Russia’s Accession to the WTO

IMGXYZ1461IMGZYXDespite broad agreement that Russia, one of the world’s largest economies and a military superpower, should be a member of the World Trade Organization (WTO), sixteen years after its application process began, the country remains on the outside looking in.

In a rare WTO Secretariat public comment on Russian accession, a distinguished panel of experts and officials, including Chiedu Osakwe, director of Accessions at the WTO, David Tarr, former lead economist and consultant at the World Bank, Aleksey Shishayev, counselor and head of the economic section of the Russian Embassy in Washington, and Carnegie’s Ambassador James Collins, discussed the progress of Russia’s accession process and offered suggestions on how to move forward on this critical issue. Carnegie’s Uri Dadush moderated.

The Progress of WTO Accession

The requirements for accession to the WTO (described in Article XII of Agreement Establishing the World Trade Organization) are clear, Osakwe explained: acceding states or trade unions must be fully autonomous and have the capacity to implement WTO regulations. From the day of accession onwards, acceding states must strengthen the WTO system and not threaten its stability.

The Russian accession process, which began in 1993, had nearly concluded in June 2009. Russia had already signed 53 bilateral agreements with member countries, the largest number of any accession country and they were also being consolidated by the WTO Secretariat.

• On June 9, in a move that surprised WTO officials as well as representatives of member governments, Russia announced that it would join the WTO as a customs union with Belarus and Kazakhstan, who are also seeking accession.
   
• Russia abandoned this plan in October, electing to pursue autonomous, yet simultaneous, accession with Belarus and Kazakhstan. Russian representatives have promised to provide WTO officials with a note explaining the details of this plan, including tariff schedules. At present, the WTO accession process has been suspended by Russia until the note can be completed.

Are Conditions Placed on Russia Unusual?

Russian Prime Minister Vladimir Putin has claimed that WTO member countries, including the United States, are blocking Russian accession. Tarr disagreed, arguing that, overall, the demands placed on Russia are not unusual, with the exception of gas pricing restrictions. In fact, Russia was allowed to avoid opening its territory to foreign banking, a commitment that the United States had demanded from all other acceding countries not classified as “least developing countries.”

Osakwe and Collins emphasized that no single member is holding up Russia’s accession. Though the WTO requirement for consensus provides members with a veto in theory, it is difficult for an individual country member in practice to resist the broader community.

Russia Stands to Gain from WTO Accession

Russia has a great deal to gain from WTO accession, including faster growth and much-needed institutional reform.

• Tarr offered analysis suggesting that Russia would see a 3.3 percent increase in GDP in the medium term, and an 11 percent increase in the long term. These gains would come largely from liberalization of policies in Russia, not from greater market access provided by the WTO.
   
• The improvements would be spread across all of Russia, though regions with a strong service sector will see the largest gains. The benefits will also be slightly progressive, with the poor gaining slightly more than the rich.
   
• Russian accession could also provide the impetus for institutional reform in Russia that would not be possible otherwise, argued Tarr. Russia has a poor business climate and ranks very low in indices that measure corruption and trade logistics; reforms associated with the WTO accession process are also needed to mitigate these problems.

Given these potential gains and the significant progress Russia has already made, Russian officials feel strongly that it is time for the WTO to accept Russia as a member, explained Shishayev.

• While Russian trade policy is not perfect, neither is that of any other country. The WTO itself, not accession to it, should be viewed as the tool used to correct these issues.  Solving problems while in the WTO is much more efficient than solving problem outside it.
   
• Furthermore, recent troubles are not limited to Russia. The financial crisis and the stalling Doha round have damaged global trade, not just Russian trade.
   
• The proposed customs union has historical roots. Close ties have existed between Russia, Kazakhstan, and Belarus for years, and the financial crisis has highlighted the need for regional cohesion. 

The U.S. Role

Ambassador Collins explained that, since the early 1990s, official U.S. policy has been strongly supportive of Russia’s accession to the WTO. However, the process of accession is a trade negotiation—not just a dialogue among leaders sharing the same broad objectives. Both sides promote their own interests on a range of issues, from intellectual property rights (IPR) to chicken trade. Ultimately, however, the United States and Russia were able to sign a bilateral agreement.

The Way Forward

To complete the accession process, Russia must first clarify its plan regarding coordination with Belarus and Kazakhstan.

• If Russia plans to proceed with the customs union, it’s unclear what role, if any, its bilateral agreements will play.  Furthermore, in order to match Kazakh commitments to those made by Russia, Kazakhstan will have to make over 3000 changes to its tariff lines, a process that would likely take years.  
   
• However, if Russia pursues a strategy of simultaneous accession, Russia must wait until Belarus is able to meet WTO requirements, which is many years away.

Additionally, Russia needs to demonstrate its commitment to implementing WTO conditions. Passing legislation in Russia would help encourage the accession process, and show members that Russia is serious about its reforms.
 

• Though bilateral agreements have been passed, implementation of these agreements remains weak. WTO members are skeptical of Russia’s level of commitment, particularly in regards to IPR, and its ability to enforce such commitments.
   
• China went through a similar accession process, but in the view of some members failed to follow through on some of its commitments once it joined the WTO. Hoping to avoid the same outcome with another large economy, the U.S. Congress and IPR lobbies want to be sure that Russia is committed to implementing its agreement.

The participants agreed that the accession process can and must be brought to a close. The longer the process takes, the harder it becomes as new issues and points of conflict will continually arise until they can be discussed under the WTO framework. Russia must develop a clearer strategy for moving forward, clarify the link of its accession with that of Kazakhstan and Belarus, and establish a calendar for completing the process. The international community must do its part to grasp the prize.