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3 Sep, 2008 02:48

WTO delays mean changes for Russia – Ukraine trade

Russia is working on measures to protect its markets from Ukrainian products, and a free trade regime with Kiev may no longer be in Moscow's interests now that Ukraine has joined the World Trade Organisation.

Russia's bid to join the WTO is now on hold. While the EU says talks should continue, the US and Georgia are seen opposing its membership and Russia could soon pull out of some agreements it had reached as part of the negotiation process according to Igor Shuvalov, First Deputy Prime Minister.

“We will continue working on joining the WTO, considering that we have set it as a priority.  But some WTO related agreements go against Russia’s economic interests.  We should inform our partners that we no longer want to stick to them.  We can return to these agreements once Russia becomes a WTO member.”

Namely, Russia is seeking to protect its market from some products that could be re-exported to Russia through Ukraine which now has lower import duties.  That means Ukrainian exports of alcohol and agricultural products could also be cheaper. The solution? Quotes or custom duties for Ukrainian products, says Georgy Petrov, Vice President of the Russian Chamber of Commerce:

“It works like this: Ukraine and Russia exchange most products under a free trade agreement, but some products – such as alcohol or sugar –
would have import duties on both sides. It's a perfectly legal, widely-practiced approach.”

There are fears the two countries could ban each other's imports under the pretext of re-export from third countries.  Russia and Ukraine had been working on a joint approach for their fellow membership of the WTO. With Russia not joining any time soon, the two countries need a different arrangement. Russian Agriculture Minister, Aleksey Gordeev, is confident he can achieve that.

“I have a good working relationship with my Ukrainian counterpart. We understand each other well, so we plan to make a joint request to our respective governments to develop a 5-year trade agreement. It would outline clear guidelines for product import and exports and would protect us from re-import from 3rd countries.”

Russia is Ukraine's biggest trading partner, accounting for over 24-percent of the country's exports.