Russian Federation’s Accession to the World Trade Organization

Subject: Economics
Pages: 30
Words: 8159
Reading time:
29 min
Study level: College

Introduction

Background Information

The World Trade Organisation (herein referred to as WTO) is tasked with the role of supervising and liberalising the international trade between countries. The organization as it is known to many people today started its operations on 1st January 1995 (Rapoza 2011).

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According to Aslond (2010), the role of the organisation is to regulate trade that is taking place between the member countries. To this end, the organization provides the member countries with a framework to negotiate and formalise the agreements between them. The organization is well aware of the fact that trade disagreements are likely to occur between two parties involved in a business transaction. As a result of this, the organization has gone ahead to provide the member states with a dispute resolution framework to ensure that the members adhere to the provisions of the WTO agreement signed between the organization and the member state (Cooper 2008).

It is important to look at the accession and membership process as far as WTO is concerned at this juncture. By late December 2011, the membership of this trade organisation stood at 155 nations after the admission of Russia (WTO 2011). Given this scenario, it is important to address the issue of how nation state or an economy in the world can gain admission to the organisation.

The accession process (which is a reference to the process of becoming a member of the WTO) varies from one country to the other. This means that the conditions that are given to one applicant country may vary from those given to another country. It is noted that the terms and conditions vary depending on various factors such as the status of economic development, the prevailing trade regime in the country among others (Aslond 2010). On average, the accession process lasts for about five years. However, the period can be more or less than five years if the applicant country is not committed fully to the process or in cases where political interests, interfere, with the process (Aslond 2010).

This paper is going to look at Russia’s accession process. The researcher will be looking at the effects of this accession on the country’s customs policy in comparison to other countries’ accession. Belarus and Ukraine will be the two countries that will be compared with Russia.

Problem Statement

Russia (which is also referred to as the Russian Federation) is regarded as one of the largest countries in the world today (BBC 2011). According to Tarr (2011), the country can be considered as a federal semi- presidential nation. It has a total of eighty three federal states.

Currently, the country is the world’s 11th largest economy in terms of GDP (Aslond 2010). When compared with other nations around the world in terms of purchasing power parity, Russia is ranked number 6. Its nominal budget is considered to be the world’s 5th largest military budget. The country is also a permanent member of the United Nations Security Council, an indication of the influence the country has in the world. It is also a member of several economic and trade organizations, including G8 and G20.

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The economy of this country is driven in large part by the enormous natural resources it has. This is especially oil and natural gas deposits. The economy of the country has grown tremendously since the year 2000. Many analysts have attributed this to the increase in domestic consumption and improved political stability. For example, in the year 2008, the country recorded its 9th consecutive year of positive growth. Between the year 2000 and the 2008, the average economic growth in this country was 7 percent (Cooper 2008).

Agriculture is one of the key drivers of the country’s economy. By the year 2005, more than 1,200,000 kilometres square of land in Russia was under cultivation. This was the fourth largest in the world in that year. For a period of ten years (between 1999 and 2009), the country recorded a steady positive growth in the agricultural sector. From a net grain importer, Russia turned around and emerged as the third largest grain exporter behind the European Union and the United States of America. The agricultural revolution in Russia has been supported by various policies formulated and implemented by the government over the years.

The discourse above proves that Russia is a force to reckon with in the world’s economy. This being the case, the accession of the country to the WTO has a great impact on the regional and international economy. It is important then to analyze what these ramifications are in relation to customs and trade.

As already indicated, the country began the process of accession in the year 1993. The process came to a successful completion on December 2011 when the country was admitted to the organisation.

Objectives of the Study

This study has one major research objective and several specific objectives. By addressing the specific objectives, the researcher would have effectively tackled the major objective of the study. The objectives are as listed below:

Major Objective

Analyze the accession of Russia to the WTO and the effects this has on the local, regional and international economies as far as customs and trade are concerned.

Specific Objectives

  1. Critically analyze Russia’s accession to the World Trade Organisation
  2. Analyze the effects of Russia’s accession to the World Trade Organisation on the trade and customs of the country and other nations in the region and in the world
  3. Analyze the concessions made by Russia in the accession process pertaining to tariffs and procedures
  4. Compare the customs procedures and legislation between Russia on one hand and Ukraine and Belarus on the other

Research Questions

The research questions for this study are related to the research objectives. This is given the fact that by addressing the research questions, the research will have effectively attained the objectives of the study. Just like in the case of the research objectives, this study had one major research question and several specific research questions. These are as listed below:

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Major Research Question

What are the effects of Russia’s accession to the World Trade Organisation on the trade costs and revenues of local, regional and international economies?

Specific Research Questions

  1. What are the major features of Russia’s accession process to the World Trade Organisation in the realm of customs?
  2. What are the effects of Russia’s accession to the World Trade Organisation on the local, regional and international economies?
  3. What were some of the concessions made by Russia in the process of acceding to the World Trade Organisation?
  4. What are the differences and similarities between Russia’s customs procedures and legislations and those of Ukraine and Belarus post accession?

Assumptions made in the Study

Irbmen (2010) is of the view that there are many variables involved in any one given study. It is noted that all variables cannot be taken into consideration in a single study. This means that there are variables that are beyond the control of the researcher. As a result of this, the researcher has to assume that some of those variables will remain constant throughout the study. In case the variables change, the researcher will further assume that the changes are not significant enough to affect the findings of the study. These variables are what Irbmen (2010) refers to as the assumptions of the study.

This study is not different. The researcher made several assumptions as analysed below:

  1. It was assumed that Russia’s accession process was taken seriously by the Russian people as it was expected to have far reaching impacts on their lives
  2. The researcher also assumed that the accession process varies from one country to the other
  3. It was assumed that the accession process has both negative and positive impacts on the local, regional and international economy

Scope and Limitations of the Study

Irbmen (2010) argues that it is not possible to cover all aspects of a given topic in a single study. This being the case, the researcher has to deliberately set out boundaries within which the study will be conducted. The breadth and width of this boundary is what Irbmen (2010) refers to as the scope of the study. This is somewhat similar to the limitations of the study which are the confining aspects of that particular study.

The following are the scope and limitations of this study:

  1. The study limits itself to the country’s accession to the WTO. This is despite the fact that the country has joined other regional and international organisations such as the United Nations which have significant impacts on the life of the average Russian. Russia’s membership to these other organizations will not be addressed
  2. The study is also limited to the economic impacts of this accession on the country and other countries in the region and internationally. This is despite the fact that the accession had other significant effects such as the impact on the social life of the citizens and such others. These other impacts will not be addressed in this study
  3. The main focus of the study is Russia, Belarus, Ukraine and to some extent Switzerland. This is despite the fact that there are other countries in the world which have accessed or are in the process of accession to the WTO. These countries were not the main focus of this paper.
  4. The researcher relied on secondary data in conducting this study. What this means is that primary data was not used. The researcher relied on materials that have been published by other people in the field.

Significance of the Study

The following are the major or important applications of this study in this field:

  1. The findings of this study will help analysts realize and appreciate the various impacts of the accession process on the applicant nation and other nations.
  2. The study will help in identifying potential negative and positive impacts of accession to the applicant nation and other countries around the world. This will help interested parties in maximising the benefits while putting in place measures to mitigate the negative impacts
  3. The findings will help in identifying some of the challenges or bottlenecks associated with accession to the WTO. This will help in addressing these bottlenecks in order to make the process worthwhile both for the WTO and the applicant nation.

Chapter Transition

In this section, the researcher introduced the reader to the study by addressing some of the major highlights of the paper. Some of the areas highlighted include background information, problem statement, research objectives, research questions, scope and limitations of the study, significance of the study and the assumptions that were made. The aim was to give the reader an idea on what the whole study is all about.

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In subsequent sections, the researcher will address other aspects of the study such as Russia’s custom history, Ukraine and Belarus’ accession to WTO, effects of Russia’s accession among others.

Russian Federation’s Accession to the WTO: The Federation’s Perspective

Introduction

In this section, the researcher will look at Russia’s accession to the World Trade Organization from the country’s perspective. To this end, the researcher will look at the country’s customs system’s history, the negotiations during the accession as well as the customs’ code and tariff changes as a result of the accession.

The Accession Process in General

A country that wants to become a member of the World Trade Organisation starts by making an application to the General Council (Aslond 2010). The application has to contain a detailed description of “…all aspects of its trade and economic policies that (are of interest to) the World Trade Organisation’s agreements” (Aslond 2010: p. 34). A working party composed of interested members of the organisation goes through the application and deliberates on all the relevant issues.

More often than not, the working party will concentrate on the discrepancies between the interested country’s international and domestic trade policies and legislations and those of the organisation (WTO 2011). These deliberations give rise to terms and conditions that have to be met by the interested nation for it to become a member of the organisation. The country is usually given time or transitional period within which it is supposed to have complied with the entry terms and conditions.

The final phase of the process is characterised by negotiations between the interested country and other members (Aslond 2010). The negotiations touch on concessions and commitments touching on tariffs and access to market. The schedule of these commitments is then presented to the General Council which acts on it. The General Council or the Ministerial Conference can either approve or disapprove the provisions in the schedule. If the provisions are accepted by this body, the Protocol of Accession is then taken before the applicant country’s legislative body (Aslond 2010). The body has to ratify the protocol for the nation to become a full-fledged member.

For the longest time, Russia remained the only G20 member which was not part of the World Trade Organisation (Cooper 2011). Analysts have attributed the delay in approval of membership to various factors. There are those who are of the view that President Vladimir Putin was not keen on or interested in the process during his second term in office. Others are of the view that the slow pace of economic reforms in Russia and the fear that other countries had for Russia were to blame for the delay. Whatever the reason, the fact remains that the Russian accession process remains one of the most significant in the history of WTO.

Some analysts are of the view that Russia’s accession to the WTO holds no significant ramifications on her economic landscape. They are of the view that during the long and arduous negotiation process, the country addressed the various technical details touching on the economic reforms that were called for. As a result of this, the overall accession program does not necessarily entail major structural changes and decisions with the potential to significantly alter the economic landscape of the country (Cooper 2011).

This was not the case in other nations such as Ukraine which have also gone through the accession process successfully. It is noted that when Ukraine joined the World Trade Organization, the schedule and the accession protocol effectively amounted to a program resulting in the opening-up of the Ukrainian economy. Major reforms were carried out in the country in subsequent years.

Another country that comes to mind during discourses on Russian accession to WTO is Belarus. This country is considered to be the least developed in the region as far as trade and customs are concerned (Cooper 2011). The country relies heavily on Russia to the extent that most of the structural adjustments that take place in Belarus mirror those already in Russia.

Russian Federation’s Customs History

Recent Customs System History in Russia

In this section, the researcher will talk about recent customs system in Russia up to late 2011. This means that the researcher will not address the new regulations that came about as a result of the country’s successful accession to the WTO. This will be addressed later in the paper. Some of these customs regimes still persist. The ones that persist and the ones that have changed will be analysed later in the paper.

Like in most other countries, commodities moving through Russian customs border (either to or from the country) have to be declared to the customs authorities (Lodyzhenskiy 2008). A customs declaration takes about fifteen days to be processed after the goods are declared to the authorities. Those who flout the customs regulations are penalised accordingly. Violations include failure to declare the goods and the means of transport. Some penalties take the form of fines which may be about twice or five times the legal minimum wage in the country (Lodyzhenskiy 2008).

According to Cooper (2011), import and export duties in Russia are set as “…a percentage (of the) goods… ad valorem…. or in EURO specific per unit measurement of the goods” (p. 34). A combination of the two systems is also widely used. As of April 1 2000, the customs tariff was set as a percentage of the customs cost of goods imported. This ranged between 0 and 30 percent of the value of goods (Osakwe, Tarr, Collins, Shishayer & Dadush 2009). It is only in alcohol where the rate is 100 percent of the imported goods, with the minimum being 2 EURO per litre (Osakwe et al. 2009).

Russian Accession Process: The WTO Principles that Russia had to Comply with

As already indicated earlier, the World Trade Organisation establishes principles or policies that govern trade between the member states. However, it is beyond the organisation to set out the outcomes of such negotiations. It is only interested in providing the rules that are supposed to govern the negotiations. To this end, the organisation has come up with five major principles that are crucial in comprehending its operations. Russia had to comply with these principles for it to be accepted as a member of the organisation. These principles are as analysed below:

Non- Discrimination

According to Tarr (2011), this principle has two main components. The first is the Most Favoured Nation (herein referred to as MFN) rule. This rule implies that a member state should apply similar conditions to all business transactions with all the other members of the organisation (Tarr 2011). What this means is that if a given nation which is a member to the organisation decides to grant a special favour to one nation as far as the exchange of a given commodity is concerned, the rule dictates that the same favour should be extended to all the other member states.

The second component of non- discrimination policy is what Tarr (2011) refers to as the National Treatment. According to this policy, goods imported from member states should never be treated less favourably than those from local producers (Rapoza 2011). This is especially so after the imported goods have entered the local market. The policy was implemented in order to address the issue of non- tariff barriers to trade (Rapoza 2011).

Reciprocity

This policy was implemented to address the ambiguity brought about by the MFN policy and the desire by the member states to obtain favourable international markets for their products. It is noted that a given country will enter into trade negotiations with another country if it is assured that the benefits of such negotiations are more than those that would have been accrued from a unilateral liberalisation (WTO 2011). As a result of this, reciprocal concessions are put in place to make sure that such benefits are realised.

Safety Valves’ Principle

According to Aslond (2010), the members have the freedom to restrict bilateral or unilateral trade under special circumstances. This is in spite of the MFN and reciprocity principles above. Safety valve policy can be seen as an exception to the MFN principle above. To this end, the member state is allowed to give preferential treatment to other countries such as those from the developing or third world regions, those countries from regional free trade zones and such others (Aslond 2010).

Transparency

Member states are expected to make public their trade regulations for the benefit of others. They are also expected to establish and maintain organs and agencies that make it possible to appeal administrative policies with ramifications on international trade (Rapoza 2011). Additionally, the transparency clause requires that the member state avail trade information requested by another member state. All changes in trade policies implemented by the member state must be communicated to the WTO secretariat. The WTO ensures that all member states adhere to this principle by conducting periodic trade policy reviews on the member states. The Trade Policy Review Mechanism is the one tasked with this responsibility on behalf of WTO (Rapoza 2011).

Binding and Enforceable Commitments’ Principle

Cooper (2008) notes that tariff commitments made by member states as far as multilateral trade dealings are concerned are recorded in a “…….schedule of concessions” (p. 34). This is together with the commitments contained in the accession agreement between the member state and WTO. Cooper (2008) is of the view that the aforementioned schedules or lists of concessions form what is referred in economic parlance as “ceiling bindings” (p. 33). As a result of this, a member state can only alter the bindings only after coming into an agreement with the trade partners. In cases where such alterations lead to losses on the part of the trading partner, this principle requires the member state to compensate the affected partner appropriately. If the affected country is not satisfied with the negotiations, it has the option of invoking the World Trade Organisation’s dispute resolution mechanism (Rapoza 2011).

Russian Accession Process: The Negotiations’ Story

Russian accession process was full of twists and turns. This is perhaps one of the reasons why the process took so long unlike in other countries where accession was granted within a comparatively shorter period. The idea to join the WTO was mooted by Russian policy makers who felt that it was the right strategy in moving the country’s economy away from the Soviet era communism (Osakwe et al. 2009). The centralized nature of the Russian economy is perhaps one of the reasons why the process took so long.

As already indicated earlier in this paper, the accession process was initiated in the year 1993. This was done by the then President Boris Yeltsin. However, over the years, the process was characterized by political overtones both from within and without Russia. A case in point is when the president had a confrontation with the Supreme Soviet which was the country’s legislative institution by then (Aslond 2010). It is noted that majority of the legislators were former communists who were not keen on liberalisation.

Boris Yeltsin’s efforts were taken over by Vladimir Putin especially during his first term in office. This was between the years 2000 and 2004. The president made efforts to integrate the country into the world economy as one of his strategies to stimulate the economy which was under a crisis by then. The crisis could be traced back to Boris’ second term in office. It is noted that the former president’s re-election was one of the most unpopular in the history of the country’s elective politics. A mismanaged privatisation program together with other factors culminated to the economic crisis that is believed to have started late 1998.

But Vladimir’s support for the accession process started to falter during his second term in office. The president insisted on reasserting state control over critical areas of the economy such as energy and agriculture. In spite of this, the country made some progress towards the accession process (Cooper 2011). This was marked by the successful completion of major bilateral trade negotiations between the country and other members of the WTO. In the year 2004, a bilateral trade agreement was signed between the country and the European Union. The United States of America followed suit in the year 2006. By the year 2009, bilateral trade agreements have been made between Russia and a majority of the WTO members (Osakwe et al. 2009).

Russian leaders have always complained that the conditions set for the country are stricter than those given to other nations aspiring to join the World Trade Organisation. This has led to expressions of reservations regarding the whole process by the leaders. A case in point is Putin’s utterances on June 10, 2007. During an economic forum held in St. Petersburg, Putin was of the view that there is a need to form new economic blocs and organisations to stop overreliance on organisations such as the World Bank, the International Monetary Fund and the WTO. This is given the fact that these organisations were seen as working for the interests of the European and other western nations such as the United States of America (BBC 2011). The president expressed his frustrations with these international institutions by claiming that they are “…archaic, undemocratic (and fail to) reflect the increasing economic power of Russia and other emerging markets” (Cooper 2008: p. 4).

By June 2009, the country was set to complete the accession process having signed more than 63 bilateral trade agreements. This was a relatively high number, higher than that of other countries at the same stage of accession. However, the president announced the intentions of the country to abandon the accession process as a single entity. Instead, the president was of the view that the country will join efforts with Belarus and Kazakhstan and pursue accession as a customs union (Cooper 2011). This was a big setback and raised doubts about the president’s commitment.

But the move was met with resistance from other World Trade Organisation members. As a result of this, the customs union angle was abandoned and the three countries resumed their accession separately.

President Medvedev and his American counterpart Obama finalised the bilateral trade agreements between the two countries in the year 2010. This was on June 24 of that year. The two heads of state agreed to bring to a close the bilateral negotiations that were necessary for Russia’s accession. The bilateral trade agreements that were finalised between the two countries included the intellectual property rights agreement (Rapoza 2011).

Russia’s Accession to the WTO: Customs Code and Tariff Changes

There are several conditions that WTO members are required to adhere to as far as customs tariffs are concerned. These changes include adjustments on tariffs charged on manufactured goods, tariff charged on services and such others. In this section, the researcher will look at some of them with reference to Russian accession.

Change in Manufactured Goods’ Tariffs

The World Trade Organization expects the members to establish what Cooper (2011) refers to as “limits or bindings on tariff rates” (p. 9). It is noted that the set limits are usually higher than what is actually applied. This gives the member nation room to manoeuvre as far as tariff policies are concerned.

In the year 2005, the average tariff rate that the federation had set for manufactured goods was 12.1 percent (Cooper 2008). However, this dropped to 9.5 percent in the year 2011 as the accession process was coming to an end. In the accession protocol, the federation had committed to reduce the average tariff rate on manufactured goods to about 7.3 percent (Cooper 2011). The table below captures the proposed changes in customs tariffs on manufactured goods as it appears in the schedule:

Table 1: Changes in Tariffs on Manufactured Goods

Category Old Tariffs (%) New Tariffs (Post- Accession) [%]
  1. Wide body aircraft

Narrow bodied aircraft
Aerospace engine

7.5
12.5
5.0
20.0
20.0
10.0
  1. Automobiles
15.1 12.0
  1. Construction equipment
5.5
  1. Agricultural equipment
5.6
  1. Medical equipment
4.9
  1. Hi- tech instruments
4.4
  1. Chemicals
6.7 5.2
  1. Machinery
7.2
  1. Electrical equipment
6.2
  1. Consumer goods
2.0
  1. Textiles, apparel etc
11.1

The country further agreed to implement at least 95 percent of the commitments contained in the schedule within the first 36 months of accession (Cooper 2011). This means that within the next three years, Russia will have implemented most of these changes proposed as far as the tariffs regime is concerned. By the year 2014, Russia will have complied fully with the provisions.

Tariffs on Agricultural Goods

Negotiations on tariffs to be imposed on these goods were one of the most controversial in the accession process, pitting the country against other agricultural products exporters such as the USA and Brazil (Kanet 2011). The country is accused of imposing high tariffs and tariff rate quotas (herein referred to as TRQs) on agricultural products entering the country (Kanet 2011). It has also been accused of imposing sanitary and phytosanitary (SPS) controls seen as protectionist policies. These policies are implemented to protect the life and health of animals, humans and animals. WTO requires that such measures be used strictly to safeguard life and health and not as disguised protectionist measures. This is where Russia was failing as far as the other members of WTO were concerned. For example, the government has always insisted that imported grains should be accompanied by a certificated declaring them to be pest free. Cooper (2011) claims that this is a costly and cumbersome process. As far as meat imports are concerned, the government has always insisted that they be shipped from facilities that have been approved by the government (Cooper 2008). This has negatively affected meat imports from the United States of America and other nations.

The table below shows some of the changes made in the agricultural front:

Table 2: Changes in Agricultural Imports’ Tariffs

Category Old Tariffs (%) New Tariffs (%)
  1. Dairy products
19.8 14.9
  1. Cereals
15.1 10.0
  1. Oilseeds, fats and oils
9.0 7.1
  1. Wood and paper
13.4 8.0

Change in Export Duties

The country has maintained export duties on strategic commodities such as hydrocarbons and scrap metals (WTO 2011). Raw lumber started to be charged these rates in the year 2007. Countries which rely on this country’s lumber (such as the EU and Finland) have complained bitterly about this. In the year 2010, the country had the intentions of raising total export duties to 80 percent from 25 percent (WTO 2011). This was abandoned after intense negotiations with the European Union. Instead, the country agreed to set quotas at between13 percent and 15 percent depending on the lumber (Cooper 2011). The issue was amicably resolved on October 21, 2011, just a few months before the country was admitted to the WTO.

Change in Sanitary and Phytosanitary (SPS) Measures

As already indicated in this paper, member countries were concerned that Russia was imposing SPS measures on goods imported from other countries which was viewed as a protectionist measure. With the accession to the World Trade Organisation, the country will now be expected to adhere to the new provisions of the organisations SPS Agreement. This is when imposing measures aimed at safeguarding the health and life of animals, humans and plants in the country.

It is noted that the major aim of SPS Agreements as far as trade within WTO members is concerned is to discourage countries from imposing the policies in order to protect the local producers. The agreement gives the member countries the freedom to impose SPS measures on imports entering the country. However, WTO requires that the measures be based on science and not on the desire to protect the local producers from competition. Also, the SPS measures should be applied without any discrimination.

As already noted, SPS negotiations were some of the most controversial in the country’s accession process. This is given the fact that the country is known to apply rigid requirements that are to be met by importers wishing to access the local market. Critics have argued that the rigid requirements are not based on science. They are of the view that the rigid requirements also fail to comply with the provisions and principles of WTO.

As far as SPS requirements are concerned, Russia agreed to change her policies to comply with the international standards. Among the commitments made include:

  1. The country will strive to formulate and implement SPS policies in accordance with the Codex Alimentarius (Cooper 2011). This is in addition to adhering to the provisions of the International Plant Protection Convention (Osakwe et al. 2009) and those of the World Organisation for Animal Health.
  2. The country will negotiate for veterinary export certificates (Cooper 2011). Such certification will have provisions that are different from those found in the customs union. This is provided that the exporting nation submits a request to this effect before January 2013.
  3. Russia also agreed to stop suspending imports from facilities in other countries on the basis of the findings made during onsite inspections. Before suspending such imports, the country is required to provide the exporting nation with the chance of providing corrective measures.

Ukraine Accession to the WTO

Background Information

For the longest time, Ukraine was a part of the larger Soviet Union. She attained her independence in the year 1991 when the union collapsed. As of the year 2010, the total population of this country was about 46 million people (Eromenko 2010). It is the second largest nation in Europe by area (Audley 2002). The economy of this country is driven mainly by agriculture and heavy industry.

As of the year 2006, the country’s nominal GDP was about 106 billion US dollars (Eromenko 2010). The same year, total exports were about 49 billion US dollars while total imports were about 53 billion US dollars. The major trading partners for this country include Russia, Belarus, Turkey, the United States of America (Eromenko 2010) and EC.

The Accession Process

Just like in the case of Russia, the accession process for Ukraine kicked off in the year 1993. The negotiations were completed on January 25, 2008 when the country became the World Trade Organisation’s member number 152 (Eromenko 2010). The Working Party Committee that approved the application was headed by Mario Matus, then Chilean ambassador (Eromenko 2010). The country was required to ratify the accession protocol before July 4, the same year.

The following are the customs tariffs agreements that Ukraine committed herself to:

Market Access for Goods

The country agreed to have her customs duties capped within the range of 0 and 50 percent (Eromenko 2010). These are what the United States Trade Representative Office [USTR] (2011) refers to as the bound rates for customs duties. For agriculture, the average rates were set at 10.66 percent (USTR 2011). It is lower for industrial products which attract a 4.95 percent tariff. Sugar and sunflower oil are some of the products that will attract high rates of customs tariffs at 50 percent and 30 percent respectively.

Just like Russia and other nations that have accessed the World Trade Organisation, Ukraine was made to act on her agricultural subsidies. To this end, the country will not subsidize the exports from this sector. The support given to local farmers and which is likely to affect the international trade in this country was to be reduced to about UDS 613 million (Eromenko 2010). However, just like other members of this organisation, the country is not required to have “…a spending limit on domestic support programs with minimal or no (impact) on (international) trade” (USTR 2011: p. 5).

Market Access for Services

Just like in the case of Russia, Ukraine made several commitments touching on major service sectors (Eromenko 2010). These sectors included construction, insurance and banking, health and social services, education among others.

Other Commitments Captured in the Accession Schedule

The Operation of Parastatals: The country made several commitments touching on the operation of the various state-owned enterprises. For example, it was required that the laws governing the operation of such institutions fully conform to the provisions of the World Trade Organisation (USTR 2011). All the parastatals were also required to operate on a commercial basis.

Privatisation: As far as privatisation is concerned, the country is required to update all the members of the organisation on any developments. This is given the fact that privatisation is one of the major strategies used by countries to carry out economic reforms.

Pricing Policies: On accession to the WTO, it is noted that Ukraine had to adhere to the WTO principles when implementing price control measures (Eromenko 2010). To this end, the country has to take into consideration the interests of the World Trade Organisation members trading with her. There will be no minimum prices for imports. In addition, the country is expected to make public all the goods and services whose prices are controlled by the state (Eromenko 2010).

Policy Making and Enforcement Framework: It is noted that the policy making procedure in Ukraine is bound to change with the accession of the country to the WTO. According to Audley (2002), the country is expected to implement the provisions of the World Trade Organisation and the accession protocol uniformly to all the trading partners. Administrative rulings touching on World Trade Organisation provisions can be appealed and arbitrated on by an independent tribunal (Eromenko 2010)

Internal Taxes: These are VAT and excise taxes imposed on imports from WTO nations (Audley 2002). Ukraine is expected to apply these taxes in a non-discriminatory manner. This is in addition to the tax charged on goods from domestic producers.

Belarus Accession to the WTO

Background Information

Belarus made a formal application to join the World Trade Organisation on 23 September 1993 (Kurilionak, Vassilevsky & Medvedev 2011). This is around the same time that Russia and Ukraine from the same region made their applications to the WTO. However, while Russia and Ukraine have already been granted membership, negotiations are still underway between Belarus and member countries. As such, Belarus is regarded as a future member of the WTO.

The Accession Process and Bilateral Negotiations

Just like in the case of Russia and other nations aspiring to join the WTO, the Belarus’ accession process is characterised by controversies and disagreements among the various interested members. For example, in a United Nations General Assembly held on September 2010, the country’s deputy foreign minister complained that the conditions set for Belarus and some of the other 30 applicants were very harsh. According to the deputy minister, it was obvious that there was discrimination as far as granting membership to the WTO is concerned. The minister was concerned that the wealthy nations were hampering the accession process of some of the developing nations (Ministry of Foreign Affairs [MOFA] 2011).

According to MOFA (2011), Belarus’ negotiations on accessing the organisation revolve around four major areas. These include harmonisation of the national legislation with the World Trade Organisation’s multilateral treaties (Kurilionak et al. 2011), access to goods and services market as well as government’s support for agriculture (MOFA 2011). These are analysed below:

Harmonisation of the National Legislation with the WTO Treaties

According to Tarr (2011), accession to the WTO requires the member country to integrate into the national legislation rules and obligations that are consistent with the principles of the WTO. These are legislations such as those touching on foreign trade, customs duty among others.

Belarus has made significant progress on this front. Between the years 2005 and 2010, the country availed to the Working Committee more than 15 information documents touching on the steps taken to harmonise the national legislation with the WTO treaties. The information touched on adjustments in the foreign trade regime, customs administration, subsidies in the agricultural sector among others.

Between August and September 2010, the country presented the WTO members with several information documents touching on the national legislation and changes that have been implemented. This is, for example, adjustments made in the country’s economic legislation and English versions of texts of legal acts touching on the same (IPM Research Centre [IPM] 2011).

Negotiations on Market Access for Goods and Services

According to Cooper (2011), trade negotiations touching on market access for both goods and services assume a bilateral dimension. During the negotiations, the two parties come to an agreement regarding the rate of customs tariff. This rate is binding and cannot be exceeded once the applicant country accedes to the WTO.

By late 2011, Kurilionak et al. (2011) argue that Belarus had held bilateral negotiations with more than 29 member countries. Out of these, an agreement had been reached with 10. These included China, Cuba, Armenia and Bulgaria among others.

Negotiations on State Support of Agriculture

Unlike the market access negotiations which assume a bilateral nature, negotiations on state support of agriculture are carried out at a multilateral level (Aslond 2010). The parties involved should agree on the maximum level of support that the government should give to local farmers.

By May 2005, Belarus and the other parties in the multilateral negotiations came to an agreement regarding the “basic period (for) calculation of the maximum level of state support” (MOFA 2011: p. 23). The basic period was set at between 1997 and 1999. As of now, the contracting parties in a given trade agreement have to agree on the volume of state support within two categories of ‘boxes’. These are green and amber boxes (IPM 2011)

Russia, Ukraine and Belarus’ Accession to the WTO: A Comparison

Overview

In this section, the researcher is going to look at the three countries’ accession process. The aim here is to compare the accession process between the three countries looking at the concessions that they made and the impacts of the accession process on the three of them. The aim is to look at the similarities and the differences between the three accession processes. This is especially so with regard to the customs regime and trade in general.

A Comparative Analysis

As far as application for membership is concerned, it is to be noted that the three countries applied for membership around the same time. In the case of Belarus, the formal application was received by the General Council on September 23, 1993. In the case of Ukraine, the formal application was made to the General Council on November 30, 1993. On her part, Russia made formal application in June 1993.

Despite the fact that the three countries made their formal applications at around the same time, the accession process was unique to each of them. The duration of the accession process varied from one country to the other. Russia was granted membership on December 16, 2011, more than 18 years after the formal application was made. On her part, Ukraine was granted membership on May16, 2008 (Lukyanov 2011). In effect, the country became a member number 152 (Kanet 2011). Belarus is yet to attain membership. Negotiations with the existing members of the World Trade Organisation are still underway, albeit at an advanced stage.

The effects of accession to WTO will be minimal for Russia after joining the organisation. This is given the fact that the country had already implemented structural adjustments during the accession process. For example, the economy was already liberalised as compared to the economy of communist Russia which was centralised. The same applies to Ukraine. The country had already liberalized its economy in preparation for the finalisation of the accession process. On her part, Belarus is already negotiating with the member states regarding the terms of trade between the applicant and the other members. Structural changes are evident as far as the economy is concerned.

Most of the structural changes mentioned above touch on the countries’ foreign trade regimes. The customs tariffs had to be adjusted to reflect the principles of the WTO.

Russian Accession to the WTO: Effects on Western Nations, European Union, Switzerland and Local Economy

Overview

As already indicated earlier in this paper, Russia is one of the largest economies in the world. The country is a member of the G- 20 and other economic and trade blocs. This being the case, the impacts of this country’s accession to the WTO on other economies around the world cannot be downplayed. In this section, the researcher will look at the effects of the accession process on Russian economy and that of other countries around the world.

Effects of the Accession

Implications for the Russian Economy

According to Cooper (2011), the World Bank is of the view that the accession will have short term, medium term and long term impacts on Russia. For example, the GDP of the country is expected to grow by 3.3 percent in the medium term (Cooper 2011). In the long run, the growth is projected to be about 11 percent annually.

The positive impacts will be brought about by efficient allocation of resources arising from decreased tariffs and increased competition on the local market spurred by an increase in imports (Baker & McKenzie 2011). The terms of trade are also projected to improve given the fact that the prices of Russian exports in the world market are set to improve.

Implications for the Western Economies

The impacts of Russia’s accession to the WTO on western economies can be analysed from the perspective of the United States of America’s economy. According to Alexandrovich (2006), successive governments in the United States of America have supported Russian accession process. This may be as a result of the realisation that the accession will have positive qualitative and quantitative effects on the economy.

Businessmen in the USA are of the view that the accession process will improve business climate in Russia. This is given the fact that in the past, the climate has been unpredictable and this has inconvenienced exporters and investors from the USA (Cooper 2008). The improvements are likely to be evident in the protection of intellectual property rights, consistency in customs duties, consistency in trade regulations and elimination or reduction of trade barriers (Cooper 2011). This is given the fact that Russia is expected to adhere to the WTO principles which are aimed at bringing such improvements.

USA’s agricultural exports are expected to increase by between 200 percent and 300 percent (Cooper 2011). This will be as a result of the reduction in tariffs as well as the “…standardisation of the SPS measures” (Cooper 2011: p. 15). These are just some of the impacts of Russia’s accession on the USA’s economy.

Implications for the European Union

On October 2, 2011, the European Union and Russia finalised their bilateral trade negotiations in the process of the latter’s accession to the WTO (International Centre for Trade and Sustainable Development [ICTSD] 2011). An analysis of this deal gives an idea on the possible impacts that Russian accession will have on the EU’s economy.

According to Jensen, Rutherford & Tarr (2004), many EU investors were not keen investing in Russia through foreign direct investment. Like their counterparts in the USA analyzed above, the investors regarded the Russian economy as volatile and unpredictable for business.

However, Russia’s demand for EU’s foreign direct investment is expected to rise with the successful completion of the accession process. The risks that were initially associated with Russia will reduce with the accession to the WTO. As such, EU’s FDI in Russia is likely to increase in the future (ICTSD 2011).

Russian support for local car manufacturers has for the longest time negatively affected EU’s automobile exports. With the signing of the deal, the two countries settled on a compensation mechanism that will address any decrease in export of automobile car parts to Russia as a result of the government’s support to the local manufacturers (Lukyanov 2011). The agreement also addressed Russian taxation of European flights within her territory. According to ICTSD (2011), Russia collects about 320 million Euros annually from these flights in form of levies.

Impacts of the Accession on Switzerland

Just like in other countries around the world, Russia’s accession to the WTO is likely to have impacts on Switzerland. It is noted that most nations were concerned about the country’s incursions to Georgia just before the accession process came to a close. Many investors were concerned that the incursion will lead to political and economic instability in Russia. Switzerland was one of the countries raising such concerns. It was of the view that the incursion will make the region very unstable and unsuitable for economic investments.

With the accession to the WTO having been completed, it is noted that the trade relations between Russia and Switzerland are likely to improve. This is given the fact that Russia will have access to Swiss markets and vice versa.

Conclusion and Recommendations

This paper looked at the Russian accession to the WTO. The researcher noted that the accession process is likely to have far reaching impacts on other countries in the world. These impacts include stabilisation of the foreign trade policies, reduction in customs tariffs, improved access to markets and increased protection for intellectual property rights among others.

It is noted that Russian accession will have both positive and negative impacts on the local economy. For example, the reduction in customs duties may negatively affect local producers in the automobile, telecommunications, aviation, agricultural and other sectors. To this end, the government should come up with strategies aimed at safeguarding the economic interests of these producers while at the same time taking advantage of the opening up of the economy. This is, for example, supporting local manufacturers so that they can produce goods that are of high quality and which are affordable. Such goods can then compete favourably on the local and international markets.

This paper also found that Russia has to make several adjustments to the foreign trade regime. The changes include a reduction in the customs tariffs imposed on goods imported from member countries. Through bilateral and multilateral negotiations, Russia agreed to change the customs tariffs to comply with the provisions of the WTO. For example, the country agreed to adjust the SPS measures imposed on imports. The SPS measures are aimed at protecting and safeguarding the life and health of plants, animals and humans in the country. However, Russia agreed to stop using such measures to protect the local industries from international competition.

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