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Russia and WTO
After 18 years of negotiations, Russia has concluded its accession to the World Trade Organisation (WTO). According to an official spokesperson from the Russian Ministry of Foreign Affairs, on 23 July the Government of the Russian Federation notified the WTO that Russia had completed all the internal procedures required to assume membership, including the ratification of the Marrakesh Agreement dated 15 April 1994, which established the WTO and was signed in Geneva on 16 December 2011.
After 18 years of negotiations, Russia has concluded its accession to the World Trade Organisation (WTO). According to an official spokesperson from the Russian Ministry of Foreign Affairs, on 23 July the Government of the Russian Federation notified the WTO that Russia had completed all the internal procedures required to assume membership, including the ratification of the Marrakesh Agreement dated 15 April 1994, which established the WTO and was signed in Geneva on 16 December 2011.
In accordance with the rules, Russia's accession to the WTO took place 22 August 2012 - the thirtieth day after that notification was given.
The possible effects of Russia's accession to the WTO are yet to be fully analysed; however, preliminary forecasts are obviously contradictory - ranging from extremely negative to exceptionally positive.
The probable and less desirable consequences, as a rule, will most likely be as a result of the inertia exhibited by Russian firms when it comes to increased competition on the Russian market, an expected and unavoidable phenomenon once the barriers to accessing foreign goods and services are lowered.
The positive and welcome developments that will follow Russia's accession to the WTO will for the most part be as a result of increased efficiency of various economic processes, including increased foreign trade, expansion of export markets in terms of access to Russian goods and motivation to increase the competitiveness of Russian goods and services.
Positive expectations related to Russia's WTO accession
Nevertheless, there are obvious positive and indisputable advantages of Russia's accession to the WTO.
These include:
1) Russia's active participation in the development and adoption of international rules and regulations regarding foreign trade under the WTO;
2) Transparency when it comes to the implementation of foreign trade rules, which assume that first and foremost, the drafts of such rules must be published beforehand. Secondly, all interested persons will have the right to forward their opinions to the relevant authorities with regard to these projects.
3) Positive effect of generally accepted international rules on domestic legislation and its application. Here is an example that is rather sensitive to many Russian importers of goods: I have customs valuation in mind. The rules applied in Russia are already based on the Agreement regarding the application of article VII of GATT 1994. However, guidelines, instructions and clarifications are obviously not enough for importers to feel confident in complicated border-line situations. There is hope that experience accumulated by the WCO Technical Committee on Customs Valuation will now be fully absorbed by the customs authorities and courts that consider disputes between the customs service and importers.
4) Some minor changes in customs administration, which are nevertheless, very tangible for those involved in foreign trade operations. For example, the fact that customs clearance fees have been reduced and their amount now depends on the way the customs declaration is submitted (in hard copy or in electronic format) may significantly reduce expenses on customs clearance with regard to the import and export of goods.
WTO and the Customs Union
Russia's entry into the WTO is unique not only in terms of the time spent in negotiations. Another factor that marks this accession out as distinctive is the fact that Russia entered the WTO as a member of the Customs Union within the Eurasian Economic Community - a unique situation that involves only one of the member countries of the latter being a party to the former.
The day before the Protocol on the Accession of the Russian Federation to the WTO was signed, the parliaments of three member states of the Customs Union ratified the Agreement on the functioning of the Customs Union under the Multilateral Trading Facilities. The members of the Customs Union agreed that, from the date any of the Parties joins the WTO, the provisions of the respective Agreement with the WTO, as stipulated in the Protocol on such Party's Accession to the WTO, will become a part of the Customs Union's legal system. The first Party joining the WTO must notify other Parties to this effect and coordinate their actions with regard to the need to change the Customs Union's legal system owning to the obligations the Party in question assumed as a prerequisite for its accession. The agreement reached by the Parties means that Russia's obligations assumed as a prerequisite for its accession to the WTO will actually be treated as obligations of all three member states of the Customs Union and bodies of the Customs Union in which Russia has vested powers with regard to the state regulation of foreign trade operations.
For example, the rates of the Customs Union's Unified Customs Tariff approved by the Eurasian Economic Commission may not exceed import duties stipulated in the List of concessions and obligations in relation to access to the commodity market forming an Appendix to the Protocol on the Accession of the Russian Federation to the WTO.
The Agreement on functioning of the Customs Union under a multilateral trading facility also establishes obligations of the Customs Union's member states in case Kazakhstan or Belarus joins the WTO, one of such obligations being the need to apply lower import duties than those stipulated in the Customs Union's Unified Customs Tariff. The Agreement provides, among other things, that in the event of any discrepancies detected in the consolidated results of negotiations regarding the Parties' import duties achieved in the course of joining the WTO, such Parties will immediately advise each other and will promptly initiate negotiations with WTO members whose interests are affected by such discrepancies, with a view to harmonising the rates of import duties. All Parties will coordinate their positions and express their intention to be guided by the relevant provisions of the Agreement with the WTO applied to harmonisation of the rates by customs unions.
Russia's obligations following WTO accession
The Protocol on the Accession of the Russian Federation to the WTO makes provision for Russia's commitment to the Marrakesh Agreement and its annexes in the Multilateral Trade Agreements. Aside from that, in the course of negotiations, Russia committed to fully implementing several aspects of the regulation, which must be completed following accession. These obligations are fixed in section 1450 of the Report of the working group on Russia's accession to the WTO.
Russia's obligations within the WTO touch various aspects of government regulation, of which it is difficult to select the most important. Nevertheless, overall, the rules and regulations of the WTO are aimed at ensuring fair competition, the elimination of redundant barriers to trade and related measures, which, other things being equal, should lead only to an increase in Russia's economic potential and qualitatively meet the needs of consumers in the country.
Russia and WTO
Galina Balandina, Partner, Head of the Customs Law and Foreign Trade Regulation Practice
E-mail: g.balandina@pgplaw.ru
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About author
Galina Balandina is a recognised expert in customs law and foreign trade regulation. Galina is an honoured lawyer of the Russian Federation and a retired major-general of the customs service. She has over 20 years of working experience, including at the customs authorities. Among other things, Galina worked for the Russian Federal Customs Service as head of Legal and for the Russian Ministry for Economic Development as head of State Regulation of Foreign Trade.
Galina was involved in drafting the Russian Customs Code and subsequent amendments to it, and also in developing most of the regulations adopted by the Russian Federal Customs Service. She took an active part in drafting amendments to the Customs Code of the Customs Union, in preparing Draft Federal Law On the customs regulation in the Russian Federation, in developing the concept of the Green Channel for Innovation Companies project and the laws and regulations that were part of the project.
Pursuant to Decision No. 69 dated 9 December 2010 of the Interstate Council of the Eurasian Economic Community, Galina Balandina was appointed as member of the Expert Board of the Customs Union (whose member states include Russia, Belarus and Kazakhstan).
Galina Balandina has a vast experience advising clients on various issues relating to customs law and state regulation of foreign trade, including the application of tariff and non-tariff regulatory customs measures; customs procedures; calculation, payment and reclaim of customs payments; customs and foreign exchange controls; and protective measures used in foreign trade. She represents clients in general jurisdiction and arbitration courts, and she is involved in drafting legislation as an expert.
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