On November 19, 2006, G. Gref, Russian Federation Minister of Economic Development and Trade, and S. Schwab, U.S. Trade Representative, signed in Hanoi the Russian-American Protocol that ends negotiations over Russia's accession to the WTO
The USA are the 56th WTO member to complete negotiations with Russia over access to commodity markets, and the 27th WTO member to complete bilateral negotiations over access to services markets.
It has been a long-awaited event.
It is a very significant step on the way towards Russia's accession to the WTO. Now, we may state that Russia has completed negotiations over access to the markets with all the members of the Working Group on Russia's accession to the WTO, which expressed their wish to enter into such talks.
The signing of the Protocol is also very important for bilateral Russian-American relations. It is a weighty positive contribution to the development of bilateral trade and investments, and one more fact confirming the willingness of the two countries to find win-win solutions to even the most difficult problems.
The negotiations over commodities lasted for nearly 9 years, those on services, 7 years.
It was a hard, sometimes tough, but no cruel, process.
As a result, we have managed to arrive at fair covenants offering new opportunities for both trade and investments. These arrangements secure in full the interests associated with upholding the development of a competitive Russian economy. They will favor opening the commodity and services markets which we are interested in, and the Russian markets of commodities and services, which are of interest to American companies. The arrangements achieved will improve the investment environment for American and Russian businessmen after Russia joins the WTO. At the same time, the arrangements allow reserving mechanisms for effective protection of industries that need such protection.
The negotiation process was not confined to governmental structures. All these years, businessmen, lawmakers, and regions were actively involved. Their assistance and advice were extremely helpful from the viewpoint of attaining well-balanced results. It is the first time in the history of modern Russia when business was actively involved in shaping a long-term policy of the state.
Similar to other agreements signed by Russia in the context of WTO accession, the US-Russia Protocol specifies the conditions for access of goods and services to the Russian market. Specific documents address some particular issues of bilateral trade relations, including veterinary inspection, measures for protection of intellectual property rights.
In the course of the US-Russia negotiations, Russia's standard position was defended in full, namely, not a single duty will be lowered after Russia joins the WTO, and the liberalization of tariffs for individual items will be extended to transitional periods, 1 to 7 years. Such periods will take into account the significance of specific items for domestic industrial sectors.
Tariff quotas for imports of beef, pork and poultry will be kept within the existing parameters until 2009, after which, upon completion of negotiations with interested suppliers, validity of the quotas may be extended. The period of such extension is not limited and will depend on Russia?s position.
In case Russia decides against using tariff quotas, it will still command adequate tariff mechanisms for protection of its meat market, more effective as compared to that based on existing quotas.
Also, Russia liberalizes its market in the segment of some kinds of animal feeding stuff and pet food (including soybeans, cake, meal), vegetables, fruit and nuts from outside Russia (e.g., pistachio, peanut, oranges, grape, bananas, etc.), particularly vegetables and fruit in winter season. Imports of feedstock lacking in food industry (for instance, quality milk whey) will be facilitated. It will allow saturating the consumer market and create favorable conditions for developing cattle breeding and processing sectors of agricultural industry.
The protective duty for alcohol will be kept unchanged, duty rates for foreign wines, brandies, champagnes and whiskeys will be reduced from 20% down to 12%.
The compromise achieved in negotiations over veterinary inspection issues is based on the following principles. The US Government guarantees the veterinary safety of food products intended for the Russian market in compliance with principles of the International Epizootic Office and applicable Russian veterinary regulations. These conditions provided, the Russian party permits imports of food products from the USA and is entitled to check respective American enterprises under the procedures agreed upon with the USA.
Once Russia joins the WTO, the weighted average rate of Russian duties for agricultural produce will be lowered by approximately 3 percentage points. A similar three-percent reduction will also be applied to tariffs for imports of industrial goods. This being the case:
- Rates of duties for foreign medicines and, alongside with that, for medical equipment and medicinal substances used in making medicines in Russia will be lowered. The medicines registration system will be brought in line with international standards, which will also produce a downward pressure upon prices for medicines;
- Duties for rawhide and raw furs, as well as wool and raw fabric, will be cut and in some cases even cancelled. These measures form part of the program aimed at supporting Russian textile and shoe manufacturers;
- Duty rates for ready garments, glassware and ceramics will be kept practically unchanged;
- Duty rates for chemicals, paper and paper goods will be lowered step by step within 3-4 years, and these market segments will be made partially opened. It will result in a tougher competition in the above segments, but by no means at the expense of any damage to Russian manufacturers;
- Rates of duties for footware, consumer electronics, and electrical equipment will be changed to arrive at an effective-demand level, which will allow eliminating grey and black import schemes in the above segments;
- Duty rates for processing, construction, scientific and measuring equipment will be noticeably cut or even cancelled;
- Within 3 years after Russia's joining the WTO, duties for computers, associated production facilities and computer components will be cancelled;
- Arrangements on conditions for opening, within 7 years, Russian markets of passenger cars (a reduction from 25% to 15%) and civil aircraft (from 20% to 7.5%-12%) have been reached, which, on the one hand, will secure the interests of Russian purchasers and consumers (and hence American exporters) and on the other hand, will allow implementing large-scale investment projects aimed at building new automobile factories and creating aircraft of new generations.
Russia has assumed commitments with respect to over 100 services sectors to thereby ensure a stable and predictable environment for business activities of foreign service providers and investors in Russia.
- In the domain of telecommunications, Russia's commitments are tailored to the market access conditions as stipulated by the applicable legislation in force. In some cases, they provide for additional measures to protect national operators (e.g., if necessary, Russia may exercise, at the initial stage, its control over fixed communications operators, including Svyazinvest companies and other traditional operators, after their privatization). The commitments in the sphere of satellite communications will contribute to further development of Russian telecommunication companies through securing their liberalized access to services that can be provided by foreign satellite systems. At the same time, full control over providing satellite communication services to end consumers and subscribers in Russia is retained.
- Considerable attention within the framework of the negotiations was paid to the sector of audiovisual services, which, by its significance to the USA, is comparable to such sectors as telecommunications and financial services. As a result, in key spheres of audiovisual services, we have managed to arrive at well-balanced and win-win conditions for the presence of foreign companies. For instance, as far as production of motion picture and video films, TV and radio broadcasting and other associated services are concerned, we are entitled, if required, to continue the current governmental support to domestic motion picture producers. In the sectors for which Russia has assumed certain commitments (e.g., exhibition of motion picture and video films), the right is also reserved to exercise measures to protect cultural heritage and identity.
- Reaching a trade-off for the sector of financial services was the most difficult problem. We have not committed to open the Russian market for direct branches of foreign banks, and have reserved the right to use 50-percent quotas for foreign participation in the banking and insurance systems. At the same time, we agreed to open the market for direct branches of foreign insurance companies 9 years after Russia joins the WTO. The commitments as formulated will allow us to apply to branches of foreign insurance companies operating in Russia the entire package of measures to ensure the financial stability of such branches, adequate quality of their services, and compliance with all requirements of the Russian legislation in force. For all practical purposes, we will be entitled to apply to such branches the same regulations as in the case of Russian legal entities licensed for insurance activities. Along with that, we reaffirmed the adherence to the existing legislation that discards any possibility (as a generic regulation) for imposing limitations upon foreign shares in the assets of banks and insurance companies established in Russia. These restrictions will be applied solely to certain kinds of insurance for as long as a 5-year transitional period.
Thus, Russia's joining the WTO will serve, first and foremost, the interests of Russia, national manufacturers, investors and consumers.
