Russia finally sees light at the end of the tunnel after nearly two decades of torturous negotiations for its much-expected accession to the World Trade Organization (WTO). The turning point came Nov 3 when it clinched a bilateral trade deal with its neighbour and former Soviet Republic of Georgia. This was followed by the two countries signing a Swiss-brokered agreement on November 9 on Russia’s entry into the world trade body.
After the Russia-Georgia agreement, the 60-member Working Party on Russia’s accession approved the package Nov 10, stating Russia’s terms of entry into the organization and will now send its accession recommendation to a WTO Ministerial Conference, set for December 15, to accept Russia’s admission.
If the bid is approved, Russia will have to sign a protocol sating that it accepts the approved “accession package.” The Russian parliament will have to ratify the protocol, usually within three months and 30 days after ratification Russia will become a full-fledged member of the WTO.
Russia has been trying to join the world trade body since 1993 by concluding agreements separately with all the 153 member-states of the WTO. Georgia was the last remaining big hurdle for Russia on its way to accession to the WTO, especially after the two neighbouring countries fought a five-day war in August 2008.
Hailing the final agreement with Georgia, Medvedev said in Cannes that Russia’s admission to the WTO will facilitate the liberalization of trade and investment. “I believe that the G-20 countries need to show leadership and do all they can to expedite the liberalization of trade and investment,” he told the G-20 summit.
“I am sure that Russia’s long-overdue admission to the WTO could become a good contribution to a common cause,” he said, adding “It benefits not only Russia, but also all of its partners.”
Russia, with a GDP of $1.9-trillion, is by far the largest economy outside the WTO and its accession to the world trade body would mark the biggest step in world trade liberalisation since China joined it in early 2000.
The World Bank has estimated the WTO membership could add three percent to Russia's economy in the medium term and up to 11 percent in the long term.
However, many economists warn that Russian agriculture and manufacturing industries may not be able to compete with cheaper imports. Russian Prime Minister Vladimir Putin said in October that the costs and benefits of WTO membership were “fifty-fifty” but over all there are probably more pluses than minuses.”
It will also send a strong signal to companies and investors that Russia, the world’s largest energy producer, is starting to shift closer to a rule-based system of conducting business.
But, above all, Russia’s entry into the WTO would benefit India and Russia, two of the key emerging economies of the BRICS countries (Brazil, Russia, India, China, South Africa) in the world.
India and Russia have so far not been able to sign a free trade agreement (FTA) for expanding their trade and economic ties as Moscow is not a member of the WTO. Russia's entry will open the way for the two countries to sign a Comprehensive Economic Cooperation Agreement (CECA).
The CECA is expected to give a great boost to bilateral trade between India and Russia by providing greater market access for the partners. Bilateral FTAs are signed to give market access to partners, but they come under the overall discipline of the WTO.
“We will revisit the subject for the CECA. India is very desirous of taking the next step,” India’s Commerce and Industry Minister Anand Sharma told Indian journalists on the sidelines of the 5th Indo-Russian Trade and Investments Forum in Moscow on Nov. 10. “Once Russia becomes a WTO member, we will negotiate CECA. It is very much on the table. It is on our agenda,” he said.
“It (CECA) will definitely improve the access for Indian companies to the Russian market through lower tariffs. It creates a better environment, depending on the sectoral strength and interests in those sectors,” said Sharma.
The bilateral trade between the two countries, which touched $8.5 billion in 2010, has grown three-fold since 2005, but has a long way to go to achieve $20 billion target for 2015.
India and Russia signed an MoU in February, 2006, to set up a Joint Study Group (JSG) to assess the feasibility of signing CECA between the two countries. The CECA is much wider in scope than a FTA as it not only includes goods, but also services and investment.
The JSG has already held several meetings and prepared a roadmap for achieving a significant increase in bilateral trade by diversifying and strengthening relations in a wide range of areas, in particular, trade in goods, services, investment and economic cooperation. The two sides also set up a Joint Task Force (JTF) to monitor the implementation of the JSG report with the ultimate goal of concluding the CECA when Russia joins the WTO.
Indian pharmaceutical companies, in particular, are very excited about Russia's accession to the world trade body, which is expected to facilitate sales of innovative drugs in the domestic market and increase its investment attractiveness.
After Russia joins the organization the data exclusivity regime aimed at protecting the data of pre-clinical and clinical trials of innovative drugs will start working locally.
Russia’s partners in BRICS (Brazil, Russia, India, China and South Africa) have repeatedly backed Moscow’s WTO membership. “Brazil, India, China and South Africa extend full support to the early accession of Russia to the World Trade Organization," a joint declaration issued after a summit of BRICS leaders held in the south China resort of Sanya said in April this year when South Africa was formally admitted to the group.
All the five BRICS countries are members of the UN Security Council and G-20. Consequently, they are viewed as the voice of the developing countries. Experts say that by 2013, BRICS countries will surpass the developed economies in terms of GDP share in the world and will be economically stronger than the US by 2015.
BRICS, which commands 25 per cent of the world's geographical area, 44 per cent of the population and 25 per cent of the global GDP, is viewed by some developed countries as an emerging counter-force to their dominance in global affairs, specifically economic.
The Sanya summit also adopted a declaration which said the BRICS countries would continue to work to deepen bilateral “economic, trade and investment cooperation.”
After the summit, Medvedev said the BRICS countries had also chalked out a joint position on the reform of the international monetary system and ways to deal with price instability on global agricultural markets.
Russia and China, two aspiring reserve-currency countries, have been seeking a broader discussion at G-20 summits of the dollar's dominant role in international finance. In a significant step towards enhanced economic cooperation, India and four other BRICS countries signed an agreement at the summit, enabling them to provide credit to each other in local currencies and collaborate in capital markets and other financial services.
Russia’s accession to the WTO, therefore, opens up fresh opportunities for spurring multi-faceted cooperation among the BRIC countries for development of agriculture and allied fields in the 21st century.
“I have had very useful and fruitful bilateral discussions with my counterparts from Brazil, China and Russia to identify the areas for prospective cooperation among the BRIC nations,” Indian Agricultural Minister Sharad Pawar said after the first meeting of Agriculture Ministers of the BRIC, in Moscow, in March 2010.
“We have identified several areas of mutual cooperation,” he said, stressing India has successfully resolved food security problem.
The meeting also noted the urgency to accelerate the Doha Round of talks at the WTO. Earlier this year in June, Russia agreed to support India in agriculture negotiations at the WTO.
(Dadan Upadhyay is a senior Indian journalist based in Moscow)
Read more: Indian boost for Russian pharma market
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