#9
Wall Street Journal
March 19, 2002
Russia Intends to Make Concessions On Some Issues to Gain WTO Entry
By GUY CHAZAN
Staff Reporter of THE WALL STREET JOURNAL

MOSCOW -- Russia is prepared to make big concessions to join the World Trade Organization but will resist demands from Europe and the U.S. to open up its market to imported cars and planes, the country's chief trade negotiator said in an interview.

Maxim Medvedkov, who also is deputy economics minister, said the government wanted to keep high import duties to protect struggling domestic car and aircraft manufacturers from western competition. But he said it was ready to allow greater foreign access to Russia's banking and insurance market and to agree to lower levels of state subsidies to agriculture.

"We understand that we have to pay a price for [WTO] accession," he said, "but our partners understand that we'll never pay a price that would be too high for our people and for our industry."

Mr. Medvedkov was speaking before the latest round of talks in Geneva on Russia's bid to join the international trade body, which began Sunday. Since China signed up last year, Russia is the last big country still outside the WTO, and Vladimir Putin has made membership a major goal of his presidency. The bid has received strong backing from the U.S., seen as a reward for Mr. Putin's decision last year to sign up for the Washington-led antiterror alliance.

But there is strong resistance to swift WTO entry from Russian businessmen who fear an inflow of cheap imports could destroy the country's manufacturing base, especially its ailing auto industry. Prominent among them are industrialists like Oleg Deripaska, president of Siberian Aluminum, which has invested heavily in Russia's second-largest carmaker GAZ. SibAl officials fear cheaper foreign cars could put plants like GAZ out of business.

The government argues WTO membership would improve Russia's investment climate and bring an end to discriminatory trade measures imposed on exports that it says currently cost the country $1.5 billion to $2.5 billion (€1.7 billion to €2.83 billion) a year. It would also help producers by allowing them access to international trade settlement procedures.

Mr. Medvedkov said this would benefit Russia's trading partners, too. Moscow is currently embroiled in a spat with the U.S. over a decision by the Russian veterinary authorities to ban imported U.S. poultry -- a move that could cost the U.S. industry $600 million a year. U.S. negotiators have been in Moscow for over a week holding talks to end the dispute.

Mr. Medvedkov said if Russia were part of the WTO the spat could have been resolved more quickly using the organization's trade-settlement body in Geneva. "Now, in our trading relations, there's no judge," he said. "The only arbiter is Russia's chief veterinary officer."

Mr. Medvedkov was upbeat about Russia's progress in accession talks. He said the government had reached agreement with its trading partners on tariffs for three-quarters of all goods. It was successfully shepherding through Parliament a package of 10 bills bringing Russian legislation into line with WTO rules.

But he said Russia would resist pressure from the U.S. and European Union to sign the Agreement on Trade in Civil Aircraft, a nonmandatory treaty that calls for lower import duties on airplanes. He said Russia's aviation industry employed one million people and produced planes that could compete with commercial airliners made by Boeing Co. of the U.S. and Europe's Airbus Industrie, but would never survive if exposed to competition from western imports.

"It's impossible to imagine that we'll agree not to support an industry where we have a clear possibility for growth, where we have a clear competitive advantage," he said.

A western diplomat familiar with Russia's WTO talks said he doubted Russia's refusal to sign the civil aircraft agreement would prove a stumbling block. "It's voluntary, so it can't be a condition of membership," he said.