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Russia Brussels, 21 October 2011

EU and Russia agree terms for Moscow’s eventual WTO accession

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The EU’s Trade Commissioner Karel De Gucht today announced that the last remaining bilateral issues for the EU in Russia’s accession to the World Trade Organisation have been resolved.

"We have struck a deal on the final outstanding bilateral issues, leaving the way open for Russia to join the WTO by the end of this year. This understanding will help to protect EU jobs in the car and car components' industry from moving to Russia", Commissioner De Gucht stated today.

"There is now very little time left to reach a bilateral agreement between Georgia and Russia. I call on both parties to continue their efforts to find a solution in a spirit of compromise. The EU is ready to offer whatever help is necessary to resolve the issue."

As regards Russia's investment regime for car production, a balance has been found between the different concerns of European car companies that have already invested in Russia, European car and component companies that export to Russia, and Russia's desire, supported by the EU, to modernise its economy.

The result is an agreement on a compensation mechanism which will come in if exports of EU car parts to Russia fall as a result of the new investment regime. This will minimise the impact on EU jobs, particularly when it is considered against the overwhelming benefits and opportunities that Russia's WTO accession would bring EU companies in all sectors of the economy.

Good outcomes have also been achieved on the other outstanding issues: clearer rules for exporting agricultural products and foodstuffs to Russia, and a reliable quota regime for wood exports.

The EU has also secured a guarantee from Russia that an agreement to amend the system of Siberian Overflight payments, which is costly for EU airlines, will be implemented in the coming weeks.

The announcement today represents a key step in Russia's accession process. The negotiations will continue at the multilateral level in Geneva with the aim of concluding these key remaining issues very soon, which would enable Russia's accession to be agreed at the 8th WTO Ministerial Conference in December.

With respect to Georgia's outstanding request for more trade transparency, the EU has strongly supported the mediation efforts made by Switzerland over the past few months to resolve this issue and it is disappointing that the talks have so far not led to a solution. The EU supports the ongoing efforts and expresses its readiness to help provide its practical support in order to reach a solution quickly.

Background
 
WTO rules on investment measures

The Agreement on Trade Related Investment Measures (TRIMS) is a set of WTO rules on the regulations applicable to foreign investments. It forbids policies such as local content requirements, which are designed to protect domestic industries.
The Russian decree on automobile assembly gives foreign car producers who build production plants in Russia trade preferences in terms of reduced import duties for components, in exchange for meeting local content requirements. It is therefore a direct contravention of the TRIMS Agreement. Russia had sought an exemption from TRIMS rules for this sector until 2020, which is unprecedented in WTO history.
 

WTO Accession process

Russia's accession process formally started 17 years ago. The EU and Russia completed their main bilateral negotiations in May 2004 but Russia's accession stalled in 2009 following the creation of the Customs Union with Kazakhstan and Belarus.

EU and Russia signed a memorandum of Understanding on the remaining issues of particular concern to the EU in December 2010. However a number of new issues of particular concern to the EU emerged later – in particular the new Russian decree on car assembly investments. On 1 October 2011 the US and Russia announced that they completed their bilateral talks. Since then, the process has focussed on the multilateral negotiations where a long list of chapters has been revised.
 

The benefits for the EU of having Russia in the WTO are:

  • It would open up opportunities in the Russian market for EU investors and exporters alike. Russia's import tariffs would come down and there would be a limit on export duty levels for a list of essential raw materials.
  • WTO accession would improve the overall business and investment climate. Russia would adopt international product standards and WTO rules in a number of areas such as customs procedures, licensing and intellectual property.
  • Accession and the ensuing economic reforms would help to make Russia's economy more transparent and predictable. This would create a strong incentive for foreign companies to boost their investments in the Russian economy – in all sectors.
EU-Russia trade in facts and figures

Russia is the EU's third largest trading partner after the US and China with an 8.6% share of EU trade in 2010.

The EU is Russia's biggest trading partner with a 45.8% share of its overall trade in 2010. Total trade with Russia amounted to €244 billion in 2010, compared to €183 billion in 2009. Imports from Russia increased by 31.4% in 2010, and exports from the EU to Russia went up by 38.2%.
The EU is by far the most important investor in Russia. It is estimated that more than 75% of the investment stock comes from the EU.

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