Russia to Join WTO Without Customs Union Members

Apr. 16 – Russia may reject its plans to join the World Trade Organization together with Kazakhstan and Belarus, First Deputy Prime Minister Igor Shuvalov said Thursday during The Russian Union of Industrialists and Entrepreneurs Congress, recanting a plan that many experts said was doomed from the start.

The Russian government had earlier indicated a willingness to apply for accession to the WTO as part of a customs union with Kazakhstan and Belarus, but Shuvalov said to Interfax that “the model of joining WTO would be changed due to tactical considerations, as long as the decision is approved by the leaders of the three countries of the customs union — Russia, Belarus and Kazakhstan.”

Russia has been in talks to join the WTO since 1993 and is currently the only major economy that is not yet part of the organization.

In June, Prime Minister Vladimir Putin said Russia, Belarus and Kazakhstan would bid for WTO membership together. Later, both he and President Dmitry Medvedev indicated that Russia would join in whichever way was most expedient. Mr. Medvedev said that “the idea of joining WTO within the union is more beautiful than practical.” He has suggested joining separately with uniform standards.

This idea was dubious from the start, said Alexei Portansky, an expert at the Higher School of Economics’ Trade Policy Institute to media.

“The announcement that Russia will join the WTO along with Belarus and Kazakhstan came as a surprise last June even for the negotiators, as it contradicts the rules of this organization,” he said.

The Marrakesh agreement, the 1994 document outlining WTO principles, stipulates that unified customs territories applying for membership must have full sovereignty over their trade policies, as do Hong Kong and Taiwan, and does not mention customs unions of any kind.

“It’s clear that the authorities realize they made a mistake last summer and are now trying to save their reputation, by saying cautiously that there is less probability now that accession to the WTO within the customs union will take place,” Portansky said.

The initial stage of the customs union went into effect on January 1 after the new organization’s legal framework was finalized. The agreement allows for the establishment of a customs territory by July 1, and the final stage of the union’s creation is expected to conclude on July 1, 2011.

So, decision about the model of joining the WTO will be accepted in July, Shuvalov said to media.

Other participants of the custom union know nothing about new Russian maneuvers. “The position of Minsk has not changed — it is necessary to enter together,” was the verdict of the representative of the government of Belarus Alexander Timoshenko to Russian newspaper Vedomosti. “There are problems, but there is a negotiating process,” recognized the official of the prime minister of Kazakhstan without specifying any hint of problems.

According to an estimate by the Russian Academy of Sciences’ Institute of Economic Forecasting, the customs union will add a cumulative US$400 billion to the gross domestic products of the three countries by 2015.

Kyrgyzstan has expressed an interest in joining the customs union, but it is not yet clear how the overthrow of the government in the Central Asian nation may affect those plans. Putin had also invited Ukraine to join the customs union last month.

Despite the change in strategy, Russia could join the WTO by year’s end, Shuvalov said Wednesday at a meeting with members of the European Commission in Brussels.

“Russia hopes to complete all procedures by the end of the year. We have support from the EU and positive signals from the U.S. administration. If the United Staes gives similar support, it will take several months,” said Shuvalov as reported by ITAR-TASS .

Shuvalov had also stated on Wednesday that Russia would start lowering its customs duties in the second half so as to come in line with the levels required by the WTO.

Reuters also quoted him saying “To start lowering the tariffs before then would be difficult, almost impossible, because it would not be easy to explain to the Russian people.”

Export tariffs on timber, which have been raised over recent years to stimulate investment in paper production, were one of the key points of recent disagreements with the WTO. In 2008, Russia introduced import duties on automobiles to protect domestic producers.