A Taxing 16-Year Marathon

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Runners say that in a marathon, the last mile is always the most difficult one to run. It is therefore easy to understand Russia's frustration with the World Trade Organization accession process because the country has been running its last mile for almost four years now, while it started the WTO marathon 16 years ago.

After so many years, however, fortune seemed to be looking again favorably on Russia's accession. At the St. Petersburg International Economic Forum in June, the European Union and the United States stated that accession was finally achievable by year's end.

Then Moscow threw a monkey wrench into the works by seeking WTO membership as a customs union together with Belarus and Kazakhstan.

In theory, the idea makes a lot of sense. The three countries would have more leverage in the negotiations, although given the size of Russia the increase would be minimal. More relevant is that by negotiating a single set of commitments, they would avoid the obligation to compensate other countries, as stipulated in the trade organization, if the customs union is more protectionist than its single members.

In practice, however, the story is slightly different. The WTO does allow membership by customs unions. The EU, for example, is a member of the WTO. But these customs unions are special: They must possess "full autonomy" in the conduct of their trade relations. In short, it requires that state sovereignty is partly transferred to the customs union. This is why the EU is the only custom union to be a member of the global trade organization.

Russia, Belarus and Kazakhstan have a lot of work to do to form a union. The "milk war" between Russia and Belarus is a vivid example of the challenges at hand.

Another possibility is that Russia would be seeking just an extension of its commitments to the two other countries. This is tantamount to "pay one, take three" ticket into the trade organization. When the Baltic counties negotiated their accession to the WTO as they were about to join the EU, other countries not only looked at their legitimate trade interests with each of them but also pushed for long-sought policy changes in the EU trade policy, especially in agriculture and audiovisual services.

Russia, Belarus and Kazakhstan should expect similar treatment. Russia may be more useful to its neighbors, whose process of accession is at an earlier stage than Russia's, by being in the organization rather than outside.

At the same time, the fear that WTO members would use other accessions for "extorting" further concessions from Russia should not be overestimated, as it would be difficult to go much beyond Russian WTO commitments with countries at a lower stage of economic development. Maybe Belarus and Kazakhstan should be worried.

The good news is that if this is the interpretation to be given to the recent announcements, then the accession of Russia may not need to be further delayed. Russia could complete the accession process -- hopefully rapidly -- while Belarus and Kazakhstan expedite applications, and the three together could implement their customs union. It is a lot to be digested in a short time, but pursuing the two at the same time could reinforce their economic benefits.

Russia should not rest on the belief that the customs union can be an alternative to the WTO. Maybe it could be an alternative for Belarus and Kazakhstan, but Russia needs the WTO to help the much-needed diversification of its economy and to facilitate the life of those companies that are already competitive on the global arena.

A customs union outside of the WTO framework will do little to improve the Russian economy. The three countries' economic structures are too similar and they share too many of the same problems to create an alternative to competitions in the international markets.

Losing the momentum for accession at a time when it has been so difficult to regain will not help Russia or the WTO. Let's hope that the last mile does not get unnecessarily longer.

Antonio Parenti is professor of international trade law at Pericles American Business and Legal Education Project, an adult educational center in Moscow.