International

Russian deal with Georgia opens way to WTO

GENEVA: Russia signed a Swiss-brokered deal with Georgia Wednesday that removes the last big obstacle to Russia joining the World Trade Organization after 18 years of negotiations.

Russia’s accession will be the biggest step in world trade liberalization since China joined the WTO a decade ago, sealing Moscow’s integration into the world economy two decades after the collapse of the Soviet Union.

The breakthrough after three years of stalemate with Georgia came at the last possible moment, one day before the WTO meets to finalize overall terms for Russia’s entry.

“The whole Russian-Georgian package is now ready,” said Russia’s chief negotiator Maxim Medvedkov.

“It’s over. We’ve signed the document,” said Sergi Kapanadze, Georgian deputy foreign minister and senior negotiator. “There are no more obstacles from Georgia to Russia to becoming a member of the WTO.”

Both sides had hailed a compromise deal last week, after shuttle diplomacy by Swiss President Micheline Calmy-Rey, whose government brokered the deal. Lingering mistrust meant that many trade officials had been wary of saying the obstacle was cleared until both sides had signed a final agreement.

One participant said the negotiation had been like a game of chess throughout, with tiny Georgia using its WTO veto to claw back some leverage over Russia, which routed Georgian forces in a war over Moscow-backed breakaway regions three years ago.

Georgia had been under strong pressure from the United States and European Union to let Russia into the WTO, widely seen as a prize not worth sacrificing because of a territorial dispute between Russia and its tiny southern neighbor – despite vocal Western criticism of Russia’s conduct in Georgia.

The United States has been a strong backer of Georgian President Mikheil Saakashvili, whose government sent troops to fight alongside U.S. forces in Iraq, and the EU is offering a free trade agreement, details of which have not yet been made public.

Georgian negotiators have denied they were swayed by diplomatic lobbying and say the EU trade deal has no link with the Russian talks, always maintaining they felt no pressure to let Russia join the WTO.

Russian accession, adding its $1.9 trillion economy to the vast bulk of the world that is already subject to WTO trade rules, will force Moscow to accept international standards and scrutiny and could add 3 percent to its gross domestic product in the short term, according to the World Bank.

It will also be a big morale-booster for the WTO, the guardian of the world trading system, which has suffered a deep crisis of confidence over the failure of 10 years of talks on deepening world trade, the so-called Doha round.

“We are delighted that agreement has been reached between Georgia and the Russian Federation. We congratulate them and we congratulate the Swiss mediators,” WTO spokesman Keith Rockwell told Reuters.

A WTO committee is expected to finalize and publish Russia’s membership terms later this week, handing it on to a meeting of trade ministers in December for final approval.

After that it only remains for Russia itself to ratify its membership. Approval by parliament is likely before an election next March that is expected to return Prime Minister Vladimir Putin to the presidency.

Accession will send a signal to companies and investors that Russia, the world’s largest energy producer, is starting to move closer to a rule-based system of doing business.

It should boost investment as foreign firms see Russia as a more stable place. In 2010, $41.2 billion of foreign direct investment entered Russia, but $51.7 billion left Russia for opportunities elsewhere, a net outflow of more than $10 billion, according to U.N. figures.

The Swiss Foreign Ministry said the deal between Georgia and Russia had established a mechanism to regulate customs administration and supervision of commercial goods, with a private company monitoring trade and Switzerland acting as a neutral third party in case of disputes.

“With this agreement, the parties have paved the way for Russia to join the WTO in the near future,” the ministry said in a statement.

“Switzerland is convinced that this measure will lead to improved economic development for Russia and for Georgia,” it added.

 
A version of this article appeared in the print edition of The Daily Star on November 10, 2011, on page 5.

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