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Russia: WTO Membership In Sight After 18-Year Long Effort

JOHN HEILPRIN   11/10/11 08:15 AM ET  AP

Russian Chief Negotiator Maxim Medvedkov (R) shakes hands with an ambassador before the opening of formal negotiations on Russia's membership bid on November 10, 2011 at the World Trade Organization

GENEVA — Russia cleared a major hurdle toward opening up its huge oil-driven economy Thursday, with negotiators agreeing to final terms that would allow it to join the World Trade Organization after an 18-year effort.

The deal is expected to quickly inject 4 billion euros a year into the ailing European economy by boosting European Union exports.

The 27-nation bloc is Russia's biggest trading partner. EU nations imported euro158.6 billion worth of goods – mostly oil and gas – from Russia last year, while exporting some euro86.1 billion worth of machinery, automobiles and farm products.

Under the deal, Russians would be able to buy European-made cars and trucks, furniture, clothes and all sorts of consumers goods and industrial machinery at far lower prices than before.

For their part, Russia would be able to sell its oil and gas more efficiently – and its steel industry would no longer be subject to Europe's quotas imposed on some non-WTO members.

Europe already buys almost two-fifths of Russia's exports, including the fossil fuels that power the continent. And the third-biggest customer for EU exports is Russia, after the U.S. and China.

"That means, by definition, all aspects of market access. It's about a 5 percent increase in European exports, just because of WTO accession," Peter Balas, the European Commission's deputy director-general for trade, told The Associated Press. "In these difficult economic times, it's a substantive, positive effort."

Until now, Russia has been the only member of the Group of 20 leading economies still outside the WTO. A panel of WTO negotiators put their stamp of approval Thursday on a package of terms for Russian membership that is expected to be signed by trade ministers at a WTO high-level meeting in mid-December.

Once that is approved, Russia would become a WTO member 30 days after it notifies WTO that it has ratified membership – presumably early next year.

Maxim Medvedkov, Russia's chief WTO negotiator, said joining the world trade body is important because his nation – as the world's 7th biggest exporter – already does 92 percent of its trade with WTO members.

"Our nation has plans for modernization of its economy based on foreign investment," he told reporters. "We do not feel any aggressive 'no' to (joining WTO) in the business community."

He predicted the Russian Duma would approve the deal early next year. Russia, whose high-end consumers enjoy Europe's fashionable clothing and other luxury products, has pledged no tariffs on cotton and information technology products.

As part of the deal, Russia has agreed to gradually lower its average tariff ceiling to 7.8 percent from its current 10 percent.

Tariffs on cars and trucks would drop to 15 percent from 25 percent now, while those on industrial machinery would fall to 10 percent from the current 12 percent.

Tariffs on agriculture products will drop to 10.8 percent from 13.2 percent, and tariffs on manufactured goods will be lowered to 7.3 percent from an average this year of 9.5 percent.

"It is good news for the gloomy economy," said Icelandic diplomat Stefan Johannesson, who headed the WTO panel that oversaw the talks with Russia and approved the terms. "It will make doing business in Russia more attractive for foreign businesses and producers."

Johannesson said the deal would mean lower prices and a greater selection of goods for Russia's 150 million consumers.

Foreign manufacturers had been closely watching what tariffs Moscow would accept, and whether it would cave to outside demands for tighter enforcement of intellectual property rights.

WTO's director general, Pascal Lamy, told reporters the deal creates new opportunities for members of WTO which, after the Russian deal, will cover 98 percent of global trade.

He said Russia is "about to cross the door" of WTO and take a big step by joining the Geneva-based international organization where nations agree to abide by trade rules, and hammer out their disputes in binding agreements.

"In acceding to the WTO, Russia embraces a series of rules and commitments that are the foundation of an open, transparent and nondiscriminatory global trading system," he said.

A day earlier at WTO headquarters in Geneva, Russia signed a deal with Georgia, its neighbor and one-time foe, that removed the last major obstacle to Moscow's membership.

The deal would essentially involve a neutral company monitoring all trade between the two nations, including the breakaway Georgian provinces of Abkhazia and South Ossetia.

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Filed by Eline Gordts  |