Forty-eighth Report of Session 2010-12 - European Scrutiny Committee Contents

6 Accession of the Russian Federation and Samoa to the WTO




COM(11) 720

Draft Council Decision on the position to be adopted by the European Union within the relevant instances of the World Trade Organisation on the accession of the Russian Federation to the World Trade Organisation



COM(11) 721

Draft Council Decision on the signing, on behalf of the European Union, and provisional application of, the Agreement in the form of an exchange of letters between the European Union and the Government of the Russian federation regarding the preservation of commitments on trade in services contained in the current EU-Russia Partnership and Cooperation Agreement



COM(11) 724

Draft Council Decision on the conclusion, on behalf of the European Union, of the Agreement in the form of an exchange of letters between the European Union and the Government of the Russian federation regarding the preservation of commitments on trade in services contained in the current EU-Russia Partnership and Cooperation Agreement



COM(11) 732

Draft Council Decision on the position to be adopted by the European Union within the relevant instances of the World Trade Organisation on the accession of Samoa to the World Trade Organisation

Legal baseArticles 91, 100(2) and 207(4), in conjunction with Article 218(9) TFEU; QMV
Document originated(a)-(c) 10 November 2011

(d) 11 November 2011

Deposited in Parliament(a) 14 November 2011

(b)-(d) 15 November 2011

DepartmentBusiness, Innovation and Skills
Basis of considerationEMs of 6 December 2011
Previous Committee ReportNone
To be discussed in Council14 December 2011
Committee's assessmentLegally and politically important
Committee's decisionNot cleared


6.1 The process of World Trade Organisation (WTO) accession consists of two strands. First, individual WTO members agree bilateral market access arrangements with the acceding country regarding market access for industrial goods, agricultural trade, and services, the outcomes of these individual negotiations then being amalgamated into the Schedules of Commitments and the best offers granted to all WTO members on the "Most-Favoured Nation" (MFN) principle. Secondly, there are discussions on the compatibility or otherwise of the trade policy regime of the acceding member with the multilateral agreements and obligations which constitute WTO membership. This process — which the Commission negotiates on behalf of the EU Member States — effectively sets out the terms and conditions of the acceding party's membership, and, once these have been agreed, a vote must be taken in the General Council of the WTO on allowing the new member to join.

The current documents


6.2 Document (a) is a draft Council Decision establishing an EU position on the accession of the Russian Federation, which applied to become a member in June 1993, and seeks to confirm the approval which the Commission proposes to give on behalf of the EU at the eighth WTO Ministerial Conference being held 15 to 17 December 2011. The Russian Federation's national assembly is expected to ratify the deal in June 2012, with WTO membership following 30 days after the instrument of ratification is deposited (expected to be September 2012 at the latest), at which point it becomes subject to WTO disciplines and has the right to participate formally in WTO committees and negotiations and be subject to the WTO's Dispute Settlement Mechanism (DSM).

6.3 As part of the accession, Russia concluded 57 agreements on market access for goods, and, on average, the final legally binding tariff ceiling for the Russian Federation will be 7.8%, compared with a 2011 average of 10%. The average tariff ceiling for agricultural products fall from 13.2% to 10.8 %; that for manufactured goods from 9.5% to 7.3%: tariffs for information technology products (currently 5.4%) will be bound at zero, in addition to which exports of such products to Russia will benefit from simplified registration and licensing conditions for goods with encryption technologies, harmonised standards and other regulatory reforms. The final bound rates will be implemented on the date of accession for more than a third of tariff lines, with another quarter to be put in place three years later: and the longest implementation period is eight years for poultry, followed by seven years for motor cars, helicopters and civil aircraft.

6.4 Important gains are also expected due to reforms in a wide range of areas, from the alignment to WTO standards as far as non-tariff measures are concerned to the elimination or reduction of trade-distorting measures, such as export duties and discriminatory pricing practices. All agricultural products will benefit from major regulatory reforms in the area of sanitary and phyto-sanitary requirements applied in Russia, and Russia has also agreed to gradually cap its domestic support subsidies to $4.4 billion by 2018, and to bind its export subsidies at zero level.

6.5 There are 30 bilateral agreements on market access for services, with Russia having made specific commitments on 11 service sectors and on 116 sub-sectors. On telecommunications, the foreign equity limitation (currently 49%) will be eliminated after four years; foreign insurance companies will be allowed to establish branches nine years after accession; foreign banks will be allowed to establish subsidiaries; there will be no cap on foreign equity in individual banking institutions, but the overall foreign capitalisation in the Russian banking system will be limited to 50% (not including foreign capital invested in potentially privatised banks). On transport services, Russia has made commitments in maritime and road transport services, including the actual transport of freight and passengers; on distribution services, Russia will allow 100% foreign-owned companies to engage in wholesale, retail and franchise sectors upon accession to the WTO. For computer services, a high growth sector, Russia is opening the sector fully, without any restrictions, at the level of the sector as a whole. With regard to the movement of natural persons providing services (Mode 4), Russia take commitments for infra-corporate transferees and business visitors (including visitors setting up a commercial presence), without application of labour market tests or quotas, with respective lengths of stay of three years renewable and 90 days respectively.

6.6 More generally, the Russian Federation will ensure that all laws, regulations and other measures related to the Agreement on Trade-Related Investment Measures will be consistent with WTO provisions, and any inconsistent measures, including preferential tariffs or tariff exemptions, applied in reference to the investment programmes (including automobile investment programmes) and any agreements under them will be eliminated by 1 July 2018. The Russian Federation will also fully apply the provisions of the WTO Agreement on Trade-Related aspects of Intellectual Property Rights including provisions for enforcement, without recourse to any transitional period, and it will continue to take action against the operation of websites (with servers in the Russian Federation) which promote illegal distribution of content protected by copyright or related rights. It will investigate and prosecute companies which illegally distribute objects of copyright or related rights on the internet, and, by the time of accession, will apply all the rules of the Berne Convention for the Protection of Literary and Artistic Works.

6.7 The provisions of the WTO Agreement would be applied uniformly throughout the territory of the Russian Federation, including regions engaging in frontier traffic, special economic zones and other areas where special regimes for tariffs, taxes and regulations could be established. All legislation affecting trade in goods, services and intellectual property rights will be published promptly, consistently with WTO requirements. The Russian Federation will regularly update its official publications, including websites, and make these laws readily available to WTO members, individuals and enterprises.


6.8 The impending accession of the Russian Federation to the WTO has also given rise to a number of bilateral agreements with the EU addressing specific issues. These cover (i) a commitment[46] by the Russian Federation to gradually reduce or eliminate certain export duties, and not to introduce or increase such duties on other products; (ii) the introduction of safeguards[47] to maintain EU exports on parts and components of motor vehicles, pending the phasing out by 2018 of any measures which are not compatible with the WTO Agreement on Trade-Related Investment Measures; and (iii) rules[48] establishing how the implementation of a commitment by the Russian Federation to reduce its export duty on raw wood products will be applied to the EU.

6.9 We think it sufficient to simply to refer to these agreements in this Chapter of our Report without making them the subject of further substantive Reports to the House, but we are drawing specific attention to documents (b) and (c), which relate to trade in services. At present, a Partnership and Cooperation Agreement (PCA) between the European Community and Russia, signed in July 1994, contains commitments in this area, which include trade in maritime transport services and on Mode 4. When the Russian Federation accedes to the WTO, the commitment in the PCA will lapse in the light of the extensive commitments undertaken by the Russian Federation, which will be made available to the EU on a Most Favoured Nation (MFN) basis. However, the PCA commitment regarding maritime transport and Mode 4 will not be reflected in full in Russia's WTO commitments, and consequently the bilateral agreement which the EU and Russia have reached — and which would be brought into effect by these two documents — seeks to preserve these obligations.


6.10 The WTO Ministerial Conference on 15-17 December 2011 will also be deciding on a similar application for membership lodged by Samoa in April 1998, and this document similarly would authorise the Commission to support this application on behalf of the EU. Accession is important to Samoa in allowing it to benefit from WTO market access and global trading rules, from the transparency of the WTO trading system, and from the WTO Dispute Settlement Mechanism, and it will also mean that foreign businesses can operate in a more transparent and predictable environment, including better protection for intellectual property rights. However, compared with the accession of the Russian Federation, there is a relatively limited UK economic interest, with exports to Samoa between 2005 and 2010 averaging only £0.7 million a year.

The Government's view

6.11 These documents are dealt with in separate Explanatory Memoranda of 6 December 2011 from the Minister for Employment Relations, Consumer and Postal Affairs at the Department for Business, Enterprise and Skills (Mr Edward Davey).

6.12 He supports the accession of Samoa to the WTO as providing a balanced but ambitious package of commitments in line with its status as a least-developed country, and he notes that the UK has also consistently supported the accession of the Russian Federation on the right terms, having worked closely with the Commission throughout the negotiations to ensure that the UK's objectives and priorities have been taken into consideration. He says that it is a measure of the success of the package that these have been met to a significant extent, and that, in acceding to the WTO, the Russian Federation will embrace a series of rules and commitments which are the foundation of an open, transparent and non-discriminatory global trading system, providing important guarantees for Russia and for the 153 other members of the WTO, and bringing Russia more firmly into the global economy, thereby making it a more attractive place to do business. He describes the outcome of the negotiations on services as very good, in that they will grant UK service suppliers significant market opportunities, whilst helping the Russian economy to modernise, thereby making it an even more attractive market.

6.13 The Minister has also commented on the application of the Mode 4 provisions to the accession of both the Russian Federation and Samoa, and to the bilateral agreement between the EU and Russia on trade in services, which he says preserves commitments either previously entered into by Russia and the EU in the existing PCA, or offered bilaterally by Russia to the EU in the course of WTO accession negotiations, which would otherwise lapse.

6.14 He says that, whilst trade in services falls within the EU's exclusive competence post-Lisbon, the Government's position is that Mode 4 provisions fall within the scope of the UK's Title V opt-in. He notes that, whilst documents (a) and (d) do not themselves contain Mode 4 provisions, accession will enable Russia and Samoa to avail themselves of the UK's commitments on Mode 4 under the General Agreement on Trade in Services (GATS), and therefore represents a widening of those commitments without changing their substance. The UK therefore intends to exercise the opt-in in relation to each Decision. Likewise, he considers that documents (c) and (d) also trigger the opt-in, pointing out that the UK's Mode 4 commitments in the GATS relate to intra-corporate transferees, business visitors and contractual service suppliers, and are made available to other WTO members on a Most Favoured Nation basis, with new countries acceding to the WTO being able avail themselves of these commitments. He notes that, in relation to Mode 4, the side agreement on trade in services replicates some of these commitments, apparently for presentational purposes in order to enable Russia to make more commitments of its own on Mode 4 to the EU, but, notwithstanding this, he says that the UK proposes to exercise the opt-in in relation to these two Decisions.

6.15 The Minister also notes that there is a separate question over whether the bilateral agreement should be mixed or EU-only. He says that his department is currently discussing this issue with the Department for Transport, and is aiming to resolve it by 6 December, the argument for mixed competence being based on the transport provisions (since this remains an area of shared competence). He adds that the two departments are investigating whether the transport provisions of the agreement are in areas where the EU has already exercised competence, but he observes that any claim by the UK in favour of mixed competence would meet resistance at an EU level.


6.16 The draft Decisions supporting the accession to the WTO of the Russian Federation and Samoa are clearly to be welcomed on policy grounds, as are the provisions of the proposed bilateral agreement between the EU and the Russian Federation on the trade in services.

6.17 However, we note that the UK intends to exercise its Mode 4 opt-in rights under Title V in the absence of agreement from other Member States and the Commission, and, consequently, of a legal base. Since Mode 4 rights can affect national labour markets, they are politically sensitive as well as important for example, the Trades Union Congress is campaigning[49] to restrict those provisions in the EU India Free Trade Agreement and in other similar EU agreements. Moreover, we have exchanged differing views with the Government on the legality of asserting opt-in rights in the absence of a Title V legal base on several previous occasions, and our view remains that such a base is necessary for the UK to exercise its opt-in rights. Consequently, we do not feel able to release these documents from scrutiny, although we recognise that, as the UK is unwilling to hold up these WTO accessions, it will signify its political agreement to these Decisions in the Council on 14 December, thus giving rise to scrutiny overrides.

46   (33356) 16821/11 and (33357) 16824/11: see chapter 28 of this Report. Back

47   (33352) 16800/11 and (33353) 16803/11: see chapter 28 of this Report. Back

48   (33348) 16758/11 and (33350) 16771/11: see chapter 28 of this Report. Back

49   EU-India Trade Agreement (temporary migration), June 2011 ( Back

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Prepared 15 December 2011