agriculture community.

With regards to the WTO Agreement on Trade-Related Investment Measures (TRIMS), the accession accord states that all WTO-inconsistent measures, including preferential tariffs or tariff exemptions, will be eliminated by 1 July 2018. This includes automobile investment programmes, which have drawn criticism in the past over their local content requirements.

The negotiated terms also place a substantial focus on transparency. All legislation affecting trade in goods, services, and intellectual property rights (IPRs) are to be published promptly, consistent with WTO requirements. Notably, Russia will publish all legislation affecting trade in goods, services, or intellectual property rights (IPRs) prior to their adoption.

WTO members will be provided with at least 30 days to comment on such legislation, with some exceptions in cases of emergencies, national security, the public interest, and other reasons outlined in the accord.

The accession package also notes that Russia will fully apply provisions of TRIPS Agreement, including provisions for enforcement, without recourse to any transitional period.

Russia's intellectual property practices have repeatedly come under fire from US lawmakers; a bipartisan group of legislators from the House and Senate Judiciary Committees wrote to US Trade Representative Ron Kirk last Friday to express "serious concerns over continuing gaps and lapses in the protection and enforcement of intellectual property rights concerns" by Moscow.

The US still lacks permanent normal trade relations with Russia, due to a Cold War-era piece of legislation known as the Jackson-Vanik amendment.

The amendment allows the US to deny most favoured nation (MFN) status to nations with limited freedom of emigration, and must be repealed by the US Congress in order for the above-mentioned normal trade relations to take effect.

Further details on Russia's WTO commitments are available here.

Russia intends to join government procurement pact

Russia also intends to join the WTO's Government Procurement Agreement (GPA), according to the terms of its accession package. The GPA, which does not extend to the whole WTO membership, would liberalise access to billions of dollars worth of public procurement contracts among the countries involved.

Upon accession, Russia would become an observer to the plurilateral agreement, which currently has 42 countries; within four years of joining the WTO, Moscow will be expected to initiate negotiations for GPA membership.

The renegotiation of the GPA is being pushed as another possible outcome for December's WTO ministerial; Government Procurement Committee Chair Nicholas Niggli concluded yesterday that parties are "very close" to finalising negotiations, trade sources told Bridges.

Next steps

The Russian accession package will be voted on at the WTO Ministerial Conference in Geneva, Switzerland, which is scheduled for 15-17 December. The Russian Parliament will then be given until 15 June 2012 to ratify the accession accord; 30 days following ratification, Russia will become a full member.

The WTO ministerial is also expected to see another three accessions move forward: Vanuatu and Samoa, whose accession packages were adopted in October by the General Council and the Samoa working party, respectively; along with Montenegro, which has its final Working Party meeting scheduled for the end of this month.

ICTSD reporting.

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