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Compliance with G8 Commitments:
From Denver 1997 to Birmingham 1998

~ Compliance Content ~

Compliance Studies by Issue Area:
Russia

Commitment:

We support the goal of early Russian accession to the WTO on the basis of conditions generally acceptable to newly acceding members."

Compliance Study: Canada

Grade: - 1

Canada has placed tremendous emphasis on Russia's accession to the WTO, but since the Denver Summit Canada has not taken any specific actions that would indicate Canada's compliance with this commitment.

Unlike the U.S. or EU, Canada is not restricted by the need for fast-track authority or limited by a common regional position on trade negotiations. Canada has been a member of Russia's Working Group on accession to the WTO since its creation in 1995, and has conducted two bilateral meetings to discuss specific aspects of tariff reductions with Russian trade authorities. In 1995 and 1996, Canada also made bilateral and multilateral contributions to support technical assistance projects that would assist the Russian Government in its accession to the WTO.

Since the Denver Summit, however, the Canadian government has not pursued any new initiatives that represent concrete support for Russia's early accession to the WTO. In October, 1997, Prime Minister Cretien visited Russia to meet with President Yeltsin, and other members of the Russian government. During the trip, Cretien reaffirmed Canada's support for the commitment, indicating that Canadian officials are still mindful of the importance of Russia's WTO accession. However, these statements have not been matched by specific actions of the Canadian government that would facilitate progress in Russia's process of accession.

Since the Denver Summit, the Canadian Government has pursued trade issues that are focused on Latin America, and economic issues that would enable it to reap the benefits of its balanced federal budget. Meanwhile, its diplomatic relations with Russia have been strained due to Russia's lack of legal support to safeguard Canadian investments in the Russia economy. These events have made the joint Canadian Ministries of Foreign Affairs and International Trade reluctant to resume bilateral negotiations with the Russian government over its WTO accession, and less willing to accept to Russia's recent comprehensive offer on tariffs reductions.

Despite Canada's strong performance on this commitment in the past, the Canadian government has not undertaken new initiatives to support early Russian accession to the WTO, and thus receives the grade of -1 for this commitment.

Compliance Study: France

Grade: - 1

France, as a central member of the European Union and the WTO, has made some public statements encouraging Russia's accession to the WTO. However, the French Government has done very little within the EC to add force to Russia's accession. To date France has not undertaken any new actions in the last year to promote successive bilateral negotiations on tariff schedules between the EC and Russia, and refrained from any unilateral initiatives that would have encouraged the EC's trade negotiator, Leon Brittan, to accept Russia's first comprehensive offer on tariffs reductions.

During the Troika Summit between President Chirac, Chancellor Kohl, and President Yeltsin in Moscow, March 25th, 1998, President Chirac encouraged Russia's continued integration with international economic institutions, which includes the WTO. This should not be considered enough to indicate the French Government's action in accelerating the process of Russia's accession.

Since the Denver Summit, the French Government has focused on existing domestic and European issues - continued labour unrest, the delicate accommodation of the Jospin cabinet, and the push to consolidate support for EMU. This has left the representatives in the European Commission's DG1 open to define the position of French Government on the larger agenda of international trade, leaving France with little scope to contribute meaningfully to Russia's early accession to the WTO.

Due to the limited scope for France to support Russia's accession to the WTO, and the lack of France's actions to change EC reluctance for early Russian accession, France receives the grade of -1 for this commitment.

Compliance Study: Germany

Grade: - 1

Germany is Russia's largest overall trading partner, and a key member of the EU, so the German Government has a vested interest in supporting Russia's accession to the WTO. However, the German Government supports the EU position that Russia accede on terms that are "commercially viable" for the EU even at the expense of Russia's early accession. Since the Denver Summit German Government has little opportunity to use its position within the EU or the EC Council of Ministers to add force to Russia's accession, which continues to progress slowly. Like the other European G7 members, the German Government has also refrained from any unilateral initiatives that would have encouraged the EC's trade negotiator, Leon Brittan, to accept Russia's first comprehensive offer on tariffs reductions.

Since the Denver Summit, the German Government has not undertaken any new actions to encourage the resumption of bilateral negotiations on tariff schedules between the EC and Russia.

During the Troika Summit held between Chancellor Kohl, President Chirac, and President Yeltsin in Moscow, March 25th, Kohl joined Chirac in supporting Russia's continued integration with international economic institutions. This should not be considered enough to indicate the German Government's action in accelerating the process of Russia's accession.

Since the Denver Summit, the attention of the German Government has been diverted by other pressing domestic and European issues - rising unemployment , the upcoming national elections, and the successful launch of the EMU and the European Central Bank. Germany's only scope for concrete unilateral contributions to support Russia's early accession to the WTO would be through a request to suspend some of the numerous anti-dumping actions currently used by the EU to penalize Russian exports, which has not been done. As a result, the position of the German Government on issues relating to Russia's accession to the WTO continues to be defined by the European Commission.

Due to the lack of new initiatives by Germany to promote EC support for early Russian accession to the WTO, Germany receives the grade of -1 for this commitment.

Compliance Study: Italy

Grade: - 1

As a central member of the European Union, and an important European trading partner of the Russian Federation, Italy has an interest in supporting Russia's accession to the WTO. However, the Italian Government has taken few concrete actions that would enable the EC to support Russia's accelerated or early accession to the WTO, and has not encouraged the EC trade negotiator, Leon Brittan, to accept Russia's recent comprehensive offer on tariffs reductions, or recommence bilateral negotiations.

In February, 1998, President Yeltsin visited Rome to meet with Italian Prime Minister Proddi, and other members of the Italian government. While it remains unclear if the issue of Russia's accession to the WTO was discussed in-camera, concrete support for Russia's accession was not included in any of the extensive agreements on greater bilateral cooperation on investment and foreign policy concluded during the trip.

Since the Denver Summit, the Italian Government has focused on domestic and European issues - the tenuous support of the Prodi Government in the Italian parliament, Italy's persistent high rate of unemployment, and the push to qualify in the first round of EMU. As a result, representatives in the European Commission's DG1 have been left to define the position of the Italian Government with regards to Russia's accession to the WTO. Similar to the position of other European governments, Italy has had little scope to contribute meaningfully to Russia's early accession to the WTO, and has refrained from pursuing other forms of support.

Due to the limited scope for Italy to support Russia's early accession to the WTO, and the lack of Italy's actions to change the reluctance of the EC to encourage early Russian accession, Italy receives the grade of -1 for this commitment.

Compliance Study: Japan

Grade: 0 (work in progress)

Japan is an important participant in the process of Russia's accession to the WTO. Since the Denver Summit, the Japanese Government has taken its first specific actions that would indicate that Japan's compliance with this commitment is "in progress".

The Japanese government also has the authority to support Russia's early accession to the WTO, unrestricted by a common regional position on trade negotiations, or the need for fast-track authority. Japan is the 4th largest destination for Russian exports (by contrast less than 1% of Japan's exports go to Russia). Japan has also been a member of Russia's Working Group on accession to the WTO since its creation in 1995.

Japan did not commence with bilateral meetings to discuss specific aspects of tariff reductions with Russian trade authorities until 1998. In March 1998, Japan a participated in its first bilateral meetings with the Russian Government regarding Russian tariff rates and a schedule for their reduction. While the meeting did not result in Japan's unequivocal support for Russia's accession to the WTO, it does represent progress towards Japan's fulfillment of this commitment.

Since the Denver Summit, the attention of the Japanese Government has been dominated by the Asian financial crisis and its impact on the slow growth of the Japanese economy. However, its diplomatic relations with Russia have improved in the aftermath of two direct bilateral meetings between Prime Minister Hashimoto and President Yeltsin. The stability of the Russian rouble has facilitated the constant increase in the import of Japanese consumer goods, enabling Japan to reduce its moderate trade imbalance with Russia. These and other developments have reinforced the importance for Japan to encourage Russia's accession to the WTO, but still on "commercially viable terms" that address Japan's concerns about Russian market access and customs regulations.

Despite Japan's weak performance on this issue in the past, the Japanese government has undertaken new action since the Denver Summit to support early Russian accession to the WTO, and thus receives the grade of '0" for compliance with this commitment 'in progress'.

Compliance Study: United Kingdom

Grade: - 1

Since the Denver Summit, the United Kingdom has been in an excellent position to promote Russia's early accession to the WTO, but has failed to undertake specific action that would result in progress on this commitment.

The United Kingdom is Russia's sixth overall trading partner outside the former Soviet Union, and currently serves as Chair of the European Union. Since the Denver Summit, the U.K. Government has had extensive opportunities to use its position within the EC and its Council of Ministers to add force to Russia's accession to the WTO. Similarly, British Prime Minister Tony Blair has had direct access to EC's chief trade negotiator, Leon Brittan, who has been unwilling to support early Russia's accession in exchange for any concessions from the EU.

Since the Denver Summit, the British Government has focused on issues that are domestic in nature - employment, investment, social assistance, and foreign policy objectives - Northern Ireland, the Israeli-Palestinian peace process, and the peaceful hand-over of Hong Kong to mainland China. Since the Denver Summit, Prime Minister Blair has put considerable emphasis on the need to conclude China's accession to the WTO in 1998, but has refrained from any concrete measures that would enable progress on Russia's accession. Despite holding the Chairmanship of the EU, and having met President Yeltsin twice in 1997, Prime Minister Blair has not used the potential of the British Government to promote the EC to take a more conciliatory stance towards progress on Russia's accession to the WTO. As a result, the position of the British Government on issues relating to Russia's accession to the WTO continues to be defined by the European Commission.

Due to the lack of new initiatives by the British Government to promote EC support for early Russian accession to the WTO, the British Government receives the grade of -1 for its performance on this commitment.

Compliance Study: United States

Grade: - 1

The United States has repeatedly emphasized the importance of Russia's accession to the WTO. Since the Denver Summit and President Clinton's loss of fast-track trade authority, the U.S. Government has refrained from any specific actions that would indicate American compliance with this commitment.

The United States has been a member of Russia's Working Group on accession to the WTO since its creation in 1995. At a bilateral summit in Helsinki in February 1997, Russia was offered American support for early accession to the WTO (as well as full membership in the Group of Seven) in exchange for Russia's cooperation with NATO expansion. While no official commitment was made in Helsinki as to the date of Russia's accession, these events were closely linked to the reappearance of the commitment on the Denver Communique. The U.S. Government has conducted two bilateral meetings with Russian trade authorities to discuss specific aspects of tariff reductions with Russian trade authorities, one prior to the Denver Summit, and another immediately after.

Since the Denver Summit, President Clinton has lost fast-track authority from the U.S. congress, and the emphasis for trade negotiations has shifted to China's accession to the WTO. In the case of negotiations with Russia , the U.S. Trade Representative, Chalene Barshevsky has not expressed any U.S. willingness to provide concrete measures or concessions that would enable progress on early Russia's accession to the WTO.

Despite the initiative for this commitment having come from the U.S. government, the United States has not undertaken new initiatives to support early Russian accession to the WTO, and thus receives the grade of -1 for this commitment.

Overall G7 Compliance Score: -1

Explanations for Low Compliance

Several factors explain the low level of compliance. First, it appears that this commitment is less likely to be fulfilled because it also requires concessions from the other parties. It specifies the use of government policy instruments in order to facilitate progress in the bilateral or multilateral negotiations that may not be under the control of the national government. Simply stated, the G7 countries could not achieve full conformance with the commitment - early Russian accession to the WTO on the basis of conditions generally acceptable to newly acceding members - without the cooperation of Russian authorities who are responsible for tabling offers on tariff reductions.

Russia has undertaken substantial actions in facilitating progress in their accession negotiations since Denver, but some of Russia's actions have served to reduce the likelihood that this commitment will be fulfilled. This is not to suggest, however, that this commitment to Russia was disregarded completely. Rather, it suggests that while the G7 have displayed reluctance to fulfill this commitment in its entirety, any one country in unable to make unilateral progress on the issue without Russian cooperation. This factor was further complicated in the case of the France, Germany, Italy, and the United Kingdom who share a common trade policy via the European Commission and its Chief Trade Negotiator, Leon Brittan. While there is little to indicate that any of the European G7 members were eager to undertake steps to facilitate Russia's early accession, their position was largely defined by a common position taken by Leon Brittan and the European Commission.

The cadence of multilateral and bilateral negotiations on Russia's WTO accession illustrates this point. Although the G7 continue to contribute to the further liberalization of global trade and services, all seven countries have been unable to conclude a bilateral agreement with Russia on schedules for tariff reductions. Moreover, this non-compliance demonstrates that the pledges in the last two summit communiques, Lyon and Denver, to support Russia's accession to the WTO remain unfulfilled.

Compliance with this Summit commitment has also been affected by its linkage to other political issues. For example, much emphasis has been put on the need to conclude China's accession to the WTO in 1998, perhaps even before June. While not formally related to progress on Russia's WTO accession, the higher expectation for China's accession has linked attention and resources for Russia's own accession to the G7's low performance on this commitment. In the case of the United States, domestic politics is also a factor, as the loss of Presidential fast-track authority has weakened the impetus to achieve early Russian accession.


Document prepared by Vinay Saldanha

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