Trade Relations: Light at End of Tunnel

Europe-East, December 14, 2010 | Go to article overview

Trade Relations: Light at End of Tunnel


A new sense of cautious optimism about the prospects of EU-Russia trade relations has developed in Brussels following a breakthrough agreement on the terms of Russia's accession to the World Trade Organisation (WTO). Following six years of tough negotiations, the EU and Russia ironed out, on 24 November, the remaining disagreements over export duties on raw materials and railway tariffs, boosting Moscow's chances to enter the WTO in 2011. The memorandum of understanding rubber-stamping the agreement will be signed by Russian and EU representatives shortly ahead of the summit, on 7 December.

The European Union has a clear interest in Russia joining the WTO and subscribing to the rules of the international trading system, with its strict procedures for resolving trade disputes. The Union hopes that once bound by WTO rules, Moscow would be far more reluctant to adopt new protectionist measures similar to those introduced during the global economic crisis. Since November 2008, Russia has introduced, without consulting the EU, a significant number of protectionist measures - mostly in the form of import tariff increases on cars, harvesters, steel products and a range of agricultural products (under Article 16 of the Partnership and Cooperation Agreement - PCA - Russia is obliged to hold consultations with the EU before making any decision to increase tariffs). "These trade distorting and restrictive measures have had a negative impact on EU exports," says an internal EU document obtained by Europolitics New Neighbours. Neither did Moscow even formally notify the EU of the introduction of a common external tariff under its Customs Union with Belarus and Kazakhstan, in force since 1 January 2010.

The WTO agreement reached with the EU, on 24 November, complements the results of the bilateral negotiations concluded in 2004. Further talks were necessary after Russia failed to respect commitments made in the 2004 agreement, obliging it to phase down export duties on most key tariff lines upon WTO accession. Instead, Moscow has been gradually increasing export duties on wood since 2007 and keeps export duties high on scrap metal and other raw materials.

In the 24 November agreement, Moscow commits itself not only to lower current duty rates on raw materials and to eliminate its discriminatory fee system for the EU railway cargo but also undertakes certain legal commitments. It commits itself to implement its tariff and export duty concessions from the date of its accession to the WTO, with de facto fixing its duties at the 2004 levels. The agreement forbids Russia from using discriminatory export duties (eg on crude oil). The agreed text contains "clear, strong non-discriminatory commitments," reads the internal EU document. It also prohibits any circumvention of export duties by alternative means (taxes, fees, etc.). Finally, it includes a "new commitment on export tariff quotas," which ensures that any future tariff quotas established for the EU "would be operated according to the relevant WTO rules". "All this means that the major legal uncertainties stemming from the 2004 agreement have been to a possible extent eliminated and the scope of the Russian legal commitments has been extended," says the document.

MULTILATERAL ISSUES

Before joining the WTO, however, Russia has yet to solve a number of outstanding multilateral issues. …

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