The working party for the accession of Yemen to the WTO held its second session on October 3. The Yemeni Industry and Trade Minister Khalid Rajeh Sheikh said that “the WTO membership is a necessary step and an important component in the efforts to integrate Yemen into the world economy”. Therefore, the country's government tries to comply with the requirements of the organization, which also include the privatization of state enterprises. The minister also emphasized that Yemen depends on oil, which accounts for 95 percent of the country's export and 60 percent of the budget revenue.
The working party for the accession of Bhutan to the WTO held its second session on October 6. It was underscored then that the country is least developed and land-locked, therefore the terms of the accession to the WTO must allow for difficulties, and members of the organization should not demand from Bhutan too much. The Bhutanese Trade and Industry Minister Lyonpo Yeshey Zimba said that “an increasingly interdependent world, Bhutan must create an open and liberal environment for private sector promotion, export growth” but “at the same time ensure that the pursuit of economic development and globalization does not adversely affect our fragile mountain environment and degrade the rich culture and heritage”.
The working party for the accession of Saudi Arabia to the WTO held its session on October 11 where Hashim Al-Yamani, the Saudi Trade and Industry Minister, mentioned that his country, which has been negotiating the joining of the WTO since 1993, had signed 38 bilateral agreements, including those with the European Union and the United States, and had also enacted 42 new laws to meet the WTO's requirements. Board of the session noted that the discrepancy between the domestic and external energy prices in Saudi Arabia should be eliminated. It is only in this case that the country will able to join the WTO this December.
Meanwhile, on October 7, the Western mass media extensively quoted Russian Transportation Minister Igor Levitin as saying that the Russian government is not ready yet to call off the double taxation for foreign planes that fly above the Russian territory (they are levied by transit and air navigation taxes). He also said that Russia does not charge that much – it takes only $95 for 100 km, while Germany and the UK ask $180 and $220, respectively. As the minister explained, Aeroflot Airlines, which the money go to, “needs it badly”. The Western mass media, in their turn, stressed the fact that Russia annually gets $300 million from European airlines alone for the flights above its territory. This practice grossly violates the WTO's existing competition rules, and the United States and the European Union will not agree to let Russia join this organization till the transit duty is abolished.
On October 8, the mass media widely cited Economic Development and Trade Minister German Gref. After the London talks with Peter Mandelson, the European Commissioner for Trade, the Russian minister said that the European Union is afraid to let Russia in to the WTO because the Russian agriculture is highly competitive and may conquer Western markets, whereas European agricultural products sell on the Russian market only thanks to 50-percent subsidies that their producers receive from the European government.
Maxim Medvedkov, the head of the Russian delegation at the talks on the accession to the WTO, said on October 11 that Russia demands a permission to pay $10 billion-worth subsidies to its agricultural producers after it joins the WTO, while it currently pays $3.5 billion. He also pointed out to the fact that the European Union and the United States still pay their producers more, which gives Russia good reasons to demand that they reduce subsidies for the goods sold on the Russian markets. As for the import duties on basic agricultural products, Russia will not reduce them after entering the WTO, Maxim Medvedkov said.
Moscow hosted on October 12 the talks on Russia's accession to the WTO with the Canadian delegation. The Russian negotiators noted with some satisfaction that this time around, the Canadians did not demand, as they used to, the opening of Western banks' branches in Russia. They noted with even greater satisfaction that the Americans did not demand it either.
So, the talks on Russia's accession have been going on more cheerfully over the past two weeks than, let's say, those on Yemen's or Bhutan's. The Russian authorities did not pledge that they would do their best to create the free market economy and promote competitiveness. Quite the opposite, they definitely refused to meet the requirements of the West and even went on to counterattack and showed it to the West that things are not unclouded at their home too, so we can demand something from them as well.
A question arise: why would Russia join the WTO, then? It resolutely does not want to change anything in its economy and does not liberalize the market, but, on the contrary, increase state holding in key industries. Gazprom's purchase of Sibneft is quite indicative of that trend. In this respect, the Russian authorities act in the same way as the Saudis did, nationalizing the oil industry in 1973-1980s and seizing it from foreigners. But there was no WTO then, there was the General Agreement on Tariffs and Trade (GATT) under which Western countries liberalized their foreign trade regimes, while developing countries toyed with socialist experiments expanding the state property. The Saudis' actions did not surprise anyone then. Moreover, the establishment of the WTO meant that socialist experiments were over, and member-countries of the WTO were to let the private business, both local and foreign, develop freely. The ideal of this organization is an opportunity for a European or an American to run business in any country in the way they do it in their home-countries without being concerned about state interests of the country.
That is why the process of Saudi Arabia and Russia's accession to the WTO lasted more than a decade. It may seem odd that these world's two major oil exporters which play main roles in the international trade are not members of the organization that unite the participants of this trade. Yet, things are quite logical: Western countries still fail to understand if Russia and Saudi Arabia are similar to the West. Among other things, the West wanted the Saudi to explain which role the so-called sunset (the obligatory donation for the poor) plays in the local tax system. As for Russia, they want from to get a confirmation that the state has stopped playing the major part in the economy, which was the case in the Soviet times, but, on the contrary, has focused on the protection of private property rights, Russian and foreign.
Saudi Arabia seems to do better at proving its similarity to the West. At least, the United States and the European Union have already believed that the Saudis can and want to protect the foreign private property. Russia is doing quite the opposite while trying to show that it cares about its state interests most (and only related to its interests it cares about the national capital). That's understandable when the welfare of these authorities mainly depends on export oil duties, which means the officials are not financially interested in the fully free trade. The Government widely emphasizes that the well-being of Aeroflot as well as that of Russian banks and insurance companies is more important for the state than some principles of fair competition, which are, by the way, the basis of the WTO. Therefore, the authorities vehemently refuse to do away with transit duties and open the Russian financial and insurance market for branches of foreign banks and insurance companies. The government persists in stating that it cannot allow the foreign capital to enter strategically important industries, and officials should examine every case. Moreover, it would be better if such industries as oil and gas extraction be mostly controlled not by the state capital, not by the mere Russian money.
Similarly, the joining of the WTO is overwhelmingly regarded as a matter of the state prestige. They claim that once the West has written out a membership card of its club, it will thus approve of all actions of the Russian officials, because the organization doesn't accept the unworthy! Much importance is attached to considerations of the high international policy: you know, Washington or Brussels won't want to quarrel with Moscow because of some bank branches. They also refer to flaws of the West itself: guys, you subsidize the agriculture - how can you speak about competition then! Besides that, the Russian authorities use the tactics of counter-demands in the bargaining with the West, as these demands may be softened soon in exchange for some concessions in return.
But as things stand now, if Russia joins the WTO, it will not change a thing for Russian citizens. They will not get a chance to use services of foreign banks or insurance companies and will keep on buying counterfeited DVDs and cigarettes. They will be able – just in theory – to take pride in the fact that Russia has been economically recognized. The situation is reminiscent of the Soviet membership in the United Nations in first post-war years. The life of the Soviet people has not bettered thanks to the USSR being a leading member of the organization that included the USA and the UK. This country did not become freer or more democratic, whereas the Soviet membership in fact caused a great harm to the United Nations and practically made the organization useless.
A host of trade agreements have been sealed during the talks on Russia's accession to the WTO, and the parties often tried to cheat each other. Kommersant Vlast columnist Vladimir Smirnov has a couple of examples.
One of the Russian negotiators told me that they had to check the Latin American counterparts again and again, especially after the new Ukrainian authorities had announced they were ready to join the WTO without any conditions. This also meant that the Ukrainians agreed for zero duties for almost all imported goods. The Latin Americans got wind of the fact and started pushing the Russian to review the signed protocols to lower the duties. The reduction was certainly denied. Then, they made up their Latin American conspiracy.
A deputy for Maxim Medvedkov, the main Russian negotiator with the WTO, got a call from a counterpart from a large Latin American country that Russia had a big turnover with (over 3,000 items of goods). “We have accidentally forgotten to enter an item we agreed on long before,” the Latin American official said. “Can we correct the mistake? We will send you a fax.” Here we need to explain. Bilateral protocols on the conditions of the joining of the WTO contain tables with changed rates of import duties. These are four columns: the first one – the name of goods, the second – the initial duty at the moment of talks, the third – a new rate, and, finally, the schedule when the agreed rate is supposed to be reached. So, the Latin Americans sent a fax with “a long-before agreed” duty for one quite important item. Medvedkov's people considered the correction, since when you arrange tariff rates, you can forget much more. But Medvedkov's deputy, in charge for tariff negotiations, decided to read the table once again before signing the protocol on the conditions of Russia's accession to the WTO.
The matter was complicated – there were about 3,000 items of goods, as was mentioned, but he noticed a discrepancy which put him on his guard: everywhere, from bottom to the top, new duties rates were fixed at 10 percent, whereas, somewhere in the middle, it was 15 percent for some item of goods. Why? It turned out that no one has ever discussed this position with him. The Americans thought that no one would notice this item among 3,000 of others. When it was crossed out, the Latin Americans did not protest – well, they failed.
Anther Latin American delegation thought up a quicker way of cheating. The country was small, so was the foreign trade with Russia – some 200 items. It was not that easy to add an item. Yet, they called to Moscow and said: “We have received your table and we agree with everything. We are sending it back without changes. We are ready to sign the protocol”. But the same Russian negotiator went through the table again at the last moment. And did he find? A 15 percent figure amidst 10-percent rates.
The Russian negotiators, however, know how to cheat too. Toyota has recenlty signed an investment agreement with the Russian government, under which car sets to be assembled in Russia are not levied with import duty. In exchange for this, Toyota pledged to use in the assembling at least 15 percent of Russian-made car components. Volkswagen and a few other Western car producers sealed similar agreements.
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