Russia may abandon its plans to join the World Trade Organization in a joint bid with Kazakhstan and Belarus, First Deputy Prime Minister Igor Shuvalov said Thursday, recanting a plan that many experts said was doomed from the start.
The government had earlier indicated a willingness to apply for accession to the WTO as part of a customs union with Kazakhstan and Belarus, but Shuvalov said that model would be changed "due to tactical considerations, as long as the decision is approved by the leaders of the three countries of the customs union — Russia, Belarus and Kazakhstan."
Russia has been in talks to join the WTO since 1993 and is currently the only major economy that is not yet part of the organization.
In June, Prime Minister Vladimir Putin said Russia, Belarus and Kazakhstan would bid for WTO membership together. Later, both he and President Dmitry Medvedev indicated that Russia would join in whichever way was most expedient.
The idea of joining the WTO within the customs union was dubious from the start, said Alexei Portansky, an expert at the Higher School of Economics' Trade Policy Institute.
"The announcement that Russia will join the WTO along with Belarus and Kazakhstan came as a surprise last June even for the negotiators, as it contradicts the rules of this organization," he said.
The Marrakesh agreement, the 1994 document outlining WTO principles, stipulates that unified customs territories applying for membership must have full sovereignty over their trade policies, as do Hong Kong and Taiwan, and does not mention customs unions of any kind.
"It's clear that the authorities realize they made a mistake last summer and are now trying to save their reputation, by saying cautiously that there is less probability now that the accession to the WTO within the customs union will take place," Portansky said.
The initial stage of the customs union went into effect on Jan. 1 after the new organization's legal framework was finalized. The agreement allows for the establishment of a customs territory by July 1, and the final stage of the union's creation is expected to conclude on July 1, 2011.
According to an estimate by the Russian Academy of Sciences' Institute of Economic Forecasting, the customs union will add a cumulative $400 billion to the gross domestic products of the three countries by 2015.
Kyrgyzstan has expressed an interest in joining the customs union, but it is not yet clear how the overthrow of the government in the Central Asian nation may affect those plans. Putin also invited Ukraine to join the customs union last month.
Despite the change in strategy, Russia could join the WTO by year's end, Shuvalov said Wednesday at a meeting with members of the European Commission in Brussels.
“Russia hopes to complete all procedures by the end of the year. We have support from the EU and positive signals from the U.S. administration. If the U.S. gives similar support, it will take several months,” Shuvalov said, Itar-Tass reported.
The timing may be right for Russia to secure the support that it needs abroad, but first it needs to step up to the plate, Portansky said.
"Last April, [U.S. President] Barack Obama promised to help Russia join the WTO, but due to a number of pressing domestic issues in the U.S., it looks like the idea was put away for some time," he said. "We need the support of the U.S. plus our own consistency in words and actions in order to join the WTO individually."
Medvedev said Wednesday that he was counting on the Obama administration's support and reproached Obama for not yet fulfilling the promise that he made in April 2009 at the G20 summit in London to help Russia join the WTO.
"Unfortunately, there has been no result so far," Medvedev told Rossia-24.
Shuvalov said Wednesday that Russia would start lowering its customs duties in the second half so as to come in line with the levels required by the WTO.
"To start lowering the tariffs before then would be difficult, almost impossible, because it would not be easy to explain to the Russian people," he said, Reuters reported.
Export tariffs on timber, which have been raised over recent years to stimulate investment in paper production, were one of the key points of recent disagreements with the WTO. In 2008, Russia introduced import duties on automobiles to protect domestic producers.
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