Russia is Ready for Accession to the WTO

On June 10, 2012, the State Duma intends to consider the issue of ratification of the protocol of Russia’s accession to the WTO. On July 4, the State Duma’s Committee on Economic Policy, Innovation Development and Entrepreneurship advised the lower chamber to approve the Draft Law On Ratification of the Protocol of April 15, 1994 on Accession of the Russian Federation to the Marrakesh Agreement on Establishment of the World Trade Organization.

The Protocol includes annexes with Russia’s obligations agreed upon in the course of negotiations as regards Russia’s access to the world market and the specifics of access of foreign goods and services to the Russian market. In particular, from the day of accession to the WTO Russia will keep applying the tariff quoting regime in import of beef, pork, poultry meat and some types of milk whey. The rates of import duties in excess of the quotas will be higher. The tariff quoting regime as regards pork will be in effect till December 31, 2019, while in respect of other types of products it is not determined.

As regards agriculture, the admissible volume of state support in 2012 and 2013 is anticipated at the level of $9bn annually with a subsequent reduction of that volume to $4.4bn by 2018. It remains to be seen whether Russia will benefit from it or not. The above amount – $9bn – did exist in the Soviet days. Now, it has been fixed, but Russia is unable to subsidize its agriculture to such an extent, anyway. Russia has the right to do that, but such a huge amount of money will not be allocated.  

The WTO rules do not forbid to support the agriculture, however, it is to be done indirectly. It is not prohibited to support science, medicine, education, that is, related industries which form to some extent the infrastructure of the rural area and as a result people will stay there. The government is not allowed to subsidies farmers directly, however, there are things which support agriculture, that is, investments in the transport infrastructure, modernization, purchasing of pedigree stock and agricultural science. Such things are not forbidden by the WTO.

Russia’s obligations to the WTO provide for reduction or abolition of export duties. In accordance with the Annex to “The Protocol on Accession …”, the maximum level which cannot be exceeded has been fixed. Upon the expiry of the transition period (from 0 to 5 years), the duty on most export goods will be equal to nil.  As regards individual goods, such as mineral fuel, oil and oil products, skin, leather, timber, paper and non-precious metals, the duty will be calculated on the basis of a formula or be a specific one (on a weight or volume basis). The duties on natural gas, oil and oil products will be applied in the same way as now.

Abolition of export duties which will take place in five years should not be afraid of. The issue of abolition of export oil duties was discussed even before Russia joined the WTO. They will be replaced by the severance tax and the tax on extra revenue from production of hydrocarbons.

S.V. Prikhodko, PhD (Economics), Executive Director of the Gaidar Institute