Russia scraps WTO customs union bid

Russia, Belarus and Kazakhstan have abandoned their attempt to join the World Trade Organisation as a single customs union, after WTO members made clear the unprecedented move would add years to the negotiations.

Speaking after talks at WTO headquarters in Geneva, Maxim Medvedkov, Russia’s veteran WTO negotiator, said the three countries would continue their separate membership talks. However, they would negotiate on the basis of a common customs tariff that is due to be implemented from the beginning of next year, with the aim of joining the WTO simultaneously.

“Today we are back in business,” Mr Medvedkov said. “The earliest completion of accession remains a strategic goal.” However, he would not be drawn on how long the negotiations, launched by all three countries in the mid-1990s, might take.

Russia is the largest economy to remain outside the 153-member world trade watchdog and, according to Mr Medvedkov, accession talks were close to completion when Vladimir Putin, Russia’s prime minister, announced in June that Moscow was withdrawing its individual WTO application in favour of a joint bid with the other two countries as members of a customs union.

The move surprised both US and European Union negotiators, who had hoped that Russia’s longtime bid could be completed this year.

No customs union has ever negotiated WTO accession as a single entity and many people, including Pascal Lamy, WTO director-general, saw the move as signalling a weakening of Russia’s desire to join.

The move to enter the WTO independently of customs union partners Kazakhstan and Belarus is a rare instance in which Mr Putin has failed to prevail in an internal political disagreement. A month after Mr Putin’s announcement, President Dmitry Medvedev appeared to reverse the prime minister’s position, saying that a separate entry was “simpler” and “more realistic”.

The disagreement resulted in an impasse, leaving powerful ministers at a loss about what to do. “It was complete confusion,” said Fedor Lukyanov, editor of the journal Russia in Global Affairs, based in Moscow. “The reasons are unclear, and probably one can find differences in approach between Medvedev and Putin just in this case.”

Andrew Kuchins, a Russia expert at the Center for Strategic and International Studies in Washington, said the WTO confusion “suggested that there are really some differences in the Kremlin between those that are more in favour of economic reform and integration into the global economy, and those that are less inclined”.

On Thursday, Mr Medvedkov said there would be no increase in the maximum tariffs Moscow had already agreed with trading partners in the bilateral talks that are part of the accession negotiations.

However, Kazakhstan will have to revisit some of its existing bilateral accords, in which it previously agreed to lower duties than the planned common customs tariff.

Zhanar Aitzhanova, Kazakhstan’s chief WTO negotiator, said trading partners would be compensated by unfettered access to a market of more than 165m rather than 16m people.

Belarus is some way behind Russia and Kazakhstan in the accession process, but officials from the three countries said on Thursday that creation of the customs union, based on international trade rules, could speed the Belarus talks.

Since the customs union will cover only trade in goods, there will be no harmonisation at this stage in areas such as services and intellectual property, which are also part of WTO membership negotiations.

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