Customs Triumvirate Wants to Join WTO

By Evelina Titova

An unexpected initiative of Moscow doesn't promote WTO joining for Russia, Kazakhstan and Belarus. The participants of the Customs Union received two variants of WTO joining: together and separately.

The decision on WTO joining in "three" (Russia, Belarus and Kazakhstan) was adopted in June 9th in Moscow during the summit of Intergovernmental Council of EurAsEC. Šfterwards it was decleared that the countires suspended individual negotiations on WTO joining.

However, during the following three months Russia managed to change its view on this issue twice.

In a month after the declared Moscow initiative that shocked Europe and WTO authorities, on July 8th the US Trade Minister G. Locke after the meeting with Russian Minister of Economic Development Elvira Nabiullina reported that Russia demonstrates its readiness to apply individually to join WTO - i.e. de-facto it will be an attempt to get back to suspended talks.

The President of the Russian Federation Dmitry Medvedev also proved the new position of Russia on WTO joining during the G-8 summit in Italy on July 10th. He declared that Belarus, Kazakhstan and the Russian Federation can join WTO separately but in accordance with the agreed principles. In practice Russian President suggested to return to the format of individual joining.

On August 12th in Moscow during the Customs Union summit the participants planned to "check the clock" on the further procedure of WTO joining. However, due to the efforts of Russian Prime Minister Vladimir Putin, insisting on joining the WTO in three, they complicated the procedure even more.

After the Summit the First Vice Prime Minister Igor Shuvalov informed that the Customs Union participants established a single negotiation group on WTO joining (headed by the Director of the Trade Negotiations Department of the Ministry of Economic Development of the Russian Federation Maksim Medvedkov - the current Leader of Russian delegation to the WTO joining talks).

shuvalovAccording to I.Shuvalov, this group will have all authority to lead talks on WTO joining as on the behalf of Customs Union as well as on the behalf of national Governments. Which can mean as it was said the following: "Legally we can join WTO separately, each state".

I. Shuvalov underlined that the main thing is that "we fulfill those decisions that we adopted in June this year - that we don't lead separate talks on WTO joining, we fully trust each other in these issues, and we established a single group for this purpose". "And the way it will be finalized - on bilateral basis, or with the Customs Union, or with the Customs Union and on bilateral basis - these are technical matters", - he said.

Thus, the participants of the Customs Union were suggested two variants of WTO joining: together and separately.

Belarus gave no reaction on such behavior of Russia. It seems that some illusions are still kept to join WTO together. Minsk considers that the Customs Union is doing well.

Although still at the level of declarations. They think that WTO will be highly interested for Belarus to become a member of this organization, as it has plenty of human and other resources.

At the same time the reaction of WTO on this spontaneous initiative of Moscow is not considered.

"I'm totally confused. The WTO members don't yet know what will be the following steps. For the WTO members it is a high time to play a serious legal poker", - said the WTO Director General Pascal Lamy regarding this issue. The US reaction was clear: the suggestion of Russia to join WTO in Customs Union of Russia, Belarus and Kazakhstan is "impossible", stated directly the US Trade Minister Gary Locke.

Obviously, that another idea of Putin was incited by the failure of his project on the establishment of the Single Economic Area (SEA). And Ukrainian participation in WTO made this project senseless. And after the August war with Georgia-WTO member, there are no prospects and hopes to receive affirmation for Moscow to join WTO.

Before the initiative of Moscow, Belarus planned to hold in May-June in Geneva an informal summit of multilateral working group with the participation of the EU and the USA on WTO joining. At the same time Belarus was officially included into the EU program of "Eastern Partnership" where the most attractive is the possibility for the participants-non EU members to get into the EU free trade area. But for this, the country should be a WTO member. Among six states of "Eastern partnership" there are only two countries like that: Belarus and Armenia.

Judging by official statements, Belarus proceeds bilateral talks with WTO member-states. Also 22 countries declared the desire to lead the kind of negotiations. The talks are finished and the protocols were signed with 10 countries, including China, India, Turkey, Dominican Republic, Brazil, Malaysia and other states, the talks of Belarus with which are close to the end.

It's acknowledged that there has been quite a long break in summit of multilateral working group on joining of Belarus to WTO. Now Belarus comes to agreement with the EU and the USA to resume this process in near future in order to start full scale activity of the group by autumn. The decision on a new format of WTO joining confused all cards for Belarusian negotiators. Simultaneously, the initiative of Moscow gives Minsk the possibility to prolong the time of WTO joining, to which Belarus is obviously not yet ready.

The course on WTO joining orients on serious reforms in economy, which are not performed in Belarus. Minsk hopes that the orientation on Customs Union establishment will help Belarus to get additional dividends without changing the sense of current economic policy which is characterized by a high level of state protectionism.

After the signing in Moscow of the decision on joining in three the First Belarusian Vice Prime Minister Vladimir Semashko stated that it will take 11-12 and more years to join WTO with a single Customs Union.

MedvedkovIt would be curious to observe the reaction of Moscow on this statement which is now standing on the doorstep of WTO after 16 years of attempts. However, Russian negotiator M.Medvedkov only corrected the First Vice Prime Minister of Belarus stating that "more likely it will take many months rather than many years".

So how do the Parties plan to agree on their approaches on WTO joining if the time approaches differ so much?

It's pretty doubtful, that Moscow doesn't realize the "deadendness" of the scenario of WTO joining in three. Moreover that the Russian Federation President D. Medvedev cleared the position of Moscow on the new format of joining absolutely honestly. "The way appeared to be long and hard - frankly speaking, we are fed up: 16 years. But we'll hope that now some reformatting will intensify the process as much as possible", - he said in his speech during Russia-American business forum on July 8th.

Trying to boost the establishment of Customs Union and being at the same time an initiator of the new format of WTO joining Russia, probably, follows several objectives. It wants to show that it is still an attractive center of integration for CIS former states. Now it's important for the attempts of the Russian Federation, Kazakhstan and Belarus were concentrated on the Customs Union to start activity from the 1st of January 2010. That is why Moscow strives to concentrate the attention of partners on the establishment of the regional union, hoping at the same time to be the first to WTO among its partners.

Commenting on the decision adopted in Moscow about WTO joining in three, Belarusian Minister of Economy Nikolay Zaichenko called this event as a "historic" one, "for which we've been striving since 1995". He didn't hide that today it's more beneficial for the three countries to establish a single customs territory.

Belarusian Party first of all counts on that by the establishment of the Customs Union the export duty on oil will be abolishment. In its turn Kazakhstan hopes that the Customs Union establishment will let it to provide free oil supplies for Belarusian OPPs, and the products of processing - to Europe, which is now impossible due to high tariffs on oil transportation through Russia.

However, as it was officially stated to the representatives of the Russian Federation, during the first stage of Customs Union formation the issues of military-technical cooperation, energy and so on are out of the frames of discussion.

Yet there is only adopted political decision of the establishment of Customs Union of three countries by the 1st of January 2010. By this time a Unique Customs Code should be developed. The Parties also have to agree on unique customs tariff without which the establishment of the Customs Union is simply impossible. If the customs tariff between Russia and Belarus is now agreed on more than 95%, then between Russia and Kazakhstan - on 38%.

But even in this case if they manage to agree on these issues, only the preparation period will be finished by the 1st of January 2010, i.e. there will be adopted a number of decisions on basic principles of formation and functioning of the union. But it will take minimum 2 more years for the first stage of the Customs Union establishment.

Considering the principal differences between Customs Union and a free trade area, the regional union will have to unify foreign relations. If Russia has about 120 basic trade agreements, Kazakhstan - 50, then Belarus only 40.
Translated by EuroDialogue XXI