Despite some progress, Russia’s 14-year quest for WTO membership continues with still no definite end date in sight. Russia had previously made clear its desire to enter the WTO ahead of parliamentary elections in December 2007 and the presidential vote in March 2008. But those dates are no longer a realistic possibility, despite the removal of a major obstacle when the US signed off on bilateral negotiations with Moscow in November 2006. Russia’s accession still faces many difficulties, and unless these are resolved soon, Russia will continue to remain the world’s only major economy not part of the WTO.
To join, Russia must sign bilateral agreements with any of the 151 Members who request one and then finalise the deal through multilateral negotiations within the WTO. On 21 September 2007, Cambodia signed a bilateral agreement on Russia’s accession to the WTO, and earlier this year Russia also signed the same agreements with Vietnam and Guatemala. This leaves Georgia and Saudi Arabia as the two last countries to accept Russia to the organisation.
Georgia – a WTO Member since 2000 – says that it will block Russia’s accession until Moscow ends the wide-ranging economic blockade it erected following an espionage row in September 2006, when four Russian officers were arrested in Tbilisi on charges of spying and deported home. Amidst furious recriminations, Russia has blocked most trade (with natural gas a notable exception), transport and financial flows between the two countries. Even before the espionage row, Russia had an embargo against Georgia, prohibiting substantial imports of Georgian wine and fruits, citing sanitary problems. However, the real issue between Russia and Georgia is the status of two separatist territories in Georgia: Abkhazia and South Ossetia. Pro-Russian leaders rule these territories, and President Putin has often indicated that they should become independent.
Unless Russia and Georgia resolve their difficulties, Georgia – which had previously signed a bilateral protocol in 2004 but has since revoked it – is not prepared to sign any bilateral protocol onmarket access with Russia. Because WTO decisions require consensus among all Members, this means Georgia could veto Russia’s accession simply by withholding consent.
Other less problematic issues that may delay Russia’s accession include:
- The need for the US to rescind the Jackson-Vanik amendment in regard to Russia as it is inconsistent with WTO rules. The Cold War-era legislation, adopted in response to Soviet restrictions on the emigration of Jews and other minorities, prevents normal trade with interests in Russia.
- Moscow may have to conduct bilateral talks with Kiev in the event Ukraine joins the WTO before Russia does.
- The EU completed negotiations in 2004, but has repeatedly warned Russia that the success of its bid is still dependent on Russia phasing out fees that European airlines are required to pay in order to fly over Siberia.
- A threat by Poland to veto Russia’s entrance to the WTO if Moscow does not cancel an embargo on exports of Polish meat produce.
- The size of Russia’s farm subsidies and export duties, and the application of WTO rules to Russian state-affiliated companies remains unresolved.
- US officials remain concerned about counterfeiting and other intellectual property rights abuse, and have suggested that should Russian music site allofmp3.com reappear on the Internet, the US is unlikely to consent to Russia joining the WTO.
As for the impact on Russia’s economy of WTO membership, it is already a market economy so WTOmembership does not imply systemic changes as significant as those undertaken by China. Nevertheless, the positive effects on the Russian economy from WTO accession would be substantial. For example, almost one-quarter of Russia’s exports consists of metals, chemicals, and forestry products, which are highly sensitive to protectionism. In December 2006, German Gref, the former Russian Economic Development and Trade Minister, estimated that accession would boost Russia’s economic growth by up to 2% per year and an annual increase in the inflow of investment by 10 percentage points.
The EU has a clear interest in Russia joining the international world trading system: the EU is Russia’s main trading partner, accounting for above 50% of its overall trade, and Russia’s accession, and the resultant lower tariffs on many goods, will undoubtedly cement this position. Moreover, accession will give a timely boost to trade in services, which has great potential for growth and will undoubtedly be increasingly important to the EU-Russia trade relationship in the future. Accession will also further increase the attractiveness to EU companies of investing in Russia.