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Russia to Join WTO `Well Before' a Year From Now, Summers Says in Moscow

Russia will probably join the World Trade Organization within a year even as the largest economy outside the trade arbiter has yet to complete talks with other member countries, Lawrence Summers said.

“We are certainly hopeful that well before 12 months from now the process will have been completed,” Summers, the departing director of the U.S. National Economic Council, told reporters in Moscow after meeting with officials including First Deputy Prime Minister Igor Shuvalov and Kremlin adviser Arkady Dvorkovich. “I can now say that the end is in sight.”

An accord with the U.S. may help complete Russia’s 17-year bid to join the 153-member, Geneva-based body after President Dmitry Medvedev signed an agreement with President Barack Obama in June to resolve contentious issues by the end of September. Negotiators met the deadline “on the main issues of principle,” Summers said today.

Medvedev is seeking to diversify the economy of the world’s biggest energy exporter to lessen its dependence on oil, gas and metals. Obama wants to build a relationship with Russia that can withstand strains over security disputes and broaden the markets for U.S. companies.

While the two countries didn’t sign a new agreement today, the U.S. “will be in a position to be supportive of the Russian initiative” to join the WTO, Summers said.

Customs Union

Prime Minister Vladimir Putin initially made joining the WTO a priority during his first presidential term in 2000. Last year, he said Russia would abandon its national bid and pursue a joint membership as a customs union with Belarus and Kazakhstan.

Russian officials have since said the three former Soviet republics will submit national bids and seek to join separately after forming a coordinated position. There is no precedent for negotiating a joint WTO accession.

“We don’t anticipate that the customs union will be an obstacle,” Summers said. “After all, there are any number of WTO members that are part of free-trade arrangements or customs unions.”

At a Sept. 30 government meeting, Putin instructed Shuvalov, his point man for foreign investment, to proceed with the WTO negotiation process “parallel to our partners in the customs union,” according to a transcript of his remarks published on the government’s website.

Sticking Points

Russia will accept the obligations and impose the restrictions associated with WTO membership only after it’s become a full member because negotiations may “go on forever,” Putin said then.

Russia and the U.S. won’t complete accession talks this year because sticking points remain over issues including U.S. demands for greater access for agricultural products, mainly poultry and pork, legislation to protect intellectual property and Russian curbs on imports and exports, Myron Brilliant, senior vice-president for international affairs at the U.S. Chamber of Commerce, said in September.

The two countries also need to agree on rule-of-origin issues associated with Russia’s customs union, he said.

Quotas for meat imports remain a point of contention that will need to be negotiated by Russia with the U.S. and other WTO members, a U.S. official who declined to be identified, said today during the briefing with Summers. Russia is committed to reaching an accord on the issue and may resolve all outstanding issues within a few months, he said.

Poultry Quotas

Poultry imports from the U.S. were limited in January after Russia, the largest importer of U.S. chicken and turkey, reduced the amount of chlorine allowed in shipments. The Industry and Trade Ministry said in June it will allocate 25 percent of import quotas for U.S. poultry to other countries after talks on resuming purchases stalled.

“Primary issues at this juncture lie in the sphere of documentation rather than in the sphere of issue resolution,” Summers said.

Finance Minister Alexei Kudrin said Oct. 1 the country may complete talks on joining the WTO in two to four months and another six months may be needed for the formal accession procedure, after all outstanding questions with the U.S. were resolved.

“I don’t really think that these are just words this time, because they are based on the main issues being cleared up,” Ivan Tchakarov, chief economist for Russia and the Commonwealth of Independent States at BofA Merrill Lynch Global Research in Moscow, said in a phone interview. “I feel confident this will translate into Russia becoming a member pretty soon.”

‘Biggest Benefit’

Increased competition and innovation as a result of WTO accession may lead to a 10 percent gain in gross domestic product in the medium term, Tchakarov said, citing World Bank studies.

“This is going to be positive for Russia for different reasons than it’s positive for many other economies, which benefit from lower tariffs for their exports,” he said. “In the case of Russia the biggest benefit is that it will begin to abide by certain rules and regulations, which will lead to higher competition in the country and more innovation, as barriers to entry in different industries become lower. This is the key benefit for the country.”

Russia, which has yet to reach an agreement on its WTO accession with Georgia, recognizes the “need for creative solutions” with the former Soviet republic to remove the remaining “obstacle to this important bit of economic integration,” Summers said.

Trade Embargo

Georgia, which was routed in a five-day war with Russia over the breakaway region of South Ossetia in 2008, has threatened to block Russia’s entry to the WTO if its northern neighbor doesn’t lift a four-year-old economic embargo.

“Our position remains the same,” Vera Kobalia, Georgia’s minister of economy and sustainable development, said by text message from Israel today. “As soon as Russia follows WTO rules and regulations, we will be happy to support it. But right now they have an embargo on a WTO member country’s products, which is against WTO regulations. Not to mention the fact that they’re occupying 20 percent of Georgia.”

Russia recognized the regions of South Ossetia and Abkhazia as independent after an August 2008 war. Georgia maintains Russia occupied the regions after the conflict.

To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net.

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net.

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