News and Analysis • Volume 12 • Number 23 • 25th June 2008

Despite Obstacles, EU Expects Russia to Join WTO This Year

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On a visit to Moscow last week, Europe’s top trade official said that he believed that Russia is in a position to finalise the terms of its planned accession to the WTO within the year.

Though challenges remain - including disputes over Moscow’s export duties on timber and its ban on some imports of European meat - European Trade Commission Peter Mandelson remained optimistic about Russia’s WTO prospects.

“I don’t identify any issue on the table at the moment which is so complex or so big a problem that it causes me to be pessimistic about the outcome,” Mandelson told Reuters.

“I certainly think we can secure agreement on Russia’s accession by the end of year,” he said.

Russia, the largest economy in the world still outside the WTO, has been pursuing membership in the global trade body for nearly 15 years.

One potential obstacle to Russia’s accession is its ongoing disagreement with the EU over its timber export duties (see BRIDGES Weekly, 20 February 2008, http://www.ictsd.org/weekly/08-02-20/inbrief.htm). EU member states Sweden and Finland have complained that Moscow’s plans to sharply increase its timber export taxes - from the current 25 percent of raw timber value to 80 percent at the start of 2009 - will hurt European paper companies.

Russia has also drawn the ire of its European neighbours by implementing a number of company-specific bans on poultry, pork and beef imports, claiming that the meat contains excessive levels of antibiotics. The import ban has hit meat firms in Belgium, Denmark, France, Germany, Italy, Hungary and Spain.

Commenting on Moscow’s meat restrictions, Mandelson told Reuters last week that he regretted the measures, which he described as “exaggerated.”

“I’m not even sure that it’s justified and either way these issues need to be resolved as soon as possible,” he said.

But Mandelson went on to stress that he did not consider the current disagreements insurmountable, calling the disputes “irritants…not impediments to the negotiations on WTO.”

The EU, which is by far Russia’s biggest trading partner and source of investment, has a vested interest in smoothing out ongoing disagreements and facilitating Moscow’s entrance into the WTO. Indeed, the 27-member trading bloc hopes to begin negotiating a free trade agreement with Russia once its membership in the global trade body has been finalised.

The EU currently receives more than half of all Russian trade. EU exports to Russia totaled US$112 billion in 2006, representing 6.2 percent of all EU exports. Just over one tenth of EU imports - or nearly US$220 billion - came from Russia in 2006. Although trade is growing between the EU and Russia, it remains largely concentrated in the energy and minerals sectors.

Accession talks with Ukraine, Georgia have yet to be finalised

Despite ongoing disagreements with the EU, Russia has made significant progress in its accession talks, having already signed protocols with more than 60 WTO Member states. All applicants for membership in the global trade body must negotiate bilateral accords with any WTO Member that requests one. As with most WTO decisions, any single Member has the power to block Russian accession.

The only bilateral talks that remain unresolved are the negotiations with two former Soviet republics, Ukraine and Georgia. Concluding talks with each of those countries could prove a challenging task.

Ukraine, which joined the WTO last month, filed an application at the end of May to initiate bilateral negotiations with its neighbour to the east. Despite historic strains on trade issues between the two countries, Ukraine has claimed that it will not seek to block Russia’s bid. To the contrary, Kiev has indicated that it intends to help facilitate Moscow’s membership in the global trade body. Once Moscow has joined, Ukrainian officials reason, its trade policies will be bound by the rules of the global trade regime, and Ukraine will be able to air its complaints against Russian policies in front of the WTO’s Dispute Settlement Body.

Negotiations with Georgia, another Russian neighbour, might present a greater challenge. Although Georgia completed a bilateral accession deal with Moscow in 2004, it withdrew its signature from that agreement two years later (see BRIDGES Weekly, 25 October 2006, http://www.ictsd.org/weekly/06-10-25/story2.htm). Tbilisi again broke off bilateral talks with Moscow in April, saying that it would veto Russia’s bid unless the country agreed to stop operating customs checkpoints in Georgia’s separatist territories of Abkhazia and South Ossetia. Tbilisi also wants Moscow to lift its ban on imports of Georgian wine and other products.

Russian trade official Maxim Medvedkov said last week that no further two-way negotiations had yet been scheduled with Georgia.

Even after Russia completes all of its bilateral talks with the Member states that request them, the WTO’s Working Party on Russian Accession will still have to set the specific terms of the country’s package of accession commitments.

ICTSD reporting; “Georgia won’t be at Russian WTO talks,” KOMMERSANT, 13 June 2008; “Ukraine to bolster Russia en route to WTO,” KOMMERSANT, 12 June 2008; “Speed bumps on Russia’s WTO road,” MOSCOW NEWS WEEKLY, 22 May 2008; “EU’s Mandelson sees Russia WTO deal in 2008,” REUTERS, 19 June 2008. “Gazprom comes up in WTO negotiations,” KOMMERSANT, 19 June 2008; “EU wants Russia to lift meat bans,” ALLABOUTFEED.NET, 12 May 2008; “Ukraine joins the WTO,” THE NEW YORK TIMES, 6 February 2008.