WTO in confusion after Russia customs union plan

GENEVA Thu Jun 18, 2009 4:36am EDT

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GENEVA (Reuters) - A week after Russian Prime Minister Vladimir Putin announced Russia, Kazakhstan and Belarus would pursue their World Trade Organization memberships jointly as a customs union and not singly, WTO members remain uncertain how the plan would work and what its motives are.

Negotiators from the three ex-Soviet republics briefed WTO members on the plan this week -- and also asked them frankly how it could be made to work.

"Nobody knows -- and they don't know," said one Latin American diplomat. "We were confused by the replies as well."

Russia, the biggest country outside the body that umpires world trade, has been pursuing membership for 16 years.

Moscow is clearly frustrated at the lack of progress on the talks, which often turn cool when western powers are unhappy with Russia, as after last August's war with Georgia. In fact, as an existing member, Georgia has an effective veto over Russia in the WTO, which operates by consensus.

This recalls China's long-running negotiations, which also went on ice at times of diplomatic tension, such as after the violent crackdown on pro-democracy protesters in Tiananmen Square 20 years ago.

China finally completed its accession negotiations after 15 years in 2001, inaugurating a period of rapid economic growth.

But WTO members have become increasingly skeptical about Russia's intentions in the light of conflicting statements from senior officials in Moscow, leading some diplomats to conclude that Russia does not really want to join.

INTEGRATION AND DOMINATION

Pursuit of a customs union fits in with a worldwide trend toward regional economic integration -- as well as Putin's wish to see Russia dominate its former Soviet neighbors.

Diplomats from WTO members said Russian officials still appeared to be feeling their way with the customs union plan.

Moscow's chief WTO negotiator, Maxim Medvedkov, said the three states would explore all options to make it work. Meanwhile, they have suspended their individual accession programs.

"They've certainly confirmed their intention to suspend -- that's essentially an attempt to buy breathing space," a senior European diplomat said.

A meeting between the three candidates and the WTO's 153 members on Wednesday turned largely on a highly technical distinction between a "customs union" and a "single customs territory."

WTO rules do not provide for countries to join as a customs union and there is no precedent for any countries doing that.

The group's Article 24 lays down the terms under which existing members can form a customs union, allowing them to override the WTO's basic principle of non-discrimination, but says nothing about accession by customs unions.

Article 12, on accession, specifies "any state or separate customs territory possessing full autonomy in the conduct of its external commercial relations" can become a member.

But the concept of a separate customs territory is intended to refer to economies such as Hong Kong and Taiwan that are not separate states, or not widely recognized as such.

It does not appear to refer to the single economic space which Russia, Kazakhstan and Belarus see as the ultimate aim of the process of integration launched with the customs union, trade officials said.

Kazakhstan's chief WTO negotiator, Zhanar Aitzhanova, said the three countries were looking for a legal mechanism to enable the customs union, which comes into force in January 2010, to proceed with its accession.

"No turning back. WTO accession remains a key priority for the economic policy of the three countries," she said.

Russia's Medvedkov acknowledged this would be difficult.

"We would like to study all possibilities which would secure effective functioning of our customs union and completion of accession as soon as possible, safeguarding the results already made," he said.

One difficulty is the customs union envisaged by the three simply provides for a common external tariff on goods.

But joining as a single customs territory would require them to have a single trade policy on areas such as intellectual property, services, non-tariff barriers and health and safety.

Stefan Johannesson, the Icelandic diplomat chairing Russia's accession negotiations, declined to comment on whether accession as a customs union was possible, saying this was something for the WTO's members to decide.

Trade diplomats said members could decide to relax Article 12 or find some other way for the three to accede -- perhaps pursuing individual applications then joining simultaneously and being recognized as a customs union.

What is clear is that the uncertainty engendered by Putin's plan will lead to further delays in completing accession.

"There is a risk of considerable delay which for everyone's trade interests is a real concern," the European diplomat said.

Both Russia and Kazakhstan have taken similar stances on the proposal, but Belarus has yet to comment publicly.

Talk of the customs union contrasts with Tuesday's move by Belarus to impose strict customs controls on roads to Russia.

The trade row reflects broader tensions between the two neighbors and although Belarus eased the rules again on Wednesday, it warned they could be resumed.

(Editing by Jon Boyle)

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