Russia as a new member of the WTO dr. Péter P. Balás DDG Trade Prague, November 2012 1
Overview Why Russia s WTO accession is important? Russia as an economic partner of the EU The Russian accession process Russia and the Customs Union Major areas of Russia s commitments EU-Russia bilateral agreements What comes next? Perspectives of EU-Russia economic relations How Member States and industry can be more involved 2
2. The EU is the biggest trading power 16 % of world trade in 2011 First exporter A MAJOR TRADING POWER Largest importer Leader in foreign direct investment: EU-27 both major recipient and source of FDI 3
The EU in The World EU external Trade (2009-2011, millions of euro, excl. Intra EU Trade) 2 000 000 Exports Imports Balance 1 500 000 1 000 000 500 000 0-500 000 2009 2010 2011 Source: Eurostat (Comext, Statistical regime 4) 4
The EU in The World Top 10 EU Major Exports Partner (2011, billions of euro) 0 50 100 150 200 250 300 United States 260.8 China Sw itzerland Russia 108.4 121.7 136.2 Turkey 72.7 Japan Norw ay India Brazil United Arab Emirates 48.9 46.6 40.4 35.7 32.7 Source: Eurostat (Comext, Statistical regime 4) 5
The EU in The World Top 10 EU Major Exports Partner (2011, %) United States 17.0% Other 41.0% China 8.9% United Arab Emirates 2.1% Sw itzerland 7.9% Russia 7.1% Brazil 2.3% India 2.6% Norw ay 3.0% Japan 3.2% Turkey 4.7% Source: Eurostat (Comext, Statistical regime 4) 6
The EU in The World Top 10 EU Major Imports Partner (2011, billions of euro) 0 50 100 150 200 250 300 350 China 292.3 Russia United States 184.8 199.5 Norway Switzerland 93.6 91.3 Japan 67.5 Turkey India Brazil South Korea 47.6 39.4 37.8 36.1 Source: Eurostat (Comext, Statistical regime 4) 7
The EU in The World Top 10 EU Major Imports Partner (2011, %) China 17.3% Other 35.5% Russia 11.8% South Korea 2.1% Brazil 2.2% India 2.3% Turkey 2.8% Japan 4.0% Sw itzerland 5.4% Norw ay 5.5% United States 10.9% Source: Eurostat (Comext, Statistical regime 4) 8
The EU & Russia EU Trade with Russia (2009-2011, millions of euro) 250 000 200 000 Exports Imports Balance 150 000 100 000 50 000 0-50 000-100 000-150 000 2009 2010 2011 Source: Eurostat (Comext, Statistical regime 4) 9
Russia and EU 500 000 Russia Exports (millions of USD) 450 000 400 000 350 000 224 410 300 000 186 114 250 000 140 774 200 000 104 060 150 000 100 000 50 000 211 811 150 796 196 174 241 361 0 2008 2009 2010 2011 (11m) EU Rest of the World Source: Rosstat 10
Russia and EU 100% Russia Imports (millions of USD, %) 90% 80% 70% 60% 230 494 145 530 197 472 276 895 50% 40% 30% 20% 10% 0% 118 116 73 321 105 991 161 975 2008 2009 2010 2011 (11m) Rest of the World World Source: Rosstat 11
The EU & Russia EU Exports to Russia - Sectoral Breakdown (2010, %) Clothing 2,9% Textiles 1,0% Other manufactures 9,0% Other products 1,7% Agricultural products 11,0% Fuels and mining products 1,5% Iron and steel 2,1% Chemicals 18,1% M achinery and transport equipment 44,7% Other semi-manufactures 8,1% Source: Eurostat (Comext, Statistical regime 4) 12
The EU & Russia EU Imports from Russia Sectoral Breakdown (2010, %) Other manufactures 0,2% M achinery and transport equipment 0,8% Textiles 0,0% Clothing 0,0% Other products 9,9% Agricultural products 1,7% Other semi-manufactures 1,9% Chemicals 2,9% Iron and steel 2,7% Fuels and mining products 79,7% Source: Eurostat (Comext, Statistical regime 4) 13
The EU & Russia EU FDI Stocks with Russia (billions of euro) 140 120 Outwards Stocks Inwards Stocks 100 80 60 40 20 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Eurostat (NewCronos) Note: EU is EU15 (1992-2000), EU25 (2001-2003), EU27 (2004-) 14
Russia and EU 100% 80% EU accumulated Investment in Russia as of September 2011 (millions of USD, %) 88 661 29 552 1 098 58 003 60% 40% 234 517 96 863 7 308 130 354 20% 0% Total Investment Direct Portfolio Other EU Rest of the World Source: Rosstat 15
3. Russia s accession process Launched in 1993, up to 1999 preparatory phase More intensive negotiations from 2000 MA commitments with major partners: 2004-2006 Protectionist trends from 2007: AG policies, XDs 2008-09: anti-crisis measures June 2009: formation of CU Early 2010 relaunch - Russia alone CU challenges WPR redrafting Decision at MC8 in December 2011 Member since August 22, 2012 16
Accession commitments GOODS Market access Industry, imports Overall tariff average reduced from 10 to 7,8% (EEs) Industrial tariffs: from 9,5 to 7,3 % Implementing all sectoral liberalisation (incl. ITA) Implementation period max. 7/8 years Commitment to start GPA accession in 4 years 17
Import Tariffs - Industry Import duties: Average FBR 7.8%: Industry 7.3% Reduced from the average applied rate of 10% in 2011 The lowest amongst BRIC countries Implementation periods for nearly half of tariff lines Sectors which will benefit most: ITA: Ave FBR 0%; reduction by 5.5% Ceramics: Ave FBR 12.2%; reduction by 5.4% Vehicles and parts: Ave FBR 8.3%; reduction by 4.2% (BUT 7-year IP) Paper: Ave FBR 7.6%; reduction by 3.7% Also Textiles (7.7%), Pharmaceuticals (4.3%), Glass (11.1%) will benefit from approx. 2% reduction Ave FBR for Medical, Agricultural and Construction equipment, Footwear and Chemicals will be bound at 4-5% 18
Export measures Industry Export restrictions General: administrative measures, bans prohibited, except shortage Export duties: Non-traditional commitment to bind rates for 700-odd products part of Goods Schedule Mainly concerns raw materials: Gas/oil products, plastic, hides and skins, precious stones and metals, base metals, fish etc. Commitments stronger than those of KSA, Ukraine but not going as far as with China Will stop the tendency to use XD as industrial and fiscal measure of 2007-2009 Unbound products subject to bilateral Agreement on raw materials Export TRQ regime EU, bilateral Exports of coniferous wood EU specific quota reserved Licensing management elaborated in bilateral Agreement and Protocol 19
Import tariffs - Agriculture Russia very important, 2nd export market for EU Agricultural tariffs: from 13,2 to 10,8%, transition periods Import TRQs for most sensitive products Meat products in-quota vs out-of-quota rates Beef: 15% vs 55% (EU specific quota reserved) Pork: 0% vs 65 (BUT flat MFN rate 25% from 2020) Some Poultry products: 25% vs 80% (EU specific quota for Boneless Poultry Meat) Some whey products: 10% vs 15% 20
Subsidies Industrial Subsidies: No exemption granted All subsidies will have to be WTO-compatible from the date of accession Agriculture Subsidies: Domestic Support: Capped at 9 bi USD in 2012 Gradually reduced to 4.4 bi USD by 2018 Export subsidies bound at zero Currently applied VAT exemptions will have to be eliminated 21
Market Access - SERVICES Commitments: Very important opening in certain key sectors: Financial (insurance, banking, securities..) Telecommunication Transport Postal Courier Distribution Tourism Professional services (legal, auditing, architectural, engineering, medical..) Construction Energy related (only consulting on services incidental to mining and distribution) Computer services - etc. Mode 4 movement of intra-corporate transferees and business visitors 22
Regulatory commitments Prompt, full respect of WTO rules, mostly without transition periods, (but TRIMs, FEZ) No specific conditions, monitoring arrangements (unlike China) MET treatment from WTO members (EU since 2004) Some limited WTO+ rules (transparency or pricing, etc.) 23
Regulatory Commitments Trading rights Customs Facilitation Pricing Policy Intellectual Property Protection State-trading Enterprises Technical Barriers to Trade Sanitary and Phyto-sanitary regulation Trade Related Investment measures Transparency 24
EU-Russia WTO+ bilateral agreements Mostly based on WTO obligations, but not part of Russia s WTO commitments Bilateral agreements with separate institutional, DS mechanism TRIMS partial compensation for effects of Russia investment policies for cars Wood TRQ administration Raw materials unbound XDs Bilateral and internal implementation regime needed by time of accession Plus: maritime services (linked to PCA) 25
Benefits of WTO accession - EU After years of protectionist measures liberalising market access for goods Disciplines on export measures - XDs Better access for services Disciplines on subsidies, NTBs Reform of broader economic policies Enforcable commitments (DS) More attractive business/investment environment Stronger rule of law 26
Benefits of WTO accession - Russia Political-economic prestige Becoming part of rule-making (DDA) More attractive business environment More safety for long-term, high-tech investments Better IPR protection: more R/D Chance to diversify production/exports Market access improvements (steel) Multilateral DS for problems 27
BUT - First experiences worrying Except for transitional commitments, all entered into force promptly Reduction of (most) tariffs, new CET affecting also KAZ and BY Delivery on political promise protecting Russian producers from the effects of tariff reductions 28
Concerns Change of tariff bindings in the CET Recycling fee for vehicles Partial implementation of wood export regime Continued misuse of SPS measures Questions about energy pricing and XDs Regulation of alcoholic drinks Continued pressure for illegal TRIMs GOOD as a last resort, all subject to DS 29
Perspectives of bilateral economic relations First priority: Full implementation of WTO PCA basis of bilateral economic relations weak disciplines/enforcement Since accession: basis - WTO relationship Next step: new PCA New Agreement Trade/investment provisions major elements of EU mandate BUT different views, after 4 years no real progress, blocking whole NA process (1) Contents of NA (regulatory issues) (2) Role of CU and EAEC For mid-term, NA is only option FTA: not for near future economic and legal (CU) reasons 30
Russia and its Customs Union For now 3 members, but intention to enlarge Political-strategic, as much as economic considerations CU now Eurasian Economic Union Russian doll : CU Eurasec CIS FT zone Eurasian Economic Commission, Febr 1 Model of EU: institutions, rules Fast progress Single Economic Space (EU s IM) foreseen by 2015 Goal: all 4 freedoms, but over time so far goods (but no XDs, IPR, GP) Challenge: only RU is WTO member 31
CU implications of Russia s WTO membership Since 2010 common import tariffs (largely based on Russia s applied duties) Russia s tariff commitments also bind max. CU tariffs Since August 2012 new CET CU covered regulatory issues TBT, SPS, customs administration, TDI For all CU competences intra-cu agreement, BUT KAZ/BY still no direct WTO obligations PLUS: For 2, outside CU competence, not even indirect commitments: XDs, services, GP 32
Thanks for the attention 33
Trading rights Regulatory Aspects /1 Registration rights defined Licensing disciplines: Import Licensing Agreement full application from the date of accession Abolition of unjustified use of non-automatic licensing (alcoholic beverages, pharmaceuticals, goods with encryption technologies) Defined use of automatic licensing (permits) 34
Regulatory Aspects /2 Customs Facilitation: Customs Valuation Agreement applies from the date of accession Abolition of use of reference or minimum prices at customs valuation Efficient procedures at the customs Proportionality and non-discrimination while applying procedures Abolition of unjustified imposition of product-specific customs check-points Not permitted to impose country-specific customs check-points (import or export) unless rules permit Transparency and justification for customs fees (commensurate to services rendered) Energy goods subject to common transit rules Effective right of appeal against administrative decisions 35
Regulatory Aspects /3 Pricing Policy (WTO+): General commitment not to use pricing policy to afford protection to domestic goods industry or undermine services concessions Railway transportation: National treatment for import and export from 1 July 2013 Full application of Art V GATT for transit Transparency on transit fees Gas pricing: Application of cost + investment + profit formula for gas supplied to domestic industrial consumers 36
Regulatory Aspects /4 Intellectual Property Protection: Full application of TRIPS from the day of accession = respect of key rights for : copyrights holders, software, motion pictures, sound recording, patents, trademarks, trade secrets, test data.. National treatment with regard to fees for patents and TM registration Enforcement commitments Ex-officio actions Actions against piracy, including via internet Fair and equitable administrative procedures, border measures and criminal procedures 37
Regulatory Aspects /5 State-trading enterprises: Act in line with WTO rules when engaged in commercial activities Monopolies not prohibited, but subject to general rules (difficult to enforce ) Notification commitment 38
Regulatory Aspects /6 TBT Russia from accession fully applies the obligations of the TBT Agreement National treatment/ non-discrimination No creation of unnecessary obstacles to international trade; for that, TR must not be more trade-restrictive than necessary to fulfil a legitimate objective (non-exhaustive list of such legitimate objectives included, e.g. national security, health and safety, environment) Available scientific and technical information to be considered in risk-assessment (Art. 2.2) Relevant international standards to be used where possible 39
Regulatory Aspects /7 SPS WTO allows health, sanitary, phyto-sanitary measures for protection of health (humans, animals, plants), but not to limit imports, protect farmers If permitted objectives followed, can be selective, discriminatory potential for abuse. Frequent DS Since 2004, especially 2007 (AGRI strategy) Russia increasingly applies SPS measures with clearly protectionist motives WTO obligations to be respected from accession, with much detailed commitments Special difficulty: parallel CU regulation 40
Regulatory Aspects /8 TRIMs WTO prohibits investment policy to be used for trade-restrictive purposes Russia, as important investment destination so far heavily relied on prohibited TRIMs (vehicles, agri machinery, chemial/pharma, etc.) Special exemption for TRIMs: cars and commercial vehicles until 2018, based on present contracts Additional bilateral commitment towards EU: in case of decreasing imports of parts and components, additional duty-free TRQ to be opened (EU + MFN) 41
Regulatory Aspects /9 Transparency Special importance due to Russia s often difficult business/investment environment To ensure transparent and predictable trade and investment climate Introduced definition of normative legal acts (not letters, telegrams, teletype messages etc.) Obligations: To publish draft legislation for public consultation well in advance of adoption To promptly publish acts once adopted No entry into force of legislation prior to publication To establish enquiry points for public queries Ensure notification of measures (privatisation programme, customs fees, state set prices, TRIMS, Subsidies, Rules of Origin, Licensing requirements, TDI etc.) 42