Russia set to end wait to join WTO

2011-11-03 18:43

Moscow - Russia is on the verge of ending its 18-year wait to join the World Trade Organisation after accepting a trade deal with Georgia, the last big obstacle to membership of a club that will seal its integration into the global economy.

Russia's accession will be the biggest step in world trade liberalisation since China joined a decade ago, making its $1.9 trillion economy more attractive to investors 20 years after the collapse of the Soviet Union.

After nearly two decades of tortuous negotiations with the 153-member club, Russia's last challenge was to reach a deal with Georgia to stop its entry being blocked by the former Soviet republic with which it fought a short war in 2008.

Russia's top negotiator said Moscow had accepted the terms of a compromise deal proposed by Tbilisi on monitoring mutual trade, and Georgian President Mikheil Saakashvili hailed the deal as a "diplomatic victory".

President Dmitry Medvedev, speaking at the Group of 20 Summit in Cannes, said he hoped to have the "good news" of Russia's WTO membership tied up by the end of the year.

"The long-anticipated entry of Russia into the WTO would be a good contribution to our common cause" of liberalising trade and investment, Medvedev said. "It is fruitful to both us and our partners."

Georgian Deputy Foreign Minister Sergi Kapanadze, whose country does not have diplomatic relations with Russia, told Interfax news agency: "Everything should reach its conclusion... by the 10th of November."

This is the date for a meeting of a WTO working group which can then draw up a final document for approval by WTO trade ministers in Geneva on December 15.

Entry also needs the approval of Russian parliament, which is likely before an election next March that is expected to return Prime Minister Vladimir Putin to the presidency.

Putin sees economic gains

Russia's entry will secure membership of the biggest economy still outside the WTO and send a signal to companies and investors that Russia is starting to move closer to a rule-based system of doing business.

Putin can expect little in the way of electoral gains from an issue that analysts say does not interest voters.

But although he has shown signs of frustration with the long accession process, Putin has made clear he regards WTO entry as vital to fostering economic growth and development by attracting foreign investors and lowering trade barriers.

The World Bank says WTO entry could increase the size of the Russian economy by 3.3% in the medium term and 11% in the long term.

"WTO membership will have no immediate impact on economic growth, the day-to-day operations of Russia's corporations or on the risk premium investors apply to investment in the country," said Chris Weafer of Troika Dialog investment bank.

"However, membership does establish a powerful catalyst for a more serious approach to creating economic reform and industry efficiency."

Traders say a clear indication of a deal for entry could boost Russian stock markets by more than 5%, offering some potentially positive news for investors worried by volatility linked to the euro zone debt crisis.

Negative impact

The WTO, which sets out to supervise and liberalise trade between its members and solve trade disputes between them, was once viewed by Moscow as an instrument of capitalist hegemony.

Opponents in Russia now say international companies will use their clout to stifle domestic producers although Russia says it has fended off attempts to split up gas monopoly Gazprom, the world's largest natural gas company.

Firms in aerospace, the auto industry and local manufacturers of tradable goods could suffer, analysts say.

"Concerns span fears about domestic industries losing against more competitive foreign counterparts, households finding it more challenging to adjust to the new environment, and Russia standing little to gain quantitatively," said Ivan Tchakarov of Renaissance Capital investment bank.

He dismissed the concerns as showing a lack of understanding of the size of the potential gains.

Georgia, which had been under pressure from its Western allies to reach a deal with Russia, offered what it called a final compromise trade agreement last week.

"We are happy that Georgia supported the draft agreement and that finally an agreement has been reached," Russia's WTO accession negotiator Maxim Medvedkov told Reuters by telephone.

Under a proposal worked out with Swiss mediation, Medvedkov said Russia had accepted the use of an independent company to audit data on trade between Russia, two rebel regions backed by Moscow, and Georgia.

"Russia and Georgia, as members of the WTO, would have to pass this data to an integrated database," Medvedkov said.

Read more on:    wto  |  mikheil saakashvili  |  dmitry medvedev  |  vladimir putin  |  georgia  |  russia  |  g20

Join the conversation! encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.
NEXT ON NEWS24X publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Inside News24


Book flights

Compare, Book, Fly

Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.