After 18 years of negotiations, the WTO Working Party on Russian accession to the WTO has approved an agreement. It must now be passed by the Eighth WTO Ministerial Conference meeting on December 15-17 in Geneva. The Russian Federation government will then have until June 15, 2012 to approve the agreement. Thirty days after the Russian government signs-off on it, Russia will become a full member of the WTO.
As with all new members, the existing 153 members with specific concerns about Russian trade have negotiated 57 bilateral agreements on trade in goods and 30 on trade in services. The average bound tariff ceiling on goods will be 7.8 percent compared to 10.0 percent under current rules. The average bound tariff ceiling for agriculture will be lowered to 10.8 percent from 13.2 percent and the manufactured goods average ceiling will decline to 7.3 percent from 9.5 percent. The final bound tariff rate on over one-third of the tariff lines will be implemented at accession with another one-fourth after three years. The longest implementation periods are eight years for poultry and seven years for motor cars, helicopters and civil aircraft.
Tariff rate quotas (TRQ) with higher over quota tariffs are established for meat and dairy products. For beef, the in-quota tariff is 15 percent with the over quota tariff at 55 percent. Pork will have a favorable in-quota tariff of zero, but an over quota tariff of 65 percent. In January 2020 the TRQ for pork will be replaced by a flat tariff not to exceed 25 percent. Selected poultry products will have in-quota tariffs of 25 percent and over-quota tariffs of 80 percent. Some whey products will have TRQ tariffs of 10 percent and 15 percent. Some TRQs will have allocations for specific WTO members. Meat will have requirements on declaration and/or entry at designated customs checkpoints. Country-specific customs procedures will not be allowed.
Agricultural subsidies are also addressed in the agreement. Total trade distorting agricultural support will not exceed U.S.$9.0 billion in 2012 and be gradually reduced to U.S.$4.4 billion by 2018. Through December 31, 2017, annual agricultural support going to specific products cannot exceed 30% of the total agriculture support that is not for specific products to avoid excessive concentration of support on individual products. All agricultural export subsidies will be bound at zero. At accession, the VAT exemption applied to certain domestic agricultural products will be eliminated.
Sanitary and phyto-sanitary (SPS) issues have been a major problem for the U.S. and other exporters of meat to Russia. All SPS measures will be developed and applied in accordance with the WTO Agreement. Russia will join and actively participate in the Codex Alimentarius, the World Organization for Animal Health (OIE) and the International Plant Protection Convention and will apply international standards for SPS measures. Suspensions, cancellations, or refusals of import permits will be consistent with international standards and guidelines and the WTO SPS Agreement. Russia is obligated to negotiate veterinary export certificates with different requirements if an exporting country makes a substantiated request prior to January 1, 2013. Except in case of serious risks of animal or human health, the Russian government will not suspend imports from processing facilities based on on-site inspections before it gives the exporting country the opportunity to propose corrective measures.
Russia will allow 100% foreign-owned companies to engage in wholesale, retail and franchise businesses upon accession to the WTO. That will encourage more rapid modernization of food supply chains that has slowed import access in other WTO member countries.
As a major exporter of raw materials, Russian export duties are an important issue. Export duties would be bound for over 700 tariff lines, including mineral fuels and oils, raw hides and skins, wood, pulp and paper and base metals. This policy has an echo of the failure to anticipate Chinese actions to restrict exports.
The Russia government has a reputation for quickly changing rules on imports to protect domestic industries. It has agreed that quantitative restrictions on imports, such as quotas, bans, permits, prior authorization requirements, licensing requirements or other requirements or restrictions not justified under the WTO provisions will be eliminated and not re-introduced. They will apply the same rail transportation charges to imported products as similar products moving between domestic locations.
Russia plans to join the WTO Government Procurement Agreement (GPA). It will become an observer to the GPA on accession and initiate negotiations for membership within four years. Upon accession, government agencies will award contracts in a transparent manner. Russia will apply the provisions of the WTO Agreement on Trade-related Aspects of intellectual property Rights including provisions for enforcement, without recourse to any transitional period.
A customs union between Russia, Kazakhstan and Belarus became effective January 1, 2010. All customs borders were removed between the three countries on July 1, 2011. From January 1, 2012, the three states will be a single economic area.
For U.S. companies to receive full benefit from Russia’s accession, Congress must lift the Jackson-Vanik amendment with respect to free emigration from Russia and authorize the extending of Permanent Normal Trade Relations (PNTR) to Russia.
The Russian government will provide annual reports to WTO members on developments in its on-going privatization program. According to a recent analysis by the Peterson Institute for International Economics, “US exports to Russia could double over the next five years—from $9 billion in 2010 to $19 billion—adding jobs in the services, agriculture, manufacturing, and high-tech sectors.” Joining the WTO now will be advantageous to Russia and its trading partners if Russia can overcome its past tendencies to use import restrictions to protect domestic suppliers that cannot compete in world markets.
Ross Korves
Ross Korves is an Economic Policy Analyst with Truth About Trade and Technology