WTO v. Customs Union: Russia Decides

As Russia is finalizing the terms of its accession to the World Trade Organization, Belarus struggles to understand what this accession will mean to it.  The question is difficult and important because Belarus closely cooperates with Russia as member of the Customs Union and the Common Economic Area.

On 16 December, 2011 the WTO trade ministers accepted Russia’s bid to join the WTO. Even under the most optimistic forecast Belarus will only follow its larger neighbor in 2-3 years. The idea of accession of the Customs Union to the World Trade Organization as a single entity had been popular for a while but has now sunk into oblivion.

A few things will certainly change for Belarus: customs rates will decrease and non-tariff measures will change in relation to the goods imported from the WTO members. This may benefit Belarusian consumers but hurt Belarusian producers.  Although the precise effect of Russia's accession deserves a serious study, one can also hope that approximation of the Customs Union’s non-tariff measures to those of the WTO will make regulation of Belarusian imports more liberal and transparent.

The Effect of Customs Rates Changes

The so-called Schedule of Goods was among the most important documents Russia had to prepare in the final stage of its accession to the WTO. This document stipulates Russia’s final inbound rates – the customs rates which it must implement if they differ from the rates effective as of the date of accession. Russia presented its commitments to the WTO in front of the Customs Union Commission on November 18, 2011.  The rates stipulated in its Schedule of Goods were approximately 3 per cent lower than the ones currently stipulated in the Common Customs Tariff.  The biggest difference is in the rates for agricultural products, household appliances, and vehicles.

The question is what this Schedule of Goods means for Belarus. It may sound counterintuitive but the obligations on rates will automatically apply to Belarus. This follows from the Agreement “On Functioning of the Customs Union Within the Framework of the Multilateral Trade System”. It provides that from the moment of accession to the WTO of the first party to the Customs Union the rates of the Unified Customs Tariff will not exceed the import customs rates indicated in the Schedule of Goods attached to the protocol of accession of such party, unless otherwise provided in the WTO Agreements. The WTO Agreements say nothing on this matter.

As a result Russia's obligations with regard to import rates to the goods from other WTO members will be equally applicable to Belarus and Kazakhstan as members of the Customs Union. In other words, not only Russia will have to open its market to cheaper imports but Belarus will have to do the same.  This may be good for Belarusian consumers but may hurt Belarusian exporters. 

As for the rates applied by the WTO members to the goods exported from Belarus, the situation is quite different. Russia’s WTO partners do not undertake any customs tariffs obligations with regard to exports from Belarus and Kazakhstan. Within the WTO the customs rates depend on the country of origin of goods, and the rates agreed with Russia will be applied to the goods originating from Russia only. In other words, WTO member states will have to lower their customs rates to goods originating from Russia, but not from Belarus. 

The Effect of Non-Tariff Measures

Many Belarusian exporters optimistically think that the Unitary Certificate of Compliance of the Customs Union issued with respect to the goods originating from Belarus will ensure a more favorable treatment in accordance with the WTO agreements. Unfortunately their optimism is not justified for the same reason that the WTO members treat goods depending on their origin. Belarusian exports will still originate from Belarus. At the same time the goods of the WTO members imported into Russia will benefit from the privileges of these Agreements, and will be granted certificates of compliance on more favorable terms. 

However, in the sphere of technical, sanitary, and phytosanitary measures Russia’s accession to the WTO can bring a few very positive trends to members of the Customs Union. Russia undertakes an obligation to bring the regulation of these measures into compliance with international standards. The Customs Union applies unified sanitary, epidemiological, and hygienic measures and their adjustment to the international standards may make them more liberal and effective.

The Customs Union member States also tightly cooperate in the area of technical regulations. A number of technical regulations of the Customs Union are still to be adopted.  To comply with relevant international standards, Belarusian business may only benefit from it, especially in the long run.

Additionally, Russia is going to undertake an obligation on transparency of the procedure of certification of compliance. Those who want to export goods to Russia will be entitled to appeal denial of import permits and to obtain detailed explanations of such denial.  Introduction of the same rules within the whole Customs Union is not required under its legislation, but because the parties to the Customs Union committed to coordinate their policy related to technical regulation, this undertaking may improve the transparency of this field in Belarus as well.

A long list of factors is yet to be analyzed to assess the effect on Belarus of Russia’s accession to the WTO. But it is already clear that the expected changes in customs rates, technical, sanitary, and phytosanitary regulations will greatly affect Belarus. The existing analysis of this effect is still very weak and Belarus needs to seriously study it to make sure it does not  become a passive object of Russia’s decisions. 

Darya Firsava is a Minsk-based lawyer working on her PhD and leading a number of educational projects in Belarus.

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