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August 22, 2012 Russian Federation Becomes a Full-Fledged Member of World Trade Organization

23.08.12

On August 22 Russia to Become a Full-Fledged Member of World Trade Organization

Business TASS, August 21, 2012 / 3:52 p.m.

 

The Ministry of Economic Development and Trade have already drawn up the draft strategy for protection of Russia’s national interests in the WTO, such strategy to define the country’s fundamental positions with regard to specific directions of international economical cooperation.

One of the top-priority missions that Russia assumes upon accession to the WTO lies in providing its assistance to Kazakhstan and Belarus in the course of their accession to this international organization, this according to the Ministry of Economic Development and Trade.

Besides, an active work is about to start this autumn aimed at lifting the current limitations on Russian export. As of July 01, 2012, 19 countries /Australia, Azerbaijan, Armenia, Belarus, Brazil, India, Indonesia, Kyrgyzstan, China, Republic of Korea, Mexico, Moldova, the USA, Thailand, Turkmenistan, Turkey, Uzbekistan, Ukraine, as well as the EU as a common customs territory/ are applying protective measures with respect to Russian goods.

Russian goods are subjected to 73 measures, and namely: 40 anti-dumping duties, 3 special protective duties, 14 non-tariff measures, 4 technical barriers, 5 quota limitations, 2 additional taxes, 3 discriminatory excise taxes, 1 nomenclature-related limitation and 1 prohibition of import. Five investigations are also being conducted, including 4 anti-dumping one and 1 special protective investigation, as well as 12 reviews of anti-dumping measures.

The Ministry of Economic Development and Trade point out that Russia’s accession to the WTO does first of all mean the stability of operating conditions on foreign markets, lowering of trade barriers and the opportunity of Russia’s participation in elaboration of international economic cooperation rules. At the same time one cannot forget that conditions to WTO accession include lowering of import customs duties, limiting the state support of a number of industries that may result in the growth of foreign goods’ competitive strength.

The first reduction of duties is going to take place right upon Russia’s accession to the WTO, although this mainly affecting the goods, the tariff rates to which were increased in 2007-2011 as part of application of “anti-recessionary measures” to create more comfortable conditions for domestic manufacturers and not cancelled prior to completion of the process of negotiating Russia’s accession to the WTO.

On the whole, however, upon completion of transition periods for market access liberalization, which normally take 2 to 3 years, while with regard to the most sensitive goods taking 5 to 7 years, the reduction of weighted average import tariff rate from the current level is going to amount, with regard to industrial goods - 3 percentage points and with regard to agricultural products amounting to 4.4 percentage points. Some 30 per cent of rates are going to reduce by no more than 5 percentage points.

 

Rates of duty on foreign medicines are going to reduce from 15 to 5 per cent to 6.5 to 5 per cent within transition period and, at the same time, duties on medical equipment and medicinal substances are going to decline at priority rates /to 2 to 3 per cent/.

Accession to the WTO is not going to significantly affect the chemical products market in the vast majority of cases. As a whole, the rate of duty will reduce from 10 to 6.5 per cent to 5 per cent. While in cases of more significant reduction / beauty products, soap and detergents, linoleum, some end products made of plastic/ – this is about to occur within 5 to 6-year transition period.

Rates of duties on technological, construction, scientific and measuring equipment will be noticeably reduced or cancelled.

Duties on computers, means of their manufacture and hardware components will be cancelled within 3 years following the accession. Having declined from 15 per cent, the duties on household electrical goods and electronics are going to remain at 7 to 9 per cent level.

As regards transportation vehicles, the level of tariffs as of the time of accession to the WTO must return to Russian tariffs “pre-crisis” level (pre-2009 period). In relation to brand-new cars, the duty is about to decline from 25 per cent to 15 per cent within 7 years, this reduction mainly to occur within the last 3 years, thus on the one part protecting the interests of Russian buyers and consumers, while on the other part allowing to implement in full the major foreign-invested car manufacturing projects in Russia. That said, the duties on junk cars /pre-used for 3 to 7 years/ will remain at 20 per cent level following the decline from 25 per cent within transition period.

The duties on finished fish products will reduce insignificantly – from 15 to 12.5 to 12 per cent in 1 to 3 years. As regards raw fish, the duties on many its types are going to reduce from today’s 10 per cent to 6 to 8 per cent, in some cases reducing to 3 to 5 per cent.

Duties on milk, dried and concentrated cream and butter are going to reduce from 25 to 20 per cent, thus reverting the rates to the level that was applicable prior to January 1, 2010. By the time of accession, the current tariff applicable to tea and coffee items is not going to decline generally.

Russia will reduce duties on some cattle and pet feedstuffs /including soybeans, press cake and oilseed meal/, non-Russian-cultivated vegetables, fruits and nuts /pistachio, peanuts, oranges, grapes, bananas and so on/, especially on vegetables and fruits in winter. The import of raw stuff that is deficient in the food industry /for example, high-quality lactoserum/ will become easier.

Upon accession to the WTO Russia will continue the tariff quota allocation treatment of beef, pork and poultry import. The finishing date of tariff quota allocation treatment of these meat types has not been determined yet. The finishing date of tariff quota treatment of pork is December 31, 2019.

The conditions of access to beef market will remain at their current level, while those in respect of poultry and pork to tighten.

By acceding to the WTO, Russia is going to assume obligations on 116 out of 155 service sectors, as provided for in WTO classification/. In vast majority of cases, however, such obligations do not provide for any changes to the current system of regulation. The main exception to this rule is represented by insurance sector, where the total quota of foreign participation in the sector must be raised from 25 to 50 per cent, while 49 per cent limitation on foreign capital participation in the companies involved in life insurance and compulsory insurance is going to transform into 51 per cent limitation upon the date of accession and to be cancelled in 5 years. Effective from 2004, though, 49 per cent limitation on foreign capital participation in the companies involved in life insurance and compulsory insurance will not be applicable to the insurance companies with EU-originated capital participation. In 9 years following accession to the WTO, formal permission to work in Russia will be granted to “direct” affiliates of foreign insurance companies – the limitations prescribed by Russian obligations, though, allowing to establish the conditions for affiliates’ access and activity at Russia’s market, identical conditions for incorporation and Activity of legal entities, thus considerably depriving these affiliates of their competitive strengths as compared to Russian companies.

In a number of sectors, the obligations provide for the opportunity to implement more stringent measures as compared with current treatment. Thus, for example, Russia will be able, if necessary, to introduce state monopoly on alcohol trade.

Being part of the WTO, Russia will only affirm the currently applicable system for import and activity type licensing /except for transition to automatic licensing of alcohol import/. The system of notices relating to the goods with cryptographic component will be preserved.

Russia’s WTO obligations relating to industry subsidizing represent customary obligations of a well-developed WTO member country. It will be prohibited to directly subsidize the exporters, as well as to grant subsidies that can be obtained subject to the condition of using domestic goods only /for example, when subsidizing purchases of the machinery that must only be domestically manufactured only, or when using domestic components in manufacture/. The share of such subsidies in the total amount of state support of Russia’s industry is extremely insignificant and of sporadic nature, while systemic support measures taken, to name a few, as part of Federal target-oriented programs, do not contradict to WTO rules, and Russia will be able to implement them without any limitations on the amount of subsidizing.

The transition period for granting to the investors in Kaliningrad and Magadan special economic zones of the benefits contradictory to WTO rules will allow fully to implement the investment projects on the conditions prescribed by Russian laws.

The arrangement for application of the transition period, during which the elements of “industrial assembly” treatment of cars and car components, such elements being contradictory to WTO rules, may continue to exist, is an unprecedented one in WTO history by the amount of exemptions in economic and legal terms. The transition period expires on July 1, 2018, when the vast majority of investors are to ensure a full cost recovery of their investment projects and start generating net profit from the investments contributed. WTO-related arrangements will not result in termination of investment agreements.

In the process of negotiations on Russian Federation’s accession to the WTO, statutory regulations were adopted step by step, such regulations not only bringing Russian intellectual property protection laws into conformity with WTO standards, but also updating them. As a result, Russia’s laws applicable in this sphere does fully conform with WTO rules and standards, particularly, with the Agreement on Trading Aspects of Intellectual Property Rights Protection.

Russia’s policy on energy sources prices must upon Russia’s accession to the WTO ensure repayment of costs and generation of profit by Russian natural gas producers and suppliers. They should act on the basis of commercial considerations. That said, such rules do not apply to gas supplies to non-commercial gas consumers, with respect to which Russian Federation reserves its right to apply such regulation of natural gas prices, which is to ensure the achievement of Russia’s socioeconomical goals and objectives. In other words, WTO-related obligations are in line with current legislation and practice.

Russia’s obligations relating to sanitary and phytosanitary measures and technical regulation are aimed at ensuring compliance with WTO rules. These should be based on international standards, backed by sufficient scientific rationale and risk assessment.

At the same time, Russia will reserve the right to apply more stringent requirements, as compared to the said international standards, where this is required by the protection level established in the Russian Federation. For this purpose, Russia will take an active part in the activity of respective international organizations when drafting their standards and recommendations.

Transparency will be ensured with regard to the procedure for importer’s possible contesting the suspension, cancellation or refusal to grant the permit to the import of regulated goods and to obtain a written reply clarifying the reasons for taking respective decisions and the measures to be taken by the applicant in order to be granted the permit. The Federal Service for Veterinary and Phytosanitary Surveillance undertakes, prior to taking the measures aimed at import suspension, to grant to the exporting country the opportunity to take respective corrective measures. This obligation does not apply to the cases associated with considerable risks to human and animal health.

As regards technical regulation, Russian Federation will ensure conformance between the laws in this sphere, and the requirements set forth in WTO Agreement with regard to technical barriers in the trade. Technical regulation will be drafted subject to international standards and recommendations, and the necessity to ensure an adequate level of safety in the Russian Federation.

According to the obligations, RF will ensure a required level of transparency of the laws and of the practices of foreign trade regulation in Russia. All general-purpose regulations and standards governing the trade will be published in official sources without coming into effect until the time of their official publication. Besides, when drafting regulatory legal acts Russia will provide all interested persons with the opportunity within reasonable time to submit their comments and proposals on drafts versions of such acts prior to the time of such acts’ adoption. This is meant to ensure a proper level of predictability of legal environment in the Russian Federation.

Obligations to provide support to agricultural sector do differ from standard obligations assumed by other countries that acceded to WTO. According to the standard approach, the acceding country shall “freeze” the total amount of trade-distorting support at the level of three-year period preceding the accession, and reduces the same within a short period following the accession.

As applied to Russia, the permitted level of support will amount to USD 9 bln, which is more than twice as large as the level, which would be permitted in Russia in accordance with standard rules. This permitted level of support will thereafter gradually reduce, and since 2018 it will be “frozen” at the current level. Besides, Russia confirmed that, following its accession to the WTO /just as today/ agricultural export subsidies will not be applied.

As regards the US, unless Jackson-Vanik amendment is abolished, WTO norms are prohibited for use in trade with this country. This means that trade with this country will be governed by the applicable bilateral trade agreement.

Russian Federation filed its application with WTO in June, 1993. The Working Group on RF’s accession to the WTO was set up in June 16-17, 1993. The first meeting of the working group was held in July, 1995. In the period from 1995, the Working Group officially held 31 meetings. A number of informal meetings took place as well. Three persons chaired the Working Group: William Rossier /Switzerland/ from 1995 to 2000, Kare Bryn /Norway/ from 2000 to 2003 and Stefán Johánnesson /Iceland/ from 2003 to 2011.

The final WG meeting was held on November 10, 2011 in Geneva: a package of documents relating to Russia’s accession to the WTO were approved thereat, whereupon the WG’s dissolution was declared. The document package includes WG report specifying all the rights and obligations assumed by Russia as a result of negotiations, the list of obligations relating to tariff concessions relating to the goods and by the level of agriculture support, the list of services-related obligations and the accession protocol. The issue of accession was finally resolved at WTO Ministerial Conference held in Geneva on December 16, 2011: RF’s accession to the WTO was approved unanimously. On July 10 and 18, 2012, the protocol of RF’s accession to the WTO was approved by the State Duma and ratified by the Federation Council; on July 21, the law on protocol ratification was signed by President Vladimir Putin. According to WTO rules, a country becomes a full-fledged member of the organization in 30 days following the end of ratification process, i.e. on August 22.

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