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Russia: Government May Not Join World Trade Organization

Moscow, 28 April 1997 (RFE/RL) - Russia's government will not pursue its application to join the World Trade Organization (WTO) if the conditions set by the organization require Moscow to accept a freeze or a cut in current tariff ceilings for imports.

Deputy Minister for Foreign Economic Relations, Georgy Gabounia, who led the Moscow team in talks with WTO officials this month, said a WTO demand for a standstill on tariffs and trade restrictions is unacceptable - "because it's illegal." He went on to warn that "we can't allow the WTO to take advantage of the Russian economy's recent difficulties. These are years of deep crisis for us. We won't negotiate new tariff ceilings based on the last three years, which are absolutely unrepresentative."

Russian negotiators say they are now preparing the schedules that must be agreed with the WTO in order for the Protocol of Accession to be signed and ratified. The schedules detail ceilings on tariffs for imported goods; levels of domestic support for agriculture and farm exports; and market access rules for services, such as insurance, banking, and accountancy.

Negotiations with the WTO on the fine print will commence in July. They are expected to reveal sharp differences between Russia and many WTO members, particularly the U.S. and the European Union (EU).

In agreeing to caps on import tariffs, Gabounia said Russian policy is to "bind at higher ceilings than we will actually use. We need the flexibility. But that doesn't mean we intend to go to these higher levels."

Russia's trade-weighted average tariff level this year will be 14 percent. This is down from 15 percent in 1993. "Despite the downturn of production, and the very unfavorable exchange rate regime since 1995, when imports became more attractive," Gabounia said "we didn't raise tariffs on imports. Practical experience shows the Government is not protectionist."

The Kremlin will insist on higher ceilings, however, in order to demonstrate to the Russian farm sector that entry to the WTO will put Russia on a parity with other members. "We want to make sure we have the same rights to protect our agriculture, and its recovery, as the WTO allows other nations," Gabounia adds.

Calculations by the Ministry of Foreign Economic Relations and the Ministry of Agriculture put the level of state support for Russian farming in the 1989-91 period at up to $90 billion. Today, the Government claims the collapse of state revenues, and the under-fulfillment of the annual budget allocations to agriculture, have resulted in what Gabounia calls "negative support. Farm product prices are supporting the rest of the economy."

The Kremlin has rejected the WTO demand for a standstill on all new trade restrictions. "Other WTO members don't accept this," Gabounia said. "There is no legal basis for it." Gabounia said that unless the Government acts quickly to safeguard some domestic sectors, "we risk undermining the reform strategy."

In return, the Russians are promising the WTO that tariffs will not be raised as a bargaining ploy in the next round of WTO negotiations.

U.S. and European exporters can anticipate tariff action by Moscow in several areas:

Sales of U.S. chicken. And, there will be no lowering of the 15 percent pork and beef duty, Gabounia suggests.

The EU offer on textile trade is unacceptable to Moscow. Gabounia accuses the European Commission in Brussels of allocating "phoney quotas" for Russian imports that are not being filled. "Our exports are virtually blocked," Gabounia said.

U.S. and European banks and insurance companies will not be given easier access to the Russian market. According to Gabounia, the restrictions on foreign bank operations in Russia "may become tighter."

Gabounia also said there is a growing consensus in the government to reject attempts by the International Monetary Fund (IMF) to make lower Russian trade limits a condition of disbursing the current IMF loan. Gabounia said the IMF loan negotiator, Yusuke Horiguchi, has demanding tougher tariff limits than WTO rules allow member states.

Asked about this unreported clash over trade policy, the IMF Moscow representative, Martin Gilman, declined to comment.