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Russia to Reduce Duties to Match Kazakhstan’s WTO Pledges

Russia will have to cut some import tariffs nearer levels accepted by its customs union partner Kazakhstan in World Trade Organization accession talks, said Eurasian Economic Commission Trade Minister Andrey Slepnev.

Kazakhstan, which has been negotiating to join the WTO since February 1996, has already agreed to cut duties on some goods to levels lower than Russia accepted during its accession process, Slepnev said in an interview in Geneva and confirmed by e-mail today. Russia became the global trade arbiter’s 156th member in August.

“We suggested a formula which allowed to adjust the level of the common tariff on the goods in accordance with the share of markets of these goods,” said Slepnev, a former Russian deputy economy minister. “It’s a fair deal, and it’s a case when Russia will provide some concessions to WTO members.”

The customs union of Russia, Kazakhstan and Belarus was set up as a first step toward forming a broader economic alliance of former Soviet states modeled after the European Union. The three members, which have scrapped customs borders between each other and introduced a single economic space, are working to foster closer ties and plan to create the Eurasian Union, which won’t be formed before 2015. Kyrgyzstan wants to enter the customs union, whose annual trade amounted to $939 billion last year, and Russia is pushing for Ukraine to join.

99.99% Consistent

About “99.99 percent” of the customs union’s tariff lines are already consistent with WTO obligations and the regional group’s regulations have been brought in compliance with WTO rules, Slepnev said in the Feb. 26 interview. Even so, “Kazakhstan still needs to finalize some issues that are bilateral and aren’t directly linked with customs union obligations, such as agriculture-support levels.” The WTO will probably admit Kazakhstan this year, he said.

Slepnev also said he doesn’t expect businesses to flee Russia for the more favorable tax regimes of its customs union partners. Some companies with headquarters near the Russian-Kazakh border have opted to relocate to Kazakhstan because of the lower levies while others prefer Belarus because it’s located closer to Europe, he said. Companies that sell “ordinary goods like coffee and clothes and shoes” tend to remain in Moscow because the market is larger, Slepnev said.

“I don’t have any big worries” that some businesses will leave Russia’s border regions with Kazakhstan, he said, adding that some competition between jurisdictions will help improve the business climate of the trade group.

The Eurasian Economic Commission is the customs union’s managing body. While Belarus applied to join the WTO in 1993, the working party on the country’s accession hasn’t met since May 2005.

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