Russia and the WTO

Steffen Kaufmann
Partner
DLA Piper

On Aug. 22, 2012, following 18 years of negotiations, Russia became the 156th member of the World Trade Organization. This has been described as "the biggest step in global trade liberalization since China joined a decade ago," and is a clear signal that Russia is finally taking a greater role on the global economic stage.

As one of the largest markets in Europe, Russia's accession to the WTO brings with it a number of advantages. According to a World Bank study, WTO entry is expected to increase Russia's gross domestic profit, or GDP, by 3.3 percent within the first three years, and it is expected to grow to 11 percent over 10 years.

Russia's accession also has the potential to bring numerous benefits to its exporters and trading partners. Membership will result in improved access for Russian exports in foreign markets, where Russian exporters will be entitled to the same non-discriminatory treatment as that accorded to exporters from other WTO members. Russia's trading partners will benefit from the significant commitments that Russia made in relation to the reduction of import duties. These will give foreign businesses greater accessibility to the Russian market and allow Russian consumers to benefit from higher quality products at a lower cost.

The legal agreements of the WTO — covering trade in goods and services, technical regulations, intellectual property rights and investment measures — provide a set of rules for international trade and seek to ensure that governments apply their domestic regulatory systems within certain agreed-upon limits. Where a WTO member establishes barriers to trade, other members, including Russia, can challenge such violations through the WTO dispute settlement process.

While Russia will have to adopt stricter legal regimes and embrace a more transparent business environment, such changes will help Russia to attract more foreign investment.

It remains to be seen how Russia intends to meet the requirements of WTO membership. A topical illustration involves recent legislation regarding the automobile industry. Under this legislation, a substantial car disposal fee must be paid to the Russian customs authorities by car importers to cover the cost of disposing of old vehicles in an environmentally-friendly manner. The fee, which is not payable by local manufacturers, is widely seen as constituting an additional measure to strengthen the position of local car makers.

As it does not seem to relate to the disposal itself, it can be considered an act of protectionism. The introduction of the disposal fee in such a manner, where it only applies to importers and not to local car makers, may be discriminatory and not compliant with Article III of the GATT, which prevents the imposition on imported products of any charges that are in excess to those applied, directly or indirectly, to domestic products.

Nevertheless, despite such concerns, Russia's accession to the WTO is a positive step towards the country's global economic integration.