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Russia Clinches Final Deal to Join WTO


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Source: AFP

Russia stood Thursday on the verge of ending its tortuous 18-year wait to get into the World Trade Organization after accepting a Swiss-mediated deal that removed reservations by its arch-foe Georgia.

The decisive breakthrough with the last holdout nation came after months of closed-door diplomacy in Switzerland between two rivals that have only had limited ties since waging a five-day border war in 2008.

Russia is now finally poised to shed its status as the world’s largest economy outside the world’s premier free trade club by winning formal accession at a meeting tentatively set for the middle of December.

“We are happy that Georgia supported the draft and that the agreement has finally been reached,” Interfax quoted chief Russian negotiator Maxim Medvedkov as saying.

The news was initially broken by the Georgian side after days of silence from Moscow over what Tbilisi had clearly indicated was its final offer.

“The Russians have agreed on the Swiss proposal. We have no details about their decision, but it looks like the deal is made,” Georgian Deputy Foreign Minister Sergi Kapanadze told AFP.

Tbilisi had been demanding international monitoring of cross-border trade in its Russian-backed breakaway regions of Abkhazia and South Ossetia. Moscow had wanted to police the border with the help of local and Russian patrols.

Medvedkov said a part of the deal would see an independent company contracted to audit trade in the disputed region.

That firm would also act as a mediator and information handler between Georgian and Russian customs agents.

The agreement “is based on our proposal and does not go outside the frameworks of Russia’s principled stand,” Medvedkov said.

“It corresponds to the realities that have emerged in the region and does not contradict WTO norms,” said the Russian negotiator.

Kapanadze for his part said that a Georgian delegation would be arriving in Switzerland later Thursday for talks with the Russians and the Swiss negotiators.

“I think the agreement will be signed within several days,” he said.

There are two more lower-level WTO sessions scheduled for November before all of the bloc’s top representatives gather for a December 15-17 ministerial meeting at which Russia’s membership is due to be put up for a vote.

Russia has already ironed out its disputes with the European Union and has no direct trade issues remaining with the United States. Other big nations such as China are also on board.

But the US Congress has still not revoked the 1974 Jackson-Vanik amendment ‒ a piece of Cold War-era trade legislation that strips most-favoured nation status from countries impeding the emigration of Jews to the West.

That amendment could theoretically lead to retaliatory steps being taken against the United States once Russia joins the WTO.

Analysts are united in viewing free trade as a net benefit for Russia.

The World Bank estimates that WTO accession may add up to 11 per cent to Russia’s gross domestic product as the business process becomes more streamlined and the investment climate improves.

But some economists warn that membership has its price ‒ something that Vladimir Putin has often referred to while serving as both president in 2000-2008 and prime minister today.

Putin is set to return to the presidency in the March elections. The final push for membership was spearheaded by the more modernising administration of President Dmitry Medvedev.

Analysts say the WTO will sound the death knell for some Russian companies that sell to domestic markets that suddenly become flooded with cheaper ‒ and often much better ‒ goods.

The new rules will also hurt Russian airlines that lose the extra tariffs they levy on European carriers that fly over Siberia. And Russian farmers will have a much harder time securing protectionist policies from the state.

“However, we think that many of these concerns reflect a lack of understanding about the exact nature and magnitude of the potential gains from joining the WTO,” the Renaissance Capital investment house wrote in a recent note.

“Doubts stem from gains not being well articulated,” it noted.

The investment house observed that most of the benefits for Russia would come from better efficiency, as money flowed to more competitive sectors.