EU-Russia
deal brings Russia a step
closer to WTO membership, Brussels, 21 May 2004
EU
Trade Commissioner Pascal Lamy and the Russian Economy Development and Trade
Minister German Gref have signed today the agreement concluding the bilateral
market access negotiations for the accession of the Russian Federation to the WTO, in the presence of the European Commission President
Romano Prodi, the President of the Russian Federation
Vladimir Putin and the President of the European Council
Irish Prime Minister Bertie Ahern.
Romano Prodi,
President of the European Commission said: “Today the EU and Russia cement further their trade
and economic relations. This deal brings Russia a step closer to the
international trade family, the World Trade Organisation, where it belongs.“
Key elements of the bilateral deal
The deal concluded today covers the
commitments that the Russian
Federation will undertake in goods and
services once it accedes to the WTO. The average
tariff level that Russia
will not exceed is 7.6% for industrial goods, 11% for fishery products and for
13% for agricultural goods, in addition to tariff rate quotas for fresh and
frozen meat and poultry representing around 600 million euro per year (15% of
total EU agricultural exports to Russia).
In services, Russia will be taking commitments
in a large range of sectors including telecommunication, transport, financial
services, postal and courier, construction, distribution, environmental, news
agency, and tourism. Commitments include cross border provision of services and
commercial establishment.
In addition, the agreement has solved a
range of trade related energy questions, in particular on the question of the
domestic price for industrial users of gas. This includes a commitment that the
price of gas for industrial users covers costs, profits and investment needed
for exploitation of new fields. Russian gas prices to industrial users would be
gradually increased from the current $ 27-28 to between $37-42 by 2006 and
$49-57 by 2010, which is in line with Russia’s own energy strategy.
Increasing domestic energy prices will encourage a more efficient use of energy
resources in Russia and it
is thus mutually supportive of the Kyoto
goals.
Finally, agreement was reached to revamp
the system of charges currently applied to EU airlines overflying
Siberia to make it cost based, transparent and non-discriminatory by 2013 at
the latest phase.
WTO
accession is likely to anchor Russia
into an international rules-based trading system. It will enhance openness,
transparency and predictability, which are key to
attracting foreign investment and provides a foundation for improved economic
governance.
WTO
accession process
Following Russia’s
application for WTO membership in 1993, the Working Party
on the accession of the Russian
Federation to the WTO
was established on 16 June 1993. An accelerated programme of work of the
Working Party was launched in 2003, focussing on a broad range of systemic
issues related to Russia´s trade regime,
including customs procedures, technical regulations, intellectual
property rights. This work is carried out at the multilateral level involving
all WTO partners. The next meeting of the Working
Party will take place in July 2004.
As part of the WTO
accession process, Russia
is negotiating bilateral market access deals with all interested WTO members. The EU being Russia’s
largest trading partner, the EU-Russia bilateral agreement is a major step in
the process of Russia’s
WTO membership. Russia
is currently conducting negotiations with the US,
Japan, China, Canada,
and Australia
among others.
Once these bilateral negotiations have
been concluded and the Working Party has completed its work on Russia´s trade regime, the Working Party will
determine the terms of accession. These will appear in a report with a protocol
of accession containing the specific market access commitments (in tariff and
services schedules) of the Russian
Federation.
Background: EU-Russia trade relations
The EU and Russia have a
solid trade relationship, which has become stronger following EU enlargement.
On the one hand, the EU is Russia’s
main trading partner, accounting for above 50% of its overall trade. On the
other hand, Russia is the EU’s fifth trading partner of the EU behind the US, Switzerland,
China and Japan and
accounting for around 5% of the EU’s overall trade.
Total trade in goods between the enlarged
EU and Russia
amounted to around euro 92 Billion in 2003. The pattern of bilateral trade
reflects comparative advantages of the two economies, with fuel and primary
products representing the bulk of Russian exports as opposed to capital and
finished industrial and consumer goods imported from the EU. Russia now
provides over 20% of the EU’s needs in imported fuel.
A significant proportion of Russian goods entering the Community market
benefits from the EU’s General System of Preferences
(GSP), which lowers import duties below the most
favoured nation rate.
The EU is also the main source of
technology, know-how and investment for Russia. Trade in services, which
represented around €10 billion in 2002, i.e. below 2% of the EU’s overall trade in services, retains great potential for
growth and the dynamic services sector will undoubtedly be increasingly
important to the trade relationship in the future. As regards foreign direct
investment, companies from EU Member States are the major foreign investors in Russia.
However, the EU outflows to Russia
are still low, i.e. €2.2 billion in 2002, and remain far below its potential.
The Partnership and Co-operation
Agreement (PCA)
governs political, economic and cultural relations between the EU and Russia. It was
signed in 1994 and entered into force on 1st December 1997. Under the terms of
the PCA, Russia receives
Most-Favoured-Nation (MFN) status, whereby no
quantitative limitations are applied except on exports of certain steel
products (which represent only 4% of bilateral trade). On 27 April, Russia agreed
to extend the PCA to the ten new EU Member States
from 1 May 2004.
At the same time, the EU and Russia agreed on a Joint Statement addressing Russia’s concerns related to EU enlargement, in
particular on tariffs, steel, trade defence, agriculture and veterinary issues,
energy and transit of goods to/from Kaliningrad.
EU enlargement has simplified and enhanced
access for Russian operators to the markets of the ten new EU Member States. Russia is well
positioned to take advantage of the opportunities offered by EU enlargement.
This is also part of the rationale behind
the Common Economic Space, which should contribute to anchor Russia in the
European and to fully benefit from the recent EU enlargement. At the EU-Russia
Summit of May 2001, the EU and Russia
launched discussions on the establishment of a Common Economic Space. The main
objective of this initiative, which covers essentially all trade and economic
issues, is the elimination of trade barriers between the EU and Russia mostly
through regulatory convergence. Indeed, regulatory convergence would allow
economic agents to operate subject to common rules in a number of fields
throughout the enlarged EU and Russia
which represent a market of around 600 Million consumers.
The EU-Russia Summit on 21 May 2004 has
discussed the next steps to develop the four Spaces launched at the EU-Russia
Summit in St. Petersburg
in May 2003, and notably the need to agree on an action plan on the Common
Economic Space in the coming months.
For more information:
http://europa.eu.int/comm/trade/bilateral/russia/russia.htm
http://www.wto.org/english/thewto_e/acc_e/a1_russie_e.htm