Consultations on Russia's accession to WTO

A new round of consultations on Russia’s accession to WTO was held in Geneva on November 24, 2008. The working group discussed a new version of the report on the subject.

Still unresolved remain three matters: the level of export duties on timber, conditions public trading companies’ operations, and subsidies to the agrarian sector. Russia maintains there is the need for the 9.2bn-worth state support of the agrarian sector (which is presently under USD 3bn), while the WTO members believe USD 3bn for this purpose suffices. They also assert that the principal objective of all the state-controlled corporations (not only Gasprom and the Russian railways) should become profit making.

The Europeans strive to have Russia reject increase of export duties on round timber, which have grown from 2.5 to 15 Euro per cubic meter over the past 2 years and should be further raised up to 50 Euro since January 1, 2009.

Prohibitive duties were believed to form a sine qua non condition that secures an influx of large-scale investment in Russia’s forestry complex. As an additional stimulus measure, the duties on timber products even at the first stage of processing were brought down to zero, while wood-working corporations were offered benefits effective over the period of construction of processing facilities. In the first half-year of 2008, exportation of unprocessed timber plunged at 23.8% and accounted for 20.1 m. t. (according to the Strategy of Development of the national wood-working complex, it should further fall to 5 m.t. by 2020). By the late summer 2008, the Ministry of Industry and Trade was in receipt of over 200 investment projects worth a total of Rb. 1.1 tn.

The fall in the export volume of timber has destabilized the Scandinavian countries’ paper industry, which found itself on the verge of bankruptcy. Meantime, the increase duties triggered domestic problems. It is timber corporations of regions that lack enough huge timber-processing plans or do not have them at all that found themselves in the most complex situation. Ports and transportation companies, too, became hostage to the situation, as by the 3rd quarter 2008 transportation of timber cargo had plummeted nearly twice.

In the aftermath of a meeting between prime ministers of Russia and Finland, the RF government promised to postpone putting in effect new customs duties for round timber for 9-10 months, explaining this by willingness to help battered by the crisis Finnish forestry corporations. At present the information of abolition of export customs duties on unprocessed timber should be considered only as a hypothesis. The increase in the customs duties is provided for by the effective Resolution of the RF Government of February 5, 2008, № 75. Postponement of the next increase of the duties will become a fact only when it is amended by a respective government resolution.

In the future, the duties shall be raised anyway, in a move to boost up the domestic timber processing in the country; however, it is necessary to optimize an increase in export customs duties of round timber in conjunction with the growth of the domestic processing capacities.

At the negotiations on Russia’s accession to WTO, Georgia claims Russia may not accept trade documents of two customs offices in Abkhazia; likewise, Georgia’s respective claims on customs offices located in North Ossetia are still in force. Georgia, however, will not be able to bloc Russia’s accession to WTO, sobeit other members of the Organizations insist on that.

Ukraine, which has just recently joined the Working Group on WTO, is not going to raise any specific issues. The Ukrainian representatives claimed that his country finds it more convenient to solve problems in the bilateral negotiations mode.

N. Volovik, Head of the Department of Foreign Economic Activity