Putin Heads to Brussels

Today Prime Minister Putin has embarked upon a two-day formal trip to Brussels to meet with the European Commission, where it is anticipated bilateral relations, energy cooperation and one looming, tired issue, that of joining the WTO, will all be fodder for discussion.  The Wall Street Journal points out this last matter which has been negotiated for almost two decades, remains problematic for a gamut of reasons:

The business community is still skeptical,” says Anka Schild, an analyst with Business Europe, the Brussels-based alliance of industry lobbies.

The issue is of big importance to global trade because Russia is the only major economy in the world not bound by the WTO’s limits on import tariffs and its legal system for adjudicating trade disputes.

With a gross domestic product of $1.48 trillion in 2010 and a tradesurplus of $137 billion, the world’s biggest after China and Germany,Russia would be a more attractive market if it were more open, sayWestern officials.

Formally, Russia has been a candidate since the WTO’s inception in1995. However, Moscow has never pushed hard to join, because its biggestexports, oil and gas, are tariff-free, and cutting import tariffs couldthreaten jobs and factories.

That has changed, Russian officials say, because the country badlyneeds to integrate more with the global economy. Foreign investors wantmore guarantees. “Without WTO access, modernization and innovation willbe very difficult,” Deputy Prime Minister Igor Shuvalov said in Brusselslast year.

Foreign companies are enthusiastic. Consumer-goods giant Procter & GambleCo. has four plants and 4,000 employees in Russia, and imports rawmaterials and ingredients. “Market barriers would be substantiallylower,” says Scott Miller, the company’s director of global tradeaffairs. Tariffs would also come down and be more “predictable,” hesays.

Another winner: Boeing Co. Russia is expected to buy more than 1,000new commercial aircraft over the next two decades if it joins, astariffs on wide-body commercial aircraft would fall to 7.5% from 20%.

Political issues remain. Each one of the WTO’s 153 members has aveto. For example, Georgia, which fought a 2008 war with Russia, couldblock membership, although it has said it won’t. Other complications:The U.S. Congress hasn’t repealed a 1974 law imposing higher tariffs onRussia for restrictive emigration policies on Jews and Moscow musteliminate fees on foreign airplanes flying over Siberia.

Once in, WTO members have to comply with a voluminous rule book.China, which joined in 2001, “was far ahead of Russia at the same stagein its accession,” says an EU official.

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