What would WTO entry mean for Russia?

The European Union has backed Russia`s entry to the World Trade Organization (WTO), clearing the way for Russia to join the trade body in 2011.

The following are the key issues and background:

What would WTO entry mean for Russia?

It would mark Russia`s integration into the world economy two decades after the 1991 fall of the Soviet Union.

Russian officials hope WTO entry would spur economic growth by increasing competition and attracting much-needed investment to Russia`s largely Soviet-era industrial base.

Russia, whose USD 1.2 trillion economy depends heavily on natural resources exports, is the largest country still outside the 153-member organisation.

When did Russia apply?

Soviet thinking viewed the WTO`s predecessor, the General Agreement on Tariffs and Trade (GATT) -- formed in 1947 at the start of the Cold War -- as an instrument of capitalist hegemony.

Under Mikhail Gorbachev, the Soviet Union formally applied for GATT observer status in 1986 and gained it in 1990 as the Soviet empire crumbled.

Russia applied to join GATT in June 1993 and held the first round of working party accession talks in 1995. The first draft report of the working party, a major foundation for prospective membership, was circulated in 2004.

Russia`s 17-year-long bid to join the WTO is the longest ever; China joined the WTO in 2001 after a 15-year process.

What does WTO mean for the Russian economy?

The Kremlin, seeking to diversify from dependence on natural resources, says WTO membership will improve access to global markets for its goods.

The World Bank estimates WTO entry could increase the size of the Russian economy by 3.3 percent in the medium term and 11 percent in the long term. It expects Russian import tariffs would fall from 14 percent on average to 8 percent.

Fund managers say WTO entry could boost sectors like steel by removing export barriers, but more broadly it would mark Russia`s integration into the world economy, a step that could improve investor perceptions.

Sceptics say Russia may lose out because international companies will use their clout to stifle domestic producers and reduce competition.

Russia`s influential Expert magazine estimated that as a member Russia would lose a domestic market equal to USD 90 billion to foreign companies while benefits for domestic companies would amount to USD 23 billion.

What about Russian economic policy?

Prime Minister Vladimir Putin launched a massive campaign to support domestic industries in response to the economic crisis, which hit Russia much harder than any other major emerging market economy.

At the height of the crisis Russia introduced a series of protectionist measures such as higher export duties on imported cars, agricultural machinery and petrochemical products. It also provided generous state support to industry.

Agriculture Minister Yelena Skrynnik said in September she had agreed with members of the Cairns group of agricultural exporters that Russian agriculture subsidies could be doubled to USD 9 billion a year in 2011-2012.

What does WTO mean for Russia`s customs union?

Putin surprised the West and threw WTO negotiations into disarray by announcing in June 2009 that Russia would join the trade group as part of a nascent customs union with ex-Soviet neighbours Kazakhstan and Belarus.

The customs union was created on January 1, 2010 with the three countries pursuing their WTO accession talks separately. They aim to create a common economic area without borders in 2012.

Russia resumed accession working party negotiations in June 2010 with agriculture subsidies, intellectual property rights, import tariffs on pork and cars and new export duties on copper and nickel as the remaining stumbling blocks.

Russia and the EU struck a deal last month to phase out Russian export tariffs on raw materials. Russia blamed the USA for the lack of accord on Russian imports of encryption equipment and software.

Is Russia really close to WTO entry?

Putin said Russia could and "would like" to join the WTO in 2011. With both the USA and the EU supporting its bid Russia probably has a better chance than ever before of joining in 2011.

After signing an accord with the EU trade commissioner on Tuesday formalising EU support, Russian Economy Minister Elvira Nabiullina said it was "absolutely realistic" that Russia could join the WTO in the first half of 2011.

Russian WTO membership has become a goal of the "reset" in ties forged between the two countries` presidents after the arguments of the George W. Bush presidency.

Russian Finance Minister Alexei Kudrin said on Oct 1 the two sides had resolved key hurdles, accession could be agreed within 2-4 months and the accession procedure could take six to 12 months after that, indicating membership was likely in 2011.

Some issues remain:

Georgia:

Georgia, which lost two rebel regions after it was defeated in a 2008 war with Russia, could veto Russia`s accession, though the USA and the EU are likely to push Tbilisi to accept Russian entry. In return, Georgia has demanded a deal over customs controls on its borders but Russia has dismissed that as absurd and little is clear on what Tbilisi is seeking behind the scenes.

Jackson-Vanik:

A senior Russian official said the removal of the Cold War-era Jackson-Vanik amendment, which tied US trade relations to emigration rights for religious minorities, would indicate that US intentions were sincere.

Election Cycle:

Officials on both sides want Russian entry before Russia`s March 2012 presidential election and the November 2012 presidential election in the United States.

But if bilateral deteriorated sharply, Putin could easily put a brake on accession talks.

Bureau Report

Tags:

By continuing to use the site, you agree to the use of cookies. You can find out more by clicking this link

Close