Fifth Annual Russian Economic Forum
Russia and the WTO: reintegration into the World Economy
It gives me great pleasure to be with you today. Over the last few years, this forum has become an increasingly important event as the attendees and the special quality of their interventions testify.
But this year, this gathering is of particular importance for the Russian Economy and the World Trading System. We are now entering into a decisive phase of the process of reintegration of the Russian Federation into the World Economy. The historic, political and social importance of this is obvious. From my perspective, the accession of the Russian Federation to the WTO constitutes a key element of this process of re-integration. I am pleased to share with you today some thoughts based on my experience as Director-General of the WTO.
Let me first offer you a brief outline of recent developments in Geneva. The most important of these is that nine years after applying to join the GATT and seven years of its WTO Working Party, Russia's accession is finally entering a decisive and final phase. This is vividly demonstrated by the circulation of the first draft of the Working Party Report. As I am sure you all know, the final version of that document, together with a Protocol of Accession and the Schedules of concessions in goods and services, will set the terms and conditions of entry of Russia into the WTO. Accordingly, this first version of the draft Report is indispensable as it sets the parameters for the negotiations on the multilateral commitments that Russia will be asked to undertake to secure entry into the WTO.
Reaching this stage has required an intense process of legislative renewal and reform by the Russian authorities. Just consider the progress in the implementation plan pertaining to legislative work relevant for WTO accession. Under this plan, in just two years, the number of legislative acts which the Russian authorities themselves consider essential for assuming WTO membership have been drastically reduced by more than two-thirds to about 40 laws or decrees for which final enactment is still pending. Legislative work is now moving rapidly on a new version of the 'Customs Code' and of the law 'On State Regulation of Foreign Trade Activity' which, once finally enacted, should go a long way to aligning Russian provisions and procedures in these key areas as well as with WTO requirements. It is clear to all that a new legal framework is now taking shape in Russia which will underpin Russia's accession commitments. Let me underline from the outset that this development has been made possible because of the strong political resolve shown by the Russian authorities at the highest level. Without this resolve, the accession of Russia to the WTO would still be very far away.
Relationship with Domestic Reform
But why was such a strong political resolve required to move things forward? The answer to this question lies in the natural relationship between accession to the WTO and the process of domestic economic reform in Russia. Accession to the WTO is directly linked to a sound process of domestic economic reform. This is a natural result of the need to bring the internal economic structure of the country into line with fundamental international norms, of which the WTO Agreement is the expression. In recent years, developments on the domestic reform front have indeed determined the pace of Russia's accession to the WTO. The Government of President Putin has been marked by a new intensity in the speed and scope of reform of the Russian economy. The energy with which this task has been undertaken has caused the accession of Russia to regain momentum and enter into its most crucial phase.
It is clear from Russia's long history, the size of its internal market, and its importance in the shaping of world politics that the process of Russian economic reform will have wide-ranging political and social implications. Changes of this kind consequently require vision as well as steady determination. They also require the building of consensus among domestic interest groups to sustain the changes, notwithstanding inevitable difficulties. We are now at a stage in which it will be critical to determine what further reforms are realistically possible in the short term.
These types of judgements will have to be made in an economic context which is better than ever for the Russian economy. Annual GDP growth of 6 per cent over the last few years, the lowering of the unemployment rate from 13 to 8 per cent over the same period and the fact that last year Russia has recorded the best investment return rate among all the emerging markets. All this news cannot be ascribed to oil and natural resources price trends. These are indicators that economic reform has begun to pay its own dividends to the Russia economy. Russia's accession to the WTO will consolidate Russia's comeback as one of the main players in the world economy.
A Time for Decisions
As I have indicated, the time for hard decisions has arrived. Reform of the Russian economy must be completed. Leaving the job half done would run the risk of watching the results so far slip away. This would diminish the prospects for further economic growth and threaten those that have taken such risks in supporting difficult change. My point is that the political costs of change have already been paid and that only early accession to the WTO will allow Russia to receive the full dividends of the hard work already done, such as guaranteeing the opening of markets by all WTO Members to Russia on stable and predictable terms. The availability of WTO dispute settlement procedures for the resolution of trade disputes is a key aspect of WTO membership. It is a critical tool to contain the sometimes inevitable commercial disputes from spreading or affecting the more general political relationships of the countries concerned. Membership in the WTO is the guarantee that trading disputes, no matter how complex or difficult, are contained and settled within a stable multilateral framework.
There is a widespread consensus in Russia on the strategic need to accede to the WTO, even amongst those that question the possible terms and timing of entry. Over the years we have seen interest groups in many acceding countries engage in the same debates as the accession negotiations enter into their final phase. Those type of debates require clear and constructive decisions from policy makers. This is certainly happening in the case of Russia's accession to the WTO. When G7 and Russian leaders met in Genoa last summer they were able to move substantially forward two issues. First, they provided through their personal engagement a fundamental input for the successful launching of the Development Round at Doha. Second, they also agreed to advance the Russian accession to the WTO, again through their personal intervention which is expected to continue later in June this year at the next G8 meeting in Canada where the issue will again be raised.
At the Doha Ministerial meeting, WTO Member Governments agreed to undertake one of the most complex and important trade negotiating Rounds ever attempted. The Doha Development Round aims to define international trading relations for the first part of this century and to provide tangible and universal economic benefits to all, particularly including developing economies and economies in transition. Should Russia exclude herself from such a negotiation by delaying its assumption of full membership in the WTO? In my view, the answer to this question can only be no. Moreover, especially after the recent accession of China, Russian entry will also provide a further step to reaching fuller universality of the multilateral trading system which would be beneficial for all Members.
But there is another important aspect which makes the agreement in Doha unprecedented. For the first time, the WTO Members also stressed the importance of concluding the Round within a defined time-frame as they launched the negotiating agenda. In the past, negotiations tended to be extended in line with the increasing complexity of the subject-matters addressed or with the difficulties encountered in giving concessions in sectors such as Agriculture and Textiles. Today, the understanding of both the task lying before us and the need to deliver speedy dividends from the acceleration of the globalization process have caused Ministers to explicitly state that results should be seen in a much shorter lapse of time. This is why already in these first months after Doha, the road-map for completion of the negotiations is being put in place with unprecedented speed. We should be aware of this, as it poses a defining choice for Russia and WTO Members in the months to come. It also shows the need to further accelerate the process of accession and bringing it to its conclusion as rapidly as possible. In my mind, the road ahead is clear. Member governments, the Russian authorities, the Secretariat and the international community should all re-double our efforts in order to make Russia's accession happen as quickly as possible. What is at stake is the evolution and eventual stability of the multilateral trading system.
The Immediate Perspective
Even though very strongly politically supported, Russia's accession to the WTO cannot be concluded on a purely political basis. Clearly, the contractual and legally binding nature of the WTO does not permit it. To complete Russia's accession, we will need to see the completion of meaningful market access deals in goods and services and a solid legal and administrative framework in Russia - which will guarantee the implementation of the contracted commitments. From this stand-point, are the conditions for an agreement starting to come together? Yes. I am firmly of the view that we can already see the emergence of the basic elements that will eventually lead to a final package. In the coming days when work restarts in Geneva, I expect to see further positive developments. Without delving into the details, I believe that in a few months time, and in the expectation of further developments on the legislative front in Russia, we should be in a position to precisely define the outstanding issues as well as set out a framework for their resolution. At that moment, as always, the necessary breakthroughs will depend upon political resolve and courage. Therefore it is important, more than ever, to use the present time to foster within Russia a constituency in positive support of continuing efforts for economic reform. I have sensed, since my visit to Moscow last year, that what we need is the constant engagement of commercial, political and academic forces as well as sectors of civil society to maintain inside Russia the necessary momentum for the accession negotiations to their positive conclusion. I will continue to do everything I can at my end to advance this historic cause and opportunity.
Our common objective is to build a balanced package capable of providing Member governments with meaningful access to the Russian market, on multilaterally enforceable terms. In turn, Russia will receive guaranteed and predictable access to the markets of its trading partners. Russia will also take a central place in the management and future development of the world economic system. In this way Russia's reintegration into the world market will be completed. No matter how difficult the outstanding problems may be, I believe there are in Washington, Brussels and Moscow, people with the horsepower, firepower and willpower to make this accession happen. Accessions, in their final phase, always come back to such core issues as agriculture, banking, insurance or telecommunications. I can only hope that negotiators think in historic terms, because it will be a great failure of leadership if this accession is not completed in time for the Mexico Ministerial next year.