10th June 2009

Bridges Weekly | Russia Abandons Unilateral Bid to Join WTO

Discuss this itemShare your views with other visitors, and read what they have to say

Russian Prime Minister Vladimir Putin threw a curveball to the trade community yesterday with his announcement that Russia will abandon efforts to join the WTO as a single nation. Instead, Russia will seek entry as a new customs union with Belarus and Kazakhstan, to be launched 1 January 2010. Russia has been negotiating its terms of entry into the global trade body since 1993, but the process has repeatedly been tripped up by disputes over politics or trade measures.

This announcement comes as a surprise after Russia generated strong political support for quick WTO accession during high-level meetings last week. EU Trade Commissioner Catherine Ashton and US Trade Representative Ron Kirk, who met with top Russian trade officials on the sidelines of the Saint Petersburg International Economic Forum, said they both remain committed to Russia’s entry to the WTO.

“We have agreed that WTO accession should be completed by the end of the year,” Ashton told Reuters following a meeting with Russian Economy Minister Elvira Nabiullina last week. “We have a common understanding on the gaps that need to be bridged now.” Kirk also told reporters that Russia had a strong chance of joining the WTO soon, although entry this year “may be a bit premature.”

Despite the vote of confidence by the EU and US, Russia still needed to resolve critical issues with its trading partners prior to accession. Moscow had more luck with Brussels than Washington on this front during last week’s meetings. The EU is seeking to reduce or eliminate Russia’s export duties on timber, which harm the timber industry in Finland. In a change of course last week, the parties initiated dialogue on altering the tariff.

US-Russia negotiations have stalled in recent months over Russia’s ban of US pork. Russia’s Federal Consumer Protection Service stated that the US pork ban is intended to prevent the spread of the H1N1 ’swine flu’ virus, despite a report by the World Health Organization last month that the virus is not transmitted through food . “We continue to hold out hope that Russia will move as quickly as possible to lift the ban,” Kirk said at a news conference, following talks with Russian trade officials.

Some analysts posit that Russia’s new move is a strategy designed to fast track Russia’s accession to the WTO. “He’s saying ‘If you don’t let us in, you’ll have to deal with a customs union’,” Nikolay Mizulin, a Russian trade lawyer, told the Wall Street Journal.

Others think the move is a genuine tactical shift. “It’s a sign of frustration on the Russian side, but it’s also recognition that WTO membership is no longer such a priority,” Roland Nash, chief strategist at investment bank Renaissance Capital, told Reuters.

Nevertheless, Putin’s announcement is puzzling in light of the recent progress in the 16-year negotiations. “[T]here is a good window of opportunity [for Russia to join the WTO] at the moment - probably the best in recent years,” Maxim Medvedkov, head of the Russian delegation negotiating Russia’s accession to the WTO, to the Rio Novosti news agency at the conclusion of last week’s meetings. “So if we don’t use this opportunity it would be a shame.”

ICTSD reporting; “Russia Changes its WTO Strategy,” THE WALL STREET JOURNAL, 10 June 2009; “Russia drops unilateral WTO bid for ex-Soviet pact,” REUTERS, 9 June 2009; “U.S. Nudges Russia on Trade,” THE MOSCOW TIMES, 8 June; “EU, Moscow say Russia should join WTO this year,” REUTERS, 4 June; “Russia to discuss WTO entry with EU, U.S. next week,” REUTERS, 29 May.

More Bridges Weekly headlines

More ICTSD highlights