USA OKs Russia’s entry into WTO

U.S. agreed on terms for Russia’s entry into the WTO (World Trade Organization) as U.S. and Russian trade negotiators reached agreement last Friday. A formal bilateral agreement is expected to be signed this week in Hanoi, where U.S. President Bush and Russian President Putin will be attending the annual APEC (Asia-Pacific Economic Cooperation) summit meeting to be held in Hanoi on the weekend of November 18-19. Last Friday’s news on progress in U.S.-Russia WTO deal became something of a sensation. Up until a crucial step forward made last week, the negotiations had stumbled along its course with enormous difficulties. Some experts argued that Russia would rather slam the door and exit the negotiations than cut a deal with the intractable Americans. It took Russia 13 years to get to the threshold of the WTO. Russia has negotiated with the U.S. for 8 out of those 13 years.

No details of the deal were immediately available. “The deal between Russia and the U.S. is well-balanced. As regards all major issues, a compromise was at last arrived at,” said Russian Economics Minister German Gref. Russia’s chief WTO negotiator Maxim Medvedkov was confident that Russia would benefit from its agreement with the U.S. “We’ve held talks with the U.S. for eight years. We had, without doubt, lots of problems to tackle during those eight years. Finally, we’ve reached an agreement that would benefit both Russia and the United States. The negotiations were pretty tough yet the results are fair and beneficial for Russia,” stressed Medvedkov.

According to Gref, the compromises were made in the areas relating to U.S. access to Russia’s banking sectors and sales of American agricultural products to Russia. The sides are still to sign an agreement under which Russia would strengthen its enforcement of intellectual property rights and copyright laws. Along with the protocol on the completion of talks, the agreement is planned to be signed during the Hanoi summit, said Gref.

About four months ago, U.S. and Russia appeared on the verge of an agreement. But it failed to materialize right before the July G8 summit in St. Petersburg. The issue of food safety rules for U.S. meat imports to Russia became a stumbling block that put the signing of a pact on hold. The sides set a new goal to wrap up talks by the end of October. One month later, Russian Economics Minister threatened that Russia would repeal Russia-U.S. meat trade agreement if the talks failed to conclude on time. Under the terms of the above agreement, U.S. poultry imports top the Russian market.

According to information obtained by Vremya Novostei, the two sides managed to cut a deal late October. Russian Economics Minister Gref and U.S. Trade Representative Susan Schwab initialed the document. The shook hands with each other and advised Vladimir Putin and George Bush that the agreement was ready for signing once necessary formal arrangements were in place. It is noteworthy that U.S. President Bush found time to discuss the details of the deal with Schwab despite his tough schedule during the midterm congressional election campaign. President Bush was reported to have been pleased with the negotiations that seemed to suit the interests of both sides.

However, the deal saga suffered another turn as Moscow raised more questions about U.S. poultry imports on November 1. Sergei Dankvert, head of Russian federal service for food safety and a member of the Russian WTO team, had earlier agreed on the termsrelating to poultry imports yet officials at the Russian Ministry of Agriculture had some second thoughts. According to a source cited by Vremya Novostei, it took the negotiators two weeks to finalize the agreement.

Analysts are trying to guess what commitments Moscow may have made in exchange for its deal with the U.S. on the WTO. Striking a deal on the basis of quid pro quo seems to be quite logical since similar accords often form part of a political bargain. The agreement reached between Russia and the European Union in May 2004 is one of the examples. Russian President Putin promised to speed up Moscow’s ratification of the Kyoto Protocol in exchange for a Russia-UE deal. Back then Russia took four months to make the promise a reality.

Some analysts say that a deal on the WTO could persuade Russia to soften its opposition to punishing Iran for refusing to halt its nuclear enrichment program. The prospects seem unlikely to come true because Moscow’s influence on Tehran is quite limited, by and large. Russia will simply lose its diplomatic leverage with Iran by taking a tougher stance on the issue.

The success of the negotiations rests on two pillars that seemed rather shaky at the beginning. Firstly, Russia’s consistently firm position (tactical maneuverings aside) during the talks played out well. Secondly, Washington and George W. Bush in particular proved to be really interested in pushing Russia’s WTO bid through. “At some point we were under the impression that every new condition put forth by the Americans was just a way for them to make the talks last forever,” said a high-ranking Russian official. “More importantly, Putin started thinking likewise. Needless to say, such an attitude couldn’t help much our negotiators. However, I believe Washingtonfinally got a signal sent byour political leadership which clearly indicated that we might as well call it quits if no things remained the same,” added the official.

The tactic reached its climax early September after Igor Shuvalov, an assistant to the Russian president told the reporters: “My understanding is that we seem to have reached the limit with regard to defining our final position. From now on we won’t be making any further concessions on any issues.” Shuvalov probably hinted at the Russian government’s intention to start fresh WTO talks with the U.S. from scratch.

In terms of power’s political effectiveness, the situation that took shape over the last several months clearly indicate that Moscow looked set to win in any case. If the sides had failed to reach an agreement, it would have been morally justifiable for the Russian government to say something like this: we have done everything we could in an attempt to safeguard the interests of the national economy. However, Russia’s terms are unacceptable for the U.S while their terms cannot be accepted by us. In the meantime, both the Democratic Opposition and Bush-friendly tycoons would have asked the U.S. administration what exactly the White House did for so long without achieving any results in the end.

Those who might have called the efforts of the U.S. administration into question include CEOs of America’s largest companies. On September 24, the industrialists sent a collective letter to Bush and Putin, requesting them to finalize the agreement at long last. Heads of such companies as Shell, Chevron, Ford and Boeing were among the signatories of the letter. Ian McDonald, president of Chevron Neftegas Inc., made a special statement following the announcement about the Russia-U.S. WTO deal. “On behalf of Chevron Corporation I’d like to extend my most sincere congratulations to the Russian Federation and United States for successfully reaching an agreement on terms for Russia’s entry into the WTO. You must be in the know that Chevron has actively cooperated with the U.S. government in order to implement these plans. Now we intend to focus our efforts on getting Russia’s normal trade status approved by U.S. Congress. Chevron hopes to have longstanding and fruitful cooperation with Russian companies,” said the statement.

By the way, the completion of the negotiations will give Russia another advantage in terms of bilateral trade. Now Washington will have to remove Russia from the notorious 1974 Jackson-Vanik amendment. “The U.S. is to grant ‘permanent normal trade’ status to any member state of the WTO, and therefore the amendment has to be canceled”, said Andrew Sommers, head of the representative office of the U.S. Chamber of Commerce in Russia, in an interview to Interfax. “Russia’s membership in the WTO looks secure even if the amendment remains in place. However, the U.S. will break the WTO rules by not lifting the amendment,” added Sommers.

In any case, the “efforts” that Chevron intends to take while working on the issue with U.S. Congress will come in handy.

As a matter of fact, a bilateral pact with the U.S. is, in fact, a very important condition yet it is not the only one Russia must meet in order to join the WTO. Russia still has to wrap up talks with Moldova, Georgia, and Sri Lanka. On the other hand, Russia does not consider the lack of a deal with the above countries a serious problem. There are currently no talks whatsoever between Russia and Georgia or Moldova. It should be noted that in 2004 Georgia agreed on Russia’s entry into the WTO. Following a transport blockade imposed on Georgia by Russia earlier this fall, Georgia recalled its signature, a move seen by some experts as belated retaliation for Russia’s ban on German wine and mineral water imports. Russian WTO negotiators believed that Moldova would simply sign an overall pact though the country never expressed its formal approval or came up with any demands. However, Moldova changed its stance on the issue after Russia slammed a ban on the import of Moldovan wines. Moldova objected to Russia’s membership in the WTO. Meanwhile, Moscow has a different viewpoint on the problem. “Russia is part of a free trade zone, and has no tariffs applicable to mutual trade with Georgia and Moldova, and therefore the issues that we have to resolve with those countries only fall under the category of system issues, which we are going to discuss in the framework of Geneva talks on the basis of a report drawn up by a work group,” said Maxim Medvedkov, Russia’s chief WTO negotiator.

As regards Sri Lanka, Russia needs to resolve only one issue that has to do with terms of Ceylon tea imports. However, prior to joining the WTO, Russia must complete multilateral WTO talks, which may take another six months to wrap up, according to estimates by Russian Economics Minister German Gref. “Russia is holding talks with every member state of the WTO. Russia still has to resolve about ten complex issues along the way,” said German Gref. Russia should be finally ready to join to the WTO by the summer of 2007 if these plans become a reality.

Vremya Novostei

Translated by Guerman Grachev

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Author`s name Dmitry Sudakov