Russia » Economics

Russia will Never Lose Sight of the WTO

WTOIn October, when rumours about irreconcilable differences in Russian and EU approaches to the problem of natural gas tariffs appeared in the press, many observers concluded that Russia would have to forget about joining the WTO for at least three to four years. However, after the November Russia-EU summit in Rome, where both sides announced their intention to conclude the talks in 2004, the situation did not seem so hopeless, after all. The head of the Russian delegation at the WTO talks, Deputy Economic Development Minister Maxim Medvedkov, has announced the schedule of WTO discussions in the near future, which clearly indicates that the "October emotions" have been forgotten and the preparatory work is in full swing.

In particular, the Russian delegation will conduct a round of talks with its American partners at the end of November. At the beginning of December, EU envoys will arrive in Moscow to discuss the conditions of Russia's accession to the WTO. Apparently, positive results are ensured by the fact that on November 18 the Russian State Duma concluded the process of adapting the Russian legislation to WTO standards by adopting the final law of the "adaptation package" - the law On Anti-Dumping, Protective and Compensation Measures.

Russia is simultaneously conducting negotiations with 68 WTO members, which is a world record. Before joining the WTO, China, for example, discussed the issue only with 37 countries. Nevertheless, Maxim Medvedkov is constantly optimistic with journalists, trying to reassure them that Russia's attitude toward the accession to the WTO has not changed a bit.

However, many Western experts are currently posing a legitimate question: how will the December 7 parliamentary elections influence Russia's accession to the WTO? "They won't affect the process at all," answers Mr Medvedkov. "These are two separate matters." "Russia's position was formulated back in 1994, and it has not changed at all," he adds. "Russia's accession to the WTO remains a priority of Russian economic policy." The deputy minister states that talks with many countries on trade issues are almost over. However, when Mr Medvedkov starts listing the remaining problematic topics - airplanes, cars, agricultural products - another question immediately arises: on what issues have the sides reached agreement? For instance, the United States is primarily concerned about "everything that has wings" - exports of poultry and airplanes. There has been some progress on the former issue, but the positions of both countries on the export of Boeing planes remain the same: the USA wants to see a 5% import duty, while Russia wants to impose 15%.

Nevertheless, Mr Medvedkov believes that the problems are not unsurpassable and the sides have the potential to reach a reasonable compromise and bring their positions closer together. And this is what matters in the end. Russia is willing to lower the average level of tariff protection from the present 11% to 7.5-8% in the 5-7 years of the transitional period. Apparently, the agreement is supposed to be reached sometime in 2004 after incessant bargaining.

Negotiations on services are going even slower. Our partners in Europe and the United States are insisting on the drastic liberalisation of the Russian markets of banking, insurance and telecommunication services. Their demands are understandable. For example, Rostelecom -- the long-distance communications monopoly -- posts annual growth of 40%. Foreign providers are certainly interested in partaking in the profits of this extremely promising market. Russia is ready for liberalisation in this sphere, but only after a 5-7 year transitional period, and not to the full extent. Mr Medvedkov and his colleagues believe that Russian insurance and banking companies must have a protected share on the domestic market because they created these markets from scratch, and it would be unfair to let foreign companies enter these markets before the Russian companies have been given a chance to become stronger. And it might take them quite a while to do so. Here is a single detail: the aggregate capitalisation of all Russian banks equals the capital of a large European bank.

We all know the reasons for this September's failure of the talks on tariff reductions within the framework of the WTO in Cancun: developing and developed countries had too many disagreements in the agricultural sphere. The same applies to Russia. Agriculture is a very sensitive sector of the economy. Russia's partners -- proponents of trade liberalisation -- are demanding that the country fight against state subsidies. "However, while there are countries that keep subsidising their agriculture and, therefore, destroy our market," says Maxim Medvedkov, "we cannot afford to eliminate support for our agricultural sector and will not do so under any circumstances. We are willing to move towards liberalisation as fast as other countries." In addition, the "energy package" remains a major problem. In this sphere, our major opponent is the European Union. The measures the EU is insisting on, i.e. a rise in domestic gas prices to meet European levels, are unacceptable for Russia, and Moscow does not intend to change its position. The difference between domestic and export prices is a normal phenomenon of the world trade, Mr Medvedkov stresses.

Vladimir Putin clearly formulated the Russian position during the meeting in Rome. Russia is willing to assume all the standard responsibilities of a WTO member on the condition that it will be able to enjoy all the rights of an ordinary member.

The majority of EU demands in the sphere of gas exports goes beyond this formula. "We are having discussions about the trade regulations on gas products in WTO countries and how these countries fulfil their obligations to the organisation. We believe that we will find the solution sooner or later," says Maxim Medvedkov.

Although the deputy minister underlines that Russia respects the economic interests of its partners, there is a limit that Russia will never go beyond. "After all," he says, "for Russia, joining the WTO is an instrument of economic growth rather than an instrument of unilaterally opening up national markets, which could harm the development of the country."

Marina Shakina, RIAN