Russian WTO Accession Generic

Matthew Hamilton Russian WTO Accession | Generic
Eveready 03/08/11
Russian WTO Accession | Generic

Table of Contents
1. General...................................................................................................................................................2
1.1 Basic Rules of the WTO..................................................................................................................2
2. PRO Accession.......................................................................................................................................3
2.1 Moscow-Based Companies Unprepared For Accession Earlier Than 2006...................................3
2.2 Russian Energy Sector Supports Accession....................................................................................4
2.3 U.S.-Russia Issues 95% Settled.......................................................................................................4
2.4 EU-Russia Disputes Have Been Settled..........................................................................................5
2.5 Russia Cooperating With Other Countries......................................................................................5
2.6 Russia GDP Gains of $53 -177 Billion Per Year.............................................................................5
3. CON Accession......................................................................................................................................6
3.1 Foreign Direct Investments Won't Necessarily Increase.................................................................6
3.2 Russia Just Wants a Voice in the WTO............................................................................................7
3.3 Russia's Key Economic Actors May be Hurt by Accession............................................................8
3.4 Russia May Only Receive Limited Benefits...................................................................................9
3. Jackson-Vanik........................................................................................................................................9
3.1 WTO Accession Coming Soon, as Well as JV Graduation.............................................................9
3.2 JV Restrictions Are Inconsistent With WTO Rules.......................................................................10
3.3 WTO Accession Coming Soon, as Well as JV Graduation...........................................................10
3.4 J-V to be Removed Before WTO Accession.................................................................................10
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1. General
1.1 Basic Rules of the WTO

The Centre for European Reform[is a think-tank devoted to improving the quality of the debate on the European
Union. It is a forum for people with ideas from Britain and across the contintent to discuss the many social, political
and economic challenges facing Europe. It seeks to work with similar bodies in other European countries, North
America and elsewhere in the world.], Katinka Barysch[is chief economist at the Centre for European Reform.
Having previously followed Russia for the Economist Intelligence Unit, she now manages the CER’s Russia
programme.], Robert Cottrell[heads the Financial Times bureau in Moscow. He previously worked for The
Economist in London and Brussels.], Franco Frattini[is Italy’s minister of foreign afairs. He is also a
member of the executive committee of the Aspen Institute Italia, a judge on the Consiglio dello Stato
and a lecturer in civil law at La Sapienza University, Romes.], Paul Hare[is professor of economics at
Herriot-Watt University in Edinburgh, where he is also research director of the School of Management and
Languages.], Pascal Lamy[has been EU trade commissioner since 1999. He was chef de cabinet for the former
president of the European Commission, Jacques Delors, and later chairman of Credit Lyonnais International.],
Maxim Medvedkov[is deputy minister for economic development and trade of the Russian Federation, and head of
the Russian delegation in the WTO accession talks. His career as a senior trade official dates back to 1980.],
Yevgeny Yasin[is the academic director of Moscow’s Higher School of Economics. He was economics minister in the
government of Prime Minister Viktor Chernomyrdin from 1994 to 1997.] , © CER DECEMBER 2002, ISBN 1
901229 39, http://www.cer.org.uk...wto.pdf
The WTO’s basic rules are the following:
• Protection only through tariffs. The WTO does not rule out
trade protection altogether. But it stipulates that if a country
deems it necessary to shield its domestic producers from
international competition, it should do so through import
tariffs only. So-called quantitative restrictions, for example
quotas for import volumes of certain goods, are forbidden,
with some rare exceptions.
• Obligation not to raise tariffs. WTO members promise not to

raise customs tariffs above the level agreed upon at the time of
their accession (this is referred to as tariff binding). They also
commit to lowering them through the WTO’s multilateral
negotiations. Exceptions exist for the least developed countries.
• The most favoured nation (MFN) principle. WTO members

have to apply the same regulations, including tariffs, to all
other member countries.
• National treatment. WTO members are not allowed to treat

imported goods and services differently from domestically
produced ones. This also applies to taxation.
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2. PRO Accession
2.1 Moscow-Based Companies Unprepared For Accession Earlier Than 2006

While the Russian leadership is clearly committed to WTO accession, the domestic politics of
accession are much more complex. Most businesses are sceptical. According to a recent survey among
Moscow-based companies for the Union of Goods Producers, two-thirds regard 2006 or later as an
acceptable time frame for WTO entry. Most consider themselves unprepared for earlier entry. The all-
important energy sector tends to support WTO entry although it has little to gain in terms of market
access.
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2.2 Russian Energy Sector Supports Accession

While the Russian leadership is clearly committed to WTO accession, the domestic politics of
accession are much more complex. Most businesses are sceptical. According to a recent survey among
Moscow-based companies for the Union of Goods Producers, two-thirds regard 2006 or later as an
acceptable time frame for WTO entry. Most consider themselves unprepared for earlier entry. The all-
important energy sector tends to support WTO entry although it has little to gain in terms of market
access.
2.3 U.S.-Russia Issues 95% Settled

Voice of Russia(Site info at end of brief), “Russia's WTO accession bid hits home run”,
http://english.ruvr.ru...141.html
Russia and the US report impressive progress in this country’s bid to join the World Trade
Organization, with the head of the US delegation at the ongoing trade talks, Ron Kirk, saying on
Saturday that the matter was “95% settled” now.
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2.4 EU-Russia Disputes Have Been Settled

RIA Novosti[Russia's leading news agency in terms of multimedia technologies, website audience
reach and quoting by the Russian media. Integrated multimedia newsroom, vast network covering over
45 countries of the world and the Russian regions allow RIA Novosti to deliver news and information
in all possible formats, including video, animated infographics and cartoons to professional clients and
the end user in 14 languages. ], December 17, 2010, “Russia moves one step closer to joining WTO
(Update 1)”, http://en.rian.ru/business/20101207/161669287.html
Russia, the only major economy outside the World Trade Organization (WTO), moved one step closer
to joining the trade bloc on Tuesday when it signed a memorandum of understanding on economic
issues with the European Union.
"We have reached an agreement on all key bilateral issues, including export duties on timber and
railway tariffs," European Commissioner for Trade Karel De Gucht told a Russia-EU summit.
2.5 Russia Cooperating With Other Countries

The Voice of Russia(Site info at end of brief), November 27, 2010, “No more barriers in the way of
Russia’s joining WTO”, http://english.ruvr.ru/2010/11/27/35747968.html [Brackets added]
Almost all issues have been generally agreed, he[Putin] said. Before that, Putin told German
businessmen during a meeting that Russia had covered its part of the path and had agreed all basic
problems with the European Union in practical terms.
2.6 Russia GDP Gains of $53 -177 Billion Per Year

The Carnegie Endowment for International Peace[is a private, nonprofit organization dedicated to
advancing cooperation between nations and promoting active international engagement by the United
States. Founded in 1910, its work is nonpartisan and dedicated to achieving practical results.],
December 10, 2009, “RUSSIA’S ACCESSION TO THE WTO”,
http://www.carnegieendowment.org...wto.pdf [Brackets added]
[According to Mr. David Tarr, the former lead economist for the World Bank:] So what would Russia
gain? And who gains, who loses? At the request of the ministry of economic development and also the
ministry of communications, I conducted several studies over several years on this subject. The initial
paper was with my colleagues Jensen and Rutherford. We estimate Russia would gain about 3.3
percent of GDP in the medium term from WTO accession and about 11 percent in the long term. This
is about 53 billion per year, each year in the medium term – just using the numbers I gave you on GDP
earlier – and about 177 billion per year in the long term.
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3. CON Accession
3.1 Foreign Direct Investments Won't Necessarily Increase

Although WTO membership entails legal adjustments and reforms that go way beyond international
trade in goods, it would be overly optimistic to assume that Russia’s accession would result in
rapid improvements in the investment climate. Over time, however, foreign investors may well take
heart if WTO accession is seen to lock in reforms while reducing the risk associated with investments
in Russia.
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3.2 Russia Just Wants a Voice in the WTO

For the international community, political arguments weigh as heavy as economic ones. Russia’s
economic importance for the world economy is limited – the size of its economy is comparable to that
of the Netherlands, if measured at market exchange rates. Politically, however, the country plays a
much larger role on the world stage. As the leading successor to the Soviet Union, Russia remains one
of the world’s key nuclear powers. And it is well integrated into the global network of international
organisations. It attends the G7 meetings of the world’s most developed economies(now G- 8). It
belongs to international financial organisations such as the International Monetary Fund and World
Bank, as well as more specialised ones, such as the International Labour Organisation and the World
Health Organisation. It is therefore an anomaly that it remains outside the WTO. Russia’s trading
partners are increasingly coming round to this view. Russia, meanwhile, considers that, since the WTO
is evolving over time, it would be better off having a voice inside than watching passively from the
sidelines. Active involvement was also one of China’s main reasons for joining the WTO, and this will
gain in importance as the new Doha round of multilateral trade talks progresses.
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3.3 Russia's Key Economic Actors May be Hurt by Accession

In terms of domestic politics, Russia will find it difficult to assemble a broad and strong coalition in
favour of WTO membership. In China, the producers of cheap manufactured exports, often backed by
western capital, had a strong interest in WTO membership. Russia’s key economic actors, however, are
raw material producers. They already face few international trade restrictions and have little to gain
from WTO entry. They may even stand to lose if WTO commitments undermined their existing
domestic monopoly positions. Russia’s industrial sector, meanwhile, is largely uncompetitive and
fearful of further trade liberalisation. Many branches are now lobbying for continued protection from
the government and would like to see WTO accession delayed, if not put off indefinitely.
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3.4 Russia May Only Receive Limited Benefits

Why should Russia join the WTO? A look at its trade accounts suggests that it might reap only limited
benefits from membership. Russia exports mostly raw materials, namely oil, gas and fuel products, as
well as precious metals, timber and iron. In exchange, it imports mainly manufactured goods, such as
machinery, consumer goods, cars and food products. Since the world markets for raw materials are
liberalised compared with those for manufactured goods, the majority of Russian exports face few trade
restrictions in other countries. In fact, Russia has been running massive trade surpluses in recent years,
in the order of $20-50 billion per year. Nevertheless, both Russia and the international community have
a strong interest in Russia’s WTO accession. Why?
3. Jackson-Vanik
3.1 WTO Accession Coming Soon, as Well as JV Graduation

Voice of Russia(Site info at end of brief), February 3, 2011, “Jackson-Vanik may be lifted - Russian
senator”, http://english.ruvr.ru...183.html
Russian Federation Council deputy and Chairman of the upper house’s Committee on International
Affairs Mikhail Margelov has said he has information that the United States is planning to repeal the
Cold War-era Jackson-Vanik amendment as early as this spring to pave the way for American
businesses in Russia following its accession to the World Trade Organization.
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3.2 JV Restrictions Are Inconsistent With WTO Rules

Boris Volkhonsky, Voice of Russia(Site info at end of brief), February 3, 2011,“Last relic of the Cold War to be
removed?”, http://english.ruvr.ru...839.html
But this time, things seem to be different. And the main reason is that in 2010 Russia successfully
removed all remaining obstacles on its path to the WTO reaching an agreement on its accession to the
organization with the leading world economic power, the USA. The WTO rules are completely
inconsistent with any trade restrictions, therefore the US will be forced to abandon the amendment if it
does not want to reverse the previously reached agreements.
3.3 WTO Accession Coming Soon, as Well as JV Graduation

Voice of Russia(Site info at end of brief), February 3, 2011, “Jackson-Vanik may be lifted - Russian senator”,
http://english.ruvr.ru...183.html
Russian Federation Council deputy and Chairman of the upper house’s Committee on International
Affairs Mikhail Margelov has said he has information that the United States is planning to repeal the
Cold War-era Jackson-Vanik amendment as early as this spring to pave the way for American
businesses in Russia following its accession to the World Trade Organization.
3.4 J-V to be Removed Before WTO Accession

The White House, Office of the Vice President, Via Teleconference, March 4, 2011, “CONFERENCE CALL ON
VICE PRESIDENT BIDEN'S UPCOMING TRIP TO FINLAND, RUSSIA AND MOLDOVA”,
http://m.whitehouse.gov...finland-russia-and-m [Brackets added]
Q Good afternoon. Russia’s WTO accession will be on the table. Can you give us on update on the possibility of Russia’s graduation from
the Jackson-Vanik amendment? As you probably know, Margelov has stated that Russia could be excluded from this amendment as early
as next month. Do you agree with this assumption? Thank you.
[Senior Director for Russian and Eurasian Affairs] MR. [Mike] McFAUL: Well, I would start by saying
what’s most important here is for Russia to finish its negotiations for accession. And many people may not realize this, but
we are negotiators in Geneva, and in our trade representative’s office here, work extremely closely with the Russian
negotiators to try to get done the literally hundreds of pages that need to be completed before accession is ready.
We applaud the very aggressive calendar that First Deputy Prime Minister Shuvalov has set out, and we’re going to work as hard as we
can with his negotiators and Russia’s negotiators to try to get this done this year.
With regard to Jackson-Vanik, just for everybody to understand, that's a somewhat different issue than WTO. It’s related, but
not linked. But we have said before that we plan to terminate the application of Jackson-Vanik in the near
future, and I think we’ll time that and that discussion will be related to when Russia is moving forward
in terms of finally finishing the negotiations on WTO.
National Security Advisor to the Vice President] MR. [Tony] BLINKEN: I would simply add that, as
Mike said, we are committed to working with Congress to terminate the application to Russia of
Jackson-Vanik. But let me emphasize that that requires working with Congress. And so that is something that we plan to do. We’re determined to
do, but it needs to be done with Congress. It’s not something that the White House can simply press a button and have done.
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Matthew Hamilton Russian WTO Accession | Generic

Russian WTO Accession | Generic

1.1 Basic Rules of the WTO

The WTO’s basic rules are the following:

• Obligation not to raise tariffs. WTO members promise not to

• The most favoured nation (MFN) principle. WTO members

• National treatment. WTO members are not allowed to treat

2.1 Moscow-Based Companies Unprepared For Accession Earlier Than 2006

2.2 Russian Energy Sector Supports Accession

2.3 U.S.-Russia Issues 95% Settled

2.4 EU-Russia Disputes Have Been Settled

2.5 Russia Cooperating With Other Countries

2.6 Russia GDP Gains of $53 -177 Billion Per Year

3.1 Foreign Direct Investments Won't Necessarily Increase

3.2 Russia Just Wants a Voice in the WTO

3.3 Russia's Key Economic Actors May be Hurt by Accession

3.4 Russia May Only Receive Limited Benefits

3.1 WTO Accession Coming Soon, as Well as JV Graduation

3.2 JV Restrictions Are Inconsistent With WTO Rules

3.3 WTO Accession Coming Soon, as Well as JV Graduation

3.4 J-V to be Removed Before WTO Accession

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