Russia’s Accession to the WTO
After Gunnar Wiegland, Deputy EU Foreign Policy Commissioner visited the Georgian capital late in October the stalemate in the negotiations was broken. He conveyed a message to the Georgian authorities that the European Union might secure such an amendment of the rules as would permit to admit a new member to the WTO by a majority vote and Russia would joint the WTO without the Georgia's consent and it would be a serious political defeat to Georgia.
As a result, Tbilisi immediately agreed on the option which allowed for deployment of international observers on land sections of the border to monitor cargo movement. Monitoring will be carried out by companies which are equipped with the state-of-the-art technology and have an efficient information exchange mechanism. Also, a mechanism of settlement of disputes between the parties is provided for.
On November 10, 2011, the working group on Russia's accession to the WTO approved the final protocol which specified the terms of the country's membership in that international organization. Russia will become a full member by mid-summer 2012. On December 15-17, a ministerial conference will be held in Geneva where the WTO's 153 member-states either approve or disapprove the recommendations of the above working group. There have been no precedents of ministers' disapproving the proposals of the working group. After approval of the package of documents, the Russian Federation will have 220 days to have it ratified. Thirty days after notification of the WTO of the ratification, Russia will become a full member of that organization.
To become a member of the WTO, Russia has agreed to reduce import duties on most goods and such a reduction will be carried out step-by-step within the period of eight years. Negotiations on the tariffs were completed as early as 2007, but as during the crisis duties were raised on some goods they need to be reduced to the pre-crisis level. With Russia's accession to the WTO, duties on new cars will fall fr om the existing 30% to 25%, and then gradually within seven years, to 15%.
Over one-third of the import duties will be reduced from the day of Russia's accession to the WTO, while another quarter is reduced in three years after the accession. The largest transition period of eight years is allowed for poultry meat, while that of seven years, for helicopters and civil aircraft.
Generally, on the basis of the results of the transition period Russia promises to reduce the average weighted rate of import tariffs from 10% in 2011 to 7.8% by July 1, 2018. The duties on manufactured products will be reduced on average from 9.5% to 7.3%, while those on agricultural products, from 13.2% to 10.8%. The tariff rate will be reduced on dairy products from 19.8% to 14.9%, on cereal crops from 15.1% to 10%, on oil-yielding crops, fat and oils from 9% to 7.1%, on chemical products from 6.5% to 5.2%, on electric equipment from 8.4% to 6.2%, on timber and paper from 13.4% to 8% and on sugar from $ 243 a ton to $ 223 a ton. Duties on cotton and IT products will be reduced from the existing 5.4% to 0%.
The tariff quotas on import of meat will be preserved, while duties beyond the quotas are reduced. The duties on pork within the quota will be reduced from 15%, but no less than Euro 0.25 per kg to 0%, while those beyond the quota are reduced from 75%, but no less than Euro 1.5 per kg to 65% and from the year 2020, to 25%. The duties on poultry meat within the quota remain at the level of 25% (but the limitation of no less than Euro 0.2 per kg is removed), while duties beyond the quota are reduced from 95% (but no less than Euro 0.8 per kg) to 80%. The only exception is made for beef: within the quota the duties on beef will be preserved at the level of 15%, while beyond the quota they are raised from 50% to 55%.
Also, by 2018 Russia has promised to reduce by 50% subsidizing of the agriculture (that is, from $ 9bn in 2012 to $ 4.4bn) with enterprises of the agricultural sector granted no export subsidies. Also, VAT privileges will be abolished in respect of individual categories of products.
In addition to the above, to avoid an excessive concentration of the state support of specific types of agricultural products Russia has promised that it will spend no more than 30% of the total amount of subsidies on them till 2018. Also, the agreement deals with introduction of prohibitive duties: Rosselkhoznadzor is not allowed to ban import of products from specific enterprises until the exporter-country has proposed measures to eliminate violations. The above rule is not applied only in cases wh ere there is "a serious risk to health of animals and human beings".
Russia has agreed on limitation of the export duties on over 700 goods; it concerns the produce of fishing industry and tannery industry, mineral fuel and oil, timber, paper pulp and nonferrous metals.
There will be changes in the services market, too. Foreign banks will keep operating through its subsidiaries. A foreign bank which intends to enter the Russian market will not be allowed to open its branch. The general quota of the foreign capital participation in the banking sector must not exceed 50%.
By 2015, Russia has promised to remove all the limitations on participation of the foreign capital in the telecommunication sector. At present, the above sector is considered a strategic industry and gaining of control over enterprises of that sector needs approval of the government. All the operators of the cellular ‘big three', as well as Rostelekom can be defined as strategic ones.
Foreign insurance companies may open branches in nine years after Russia's accession to the WTO.
By July 1, 2013, tariffs on railway carriage of transit goods are to be the same as for the internal carriage.
Accession to the WTO may have a positive effect on the capital inflow to the country. The key elements of the Russian foreign trade legislation are linked together now, which situation makes the Russian business climate more predictable. That will be an important advantage of the accession to the WTO.
Quotas on Russian goods and other discriminatory measures will be abolished. It concerns the produce of chemical industry, metallurgy and agriculture. There are about 100 such limitations and they affect Russia's commercial interests which are evaluated at about $ 2.5bn a year. Now, a portion of those limitations will be abolished automatically, while the other is not.
N.P. Volovik, Head of the Foreign Trade Department