Russia: Obstacles To WTO Membership Remain

By Michael Scollon http://gdb.rferl.org/1941C5B5-23C1-47C7-ACB3-BC77D467159C_w203.jpg A bulldozer smashes pirated software and music DVDs and CDs in May, 2005 (AFP) PRAGUE, June 16, 2006 (RFE/RL) -- In recent weeks both Russian and U.S. officials have expressed hope that the last hurdle to Russia's WTO eligibility -- a bilateral agreement with the United States -- can be inked ahead of next month's G8 summit in St. Petersburg.

The issue has become a thorn in U.S.-Russian relations, with an increasingly vocal and wealthy Russia accusing the United States of deliberately thwarting its efforts to join the trade bloc.

Russia is eager to add to its influence as sitting G8 president and as a growing economic power by joining the world's largest trading bloc.

Yury Isakov, the Russian Foreign Ministry's special G8 representative, said at a June 14 press conference in Moscow that Russia is approaching a certain psychological line. "We are on the eve of entering that entity [the WTO]. And if my memory and information is correct, the only country with uncompleted process of bilateral negotiations is the United States," Isakov said.

Signing Off On Membership

Fifty-eight countries belong to what is called the Working Party on Russia's WTO accession. Each of the 58 has the right to sign individual, bilateral agreements with Russia before granting their approval for potential membership. Once all of them have done so, the 149 countries that belong to the WTO can collectively decide whether to accept a new member into its ranks.

Since Russia began conducting negotiations in 1993, it has signed bilateral agreements with all Working Party members except the United States.

Progress?

But there are increasing indications -- from both Russian and U.S. officials -- that they are on the verge of an agreement.

The strongest statement by a U.S. official came this week during the International Economic Forum in St. Petersburg. U.S. Treasury Secretary John Snow used that occasion to express hope that a bilateral deal could be reached before the northern city hosts the annual G8 summit in July.

Russian President Vladimir Putin echoed that optimistic sentiment in Shanghai on June 15 -- albeit with reservations.

Putin said it was possible that an agreement could be reached before the G8 summit, but he also accused U.S. negotiators of constantly changing their bargaining position, saying "they often return to issues that were considered to be agreed."

Eric Kraus, portfolio manager for the Nikitsky Russia Fund, said that Putin is referring to experiences over the last few years in which the two sides were nearing agreement, only to see their talks unravel.

"It is not so much the Bush administration that is setting the policy here, but pressure coming out of the U.S. Senate. A lot of the U.S. Senate is very hostile towards Russia and they are doing whatever they can to delay anything which they think the Russians want," Kraus said. "I think it is very arguable whether the WTO will actually be beneficial to Russia -- after all, Russia's main exports don't suffer tariff duties, whereas Russia would have to open up internal markets to foreign competition. But basically what Putin means is that he is negotiating with one particular interlocutor and then suddenly the demands change because of pressure out of the U.S. Senate."

In March, Secretary of State Condoleezza Rice told reporters that Russia's accession agreement must conform to WTO rules and be able to "pass congressional scrutiny."

U.S. Concerns

Currently, the United States's main issues with Russia concern the protection of intellectual property rights, banking, agricultural subsidies, and access to Russia's lucrative energy markets.

First Deputy Prime Minister Dmitry Medvedev raised some eyebrows this week when he said in St. Petersburg that the issue is not pursuing the countries where piracy is most widespread, but "seeking the balance of an acceptable price for intellectual property."

The United States also wants Russia to further liberalize its banking sector to allow foreign bank branches, as well as subsidiaries, to operate in Russia.

But are Russia's qualifications really so bad, or is the United States really just playing politics as Moscow has claimed on repeated occasions?

"This is a purely political story. Russia certainly complies with WTO standards better than numerous other countries. This is an attempt to exert political pressure, in particular to force Russia to open up oil exploration to foreign companies, which, of course most of the WTO-member oil producers do not do," Kraus said.

U.S. officials wouldn't agree. In a March 29 press release, U.S. Trade Representative Rob Portman refuted assertions that the United States is holding up Russia's accession. He said Russia is being held to the same standards of any country seeking to join the WTO.

U.S. industry estimates it loses more than $1.7 billion per year due to copyright piracy, mainly of music, films, and computer software.

Nevertheless, Russian officials seem confident of the country's prospects of joining the economic bloc. Economic Development and Trade Minister German Gref recently said that once negotiations with the United States are wrapped up, Russia could gain entry to the WTO by early 2007.

That may be overly optimistic, considering that it took China about two years to gain entry even after wrapping up its negotiation phase. And Kraus has a much more dire estimate -- he says he doesn't expect Russia to join the WTO before 2010.