new members activities
USRBC Luncheon with Chiedu Osakwe Director Accessions Division World Trade Organization January 23, 2012 Washington, DC
Mr. Chiedu Osakwe opened the discus-
Russia Business Watch
Spring 2012
sion by providing a snapshot of Russia’s World Trade Organization (WTO) package. The ministerial conference adopted the report of the Working Party on Russia’s WTO Accession by consensus on December 16, 2011. According to Mr. Osakwe, the adoption by consensus was significant and demonstrated the successful conclusion of a process that had dragged on for more than 18 years. As a whole, he described the market access commitments as substantial and meaningful and noted that there has never been a more extensive report in terms of scope, extent and commitment in the history of the WTO.
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In terms of the benefits, Mr. Osakwe depicted Russian accession to the WTO as a “win-win-win” scenario; the global economy, Russia and the WTO are all in a position to greatly benefit from the package. For Russia, accession to the WTO provides a platform to continue the program of modernization and diversification of the Russian economy, achieve faster economic growth rates and address pervasive issues such as corruption. For the global economy, the conclusion of the accession extends the WTO’s rules-based system to the Russian economy, which comprises 2.1 percent of global trade. The share of the global economy now subject to these enforceable rules has increased from 95 percent to 97.1 percent. Mr. Osakwe mentioned a number of mechanisms that will affect Russia’s trade rules and regulations. The package contains 1,451 paragraphs, of which 163 are legally binding — Russia has been bound to a number of commitments that are enforceable. These commitments, Mr. Osakwe argued, will serve as a restraint on Russian behavior moving forward. Additional mechanisms include the dispute settlement system and an annual trade policy review that WTO members can initiate.
Mr. Osakwe credited the critical roles played by the United States and the European Union throughout the process saying that, without this strong support, the chances of Russia acceding to the WTO this year would have been slight. He explained that trade multilateralism is not self-perpetuating and requires leaders to drive the process. The U.S. and EU initiated and drove the end-game process in a way that reinforced the rules of the trading system while also opening important markets for goods and services. Speaking on the specific provisions of working party report with respect to goods, Mr. Osakwe stated that Russia concluded 57 bilateral market access agreements with members, which is greater than the number on goods agreements concluded by China (and a WTO record). In the 57 bilateral market access agreements, there are a total of 90,000 tariff concessions, which the WTO secretariat consolidated and minimized into a final goods offer of 11,526 tariff concessions that was given to the entirety of the membership on an MFN basis. On average, the final legally-binding tariff ceiling for Russia will be 7.8 percent, compared to the current average of 10 percent. For agricultural products, the applied duty for 2011 of 13.2 percent will be lowered to 10.8 percent. Manufactured products will be reduced from 9.5 percent to 7.3 percent. Speaking on the information technology agreement (ITA), Mr. Osakwe explained that there were two agreements that eliminated any ambiguity in the goods schedule. Head note number 3 states that the Russian Federation will reduce the tariff on all ITA products over a three year period from 5.4 to zero percent.
In addition, paragraph 424 refers to Russia’s commitment to ITA, as related to the head note in the goods schedule, so that when the Russian Federation becomes a WTO member, they will present a draft schedule to the ITA committee for review. Mr. Osakwe highlighted a number of other areas as well. In wines and spirits, the average tariff reduction will be from 22.8 percent to 11.2 percent, while in beverage and tobacco the average applied tariff duty will be lowered from 21.2 to 14.9 percent. Similar reductions will occur in chemicals, automobiles, electrical machinery, wood, paper, and dairy products. Another member concern that Mr. Osakwe mentioned related to what may happen to goods behind the borders, such as VAT, applied duty, excise duties, and the arbitrary application of internal taxes and charges. In response to these concerns, Mr. Osakwe noted the Russian Federation’s commitment that all internal charges, duties and taxes will be applied on an MFN basis, without discrimination. He characterized the commitment as strong and binding. Turning his attention to agriculture, Mr. Osakwe highlighted three areas. First, the Russian Federation undertook a commitment to bind its export subsidies. Second, Russia is committed to gradually reducing agricultural subsidies from a total of $9 billion in 2012 to $4.4 billion in 2018. Lastly, a new section in the goods schedule was created specifically for Russia on export duties (Part V). The section fixes the export duties for 704 products for the purpose of stability and predictability of policy. WTO members wanted to establish constraining disciplines that would limit the
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