After the go-ahead from the Working Party on Russia's Accession in last November, the acceptance of Russia into WTO fold was a mere formality. The WTO Ministerial Conference, the highest decision-making body, finally approved Russia's accession on December 16, 2011. A country desirous of joining WTO has to negotiate separately with each WTO member country which has trade interest in the country being considered, making it a never-ending process. It took almost 18 years of strenuous negotiations for Russia to finally be accepted at WTO. With Russia's entry, 97 per cent of world trade will come under the purview of WTO.

Considering the size and stature of Russia, this may turn out to be a significant bright spot, when the world is faced with worsening Euro zone crisis and continuing economic slowdown in the US. With 141 million people and GDP of $1.5 trillion, and an obligation to play by WTO rule book, Russia is a market to be in. Russia will also be a dependable Indian ally to counter the dominance of the US in trade negotiations. To Russia, a country which has so far relied excessively on export of energy products, WTO membership will improve its attractiveness as a place for doing business and provide immense opportunities for diversifying its export products and market mix.

Despite the long history of cooperation, Russia accounted for less than 1% of India's trade in 2010-11 and its share has declined over the years especially after the breakup of former Soviet Union. Entry of Russia into the WTO fold may provide the necessary impetus to catch up with good old days.

Analysis of trade data shows that in 2010-11, the top five product categories (pharmaceuticals, ships, boats & other floating structures including war ships, tea, coffee and spices, electrical machinery and equipment and transport vehicles) accounted for 60 per cent of India's total export to Russia. Russia has a relatively narrow export basket with two energy-intensive product categories -- fertilisers and mineral fuel, along with gems and precious stones, iron and steel, and articles of rubber and nickel, accounting for roughly 75 per cent of its total export to India.

How will Russia's acceptance at WTO help India's export? Russia's entry into the WTO fold, besides creating a transparent and predictable trade policy environment, will lead to other advantages for Indian exporters, such as low duties, reduced subsidies on import competing products, rationalisation of sanitary/phyto-sanitary (SPS) measures and technical standards.

Market Access for Goods

As a bargain for of its accession to WTO, Russia has committed to reduce its average bound duties to 7.8 per cent from currently applicable 10 per cent. The average tariff ceiling for agriculture products will be 10.8 per cent, while those for manufactured goods will be 7.3 per cent. Some of the items of India's export interest which will get substantial duty cuts are dairy products, chemicals and pharmaceuticals, automobiles and electrical machineries and equipments.

Implementation of final bound tariffs will happen on date of accession for more than one third of tariff lines with another one-fourth in the next three years.

Russia will have to do way with all the quantitative restrictions on imports, such as quotas, bans, permits, prior authorization or licensing requirements that are incompatible with WTO. Railway transportation charges on goods in transit will have to comply with its commitment at WTO by July 1, 2013. No import licence will be needed for import of alcohol, pharmaceuticals and most products with encryption technology. Under Customs Union Generalized System of Preferences (CU GSP), import of eligible goods from developing countries will get additional duty discounts while import from LDCs will be allowed duty free.

Trade-Distorting Subsidies

Russia will have to eliminate all export subsidies (on industrial products) or subsidies contingent upon export performance or use of domestically produced inputs over imported ones. Russia has committed to base its pricing of energy products on commercial considerations though it will remain regulated for non-commercial consumption.

When tariff are going down as a result of unilateral, bilateral or multilateral trade liberalisation, SPS and TBT are the biggest barriers to trade. Russia has agreed to make all its health & safety regulations compliant with WTO Agreement on Sanitary and Phyto-Sanitary Measures. It will also ensure that its technical regulations, standards and certification requirements are in conformity with WTO Agreement on Technical Barriers to Trade (TBT).

Further, Russia will develop and apply international standards wherever possible and actively participate in the Codex Alimentarious, the World Organisation for Health and Plant Protection Convention. All these will make Russia an attractive market to explore for pushing Indian merchandise.

Market Access for Services

When it comes to services, Russia has undertaken specific commitments in 11 services sectors and 116 sub-sectors. Of particular interest to Indian businesses are computer, telecommunication, accounting, engineering, legal, banking and insurance, maritime and road transport services. Foreign banks will be allowed to set up subsidiaries with no cap on foreign equity. Russia will allow 100 per cent FDI in retail, single and multi-brand, on the date of accession to WTO. Tapping the fast-growing Russian market will somewhat compensate India's services sector suffering from shrinkage of markets in developed world.

(The author is an expert in international trade for a top corporate house. Views are personal.)

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