You're reading: Russia talks tough as it clears final hurdle to WTO

MOSCOW/GENEVA - Russia said on July 10 it would lobby hard for its interests as a member of the World Trade Organization after lawmakers voted to ratify its accession, promising further friction after 18 years of often gruelling talks on joining the trade rules club.

The lower house vote clears the final political obstacle to Russia’s long-awaited WTO entry under a deal reached last
December that would ease import tariffs and open up the world’s
ninth-largest economy to foreign investment.

“Membership creates the possibility to pursue our interests
inside the WTO and that of course requires a certain
aggression,” Economy Minister Andrei Belousov said after the
State Duma endorsed accession with a 30-seat majority.

Russia’s epic accession talks were characterised by disputes
and delays that earned President Vladimir Putin a reputation as
a prickly negotiator. He pulled the plug on talks in 2009,
announcing instead that Russia would build a customs union with
two fellow former Soviet republics – Kazakhstan and Belarus.

Many trade diplomats have colleagues working at the United
Nations in Geneva, just up the hill from the WTO, who have
witnessed bruising diplomacy between Russia and its opponents
over the deepening crisis in Syria.

There are fears too that Russian entry could have an impact
similar to that of China’s arrival as a WTO member in 2001 – an
event that helped create a power stalemate that has held up the
broader discussion on opening up global commerce.

“There’s some anxiety because we know there’s not going to
be a honeymoon. With the Chinese there was a honeymoon, but with Russia it’s going to be hot very soon,” said one trade diplomat.

“I’m sure that sort of stuff will start off pretty quickly,”
said another. “It’ll be interesting to see whether they come out
with all guns blazing.”

Pending approval by Russia’s upper house of parliament and
Putin’s signature – both of which are formalities – Russia would
become a fully-fledged WTO member in 30 days.

INSIDER, OUTSIDER

Post-Soviet Russia is a hybrid on the world stage: A
veto-wielding member of the U.N. Security Council and member of
the Group of Eight powerful nations, it has long been the
largest outsider in the global trade arena.

Economists and trade experts expect Moscow to keep its
posture on trade separate, by and large, from great-power
diplomacy – although trade frictions with the United States
could yet morph into a broader setback for bilateral relations.

The U.S. Congress must still repeal a Cold War-era provision
called the Jackson-Vanik amendment in order to accord Russia
permanent normal trade ties. Failure to do so would allow Russia
under WTO rules to deny the United States most-favoured status.

“When China joined the WTO in 2001 there was a lot of
nervousness, and a lot of people thought that China was ‘too
big’ for the WTO,” said Brendan McGivern, executive partner and
head of the WTO practice at law firm White & Case in Geneva.

“All these fears that China was too big or too difficult to
integrate into the WTO were all for nothing … I see the same
with the Russians.”

Russia has, however, made it clear that it would use a range
of measures – including aid to the car industry, national
preferences in state procurement and even a weaker exchange rate
for the rouble – to protect its domestic market.

The European Union and Mexico have, meanwhile, already
complained within the WTO that Moscow wants to impose
restrictions on alcohol imports, including mandatory laboratory
tests on every consignment.

“Should this draft regulation be adopted in its current
form, a considerable number of EU exports of wines, spirits and
other alcoholic beverages would no longer be allowed on the
Russian market,” an EU diplomat told a WTO committee in March,
according to the minutes of the meeting.

Russia’s inclusion in the WTO is also likely to further
paralyse attempts to negotiate more reforms in the global
trading architecture.

Last year the WTO’s decade-old Doha round of talks
collapsed, and it has since struggled to agree on a much simpler
deal, new rules for “trade facilitation”, cutting red tape costs
and bureaucracy of customs procedures.

One diplomat said the WTO had rushed to try to conclude that
deal before Russia came on board, but had now lost the race.

THE NATIONAL INTEREST

While export powerhouse China was widely seen upon its
accession as a competitive threat to existing WTO members, Russia’s $1.9 billion economy, dominated by natural resources,
is a different story.

Russia earns two-thirds of its export revenues from oil and
gas – which are little affected by WTO rules.

Despite its legacy of collective farming, Russia is seeking
to establish itself as a major grains exporter and will seek
allies among the so-called Cairns Group of farming nations, said
Yaroslav Lissovolik, chief economist at Deutsche Bank in Moscow.

Putin will also seek to build on the Russia-led regional
customs union to establish a post-Soviet caucus once Kazakhstan
and Belarus join the WTO.

“It would reflect patterns you see in other regions … and Russia is very likely to mimic that kind of integration within
the WTO,” said Lissovolik, who covered trade when he worked
previously at the International Monetary Fund.

Tellingly, in a major foreign policy speech on Monday, Putin
barely referred to Russia’s WTO accession while he spoke at
length about the regional customs union and attempts to persuade
Ukraine, a WTO member, to join it.

“Deepening integration across the Commonwealth of
Independent States is the heart of our foreign policy,” Putin
told Russian diplomats in Moscow. “It is a great shame that
brotherly Ukraine remains outside this process.”