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C O N F I D E N T I A L SECTION 01 OF 03 MOSCOW 003084 
 
SIPDIS 
 
COMMERCE FOR BROUGHER/EDWARDS 
WHITE HOUSE ALSO FOR USTR HAFNER AND KLEIN 
GENEVA FOR WTO REPS 
 
E.O. 12958: DECL: 12/24/2019 
TAGS: ETRD EAGR ECON PREL RS WTO KZ BO
SUBJECT: THE CUSTOMS UNION AND A UNIFIED WTO ACCESSION 
PROCESS - CHALLENGES AND OPPORTUNITIES? (PART 3 OF 3) 
 
REF: A. MOSCOW 3083 
     ¶B. MOSCOW 3082 
     ¶C. MOSCOW 3053 
     ¶D. MOSCOW 3050 
     ¶E. ASTANA 2131 
     ¶F. GENEVA 1001 
     ¶G. MOSCOW 2381 AND PREVIOUS 
 
MOSCOW 00003084  001.2 OF 003 
 
 
Classified By: Ambassador John Beyrle, Reasons 1.4 b&d. 
 
¶1. (U) Summary: This cable is the third in a three-part 
series presenting major features of the Russia, Belarus, 
Kazakhstan Customs Union (RBKCU), which was finalized on 
November 27 with the signing of most binding agreements.  The 
first cable covered the major structure and decision-making 
process of the RBKCU (ref A).  The second cable discussed the 
principal points regarding tariffs and non-tariff regulations 
(ref B).  This cable addresses the RBKCU and its effect on 
the WTO accession of member countries.  Post believes that 
the RBKCU likely will create stumbling blocks for the WTO 
accession process, but may present may present opportunities 
to advance U.S. trade objectives in the three countries.  End 
Summary. 
 
So What Comes Next for WTO? 
--------------------------- 
¶2. (U) On December 7, Russia's Lead Trade Negotiator Maxim 
Medvedkov briefed foreign embassy representatives on the 
newly approved RBKCU and next steps for WTO accession. 
Medvedkov reiterated the position heard for the last few 
months, that all three RBKCU countries want to continue their 
WTO accession as individual countries.  That said, the three 
want to coordinate the contents of the accession agreements 
and accede to the WTO simultaneously.  The view from Moscow 
indicates that in negotiations with the WTO (as with much 
else in the RBKCU), Russia continues to take the lead in any 
planning on negotiations. 
 
¶3. (U) Medvedkov confirmed that the current plan for the 
RBKCU members is to present to the WTO Secretariat a document 
explaining the RBKCU and how its members see it affecting 
their respective accessions.  This was supposed to happen 
before the end of the year (reportedly the week of December 
14, but we have received no confirmation it was submitted.) 
According to Michael Cherekaev, Head of the WTO Unit at the 
Ministry of Economic Development (MED), Russia wants the WTO 
Working Party members to have a chance to review the material 
and be ready to set up negotiating schedules early in January 
¶2010.  Cherekaev assured econoff that the Russian WTO team is 
ready to re-start negotiations as soon as the holidays are 
over.  The MED negotiations office has handed over all RBKCU 
negotiation responsibilities to a newly formed unit so that 
the Russian WTO team will no longer be "distracted." 
Cherekaev could not comment on the preparedness of the 
Belarussian and Kazakh negotiating teams. 
 
Let's Go Back to Where We Left Off 
---------------------------------- 
¶4. (U) According to Medvedkov none of the existing RBKCU 
agreements contradicts any of Russia's WTO Working Party 
Agreements signed so far.  As most of the RBKCU's standards, 
tariffs and regulations are based on Russia's, which are 
close to meeting the terms for WTO accession, Medvedkov 
believes there should be few problems.  If there are any 
issues, the RBKCU can adjust its regulations "as needed upon 
accession."  This possibility of revision of the RBKCU 
agreements is "why the three RBKCU members want to negotiate 
similar accession agreements" and have simultaneous 
accession.  But, according to Medvedkov, this should not 
really be an issue, as RBKCU is "generally in compliance." 
 
¶5. (U) According to Medvedkov, the RBKCU harmonized tariff 
table contains over 11,000 lines, 80% of them ad-valorem 
tariffs.  He insisted that the harmonization process has only 
resulted in a small number of Russia's tariffs increasing, 
most in the area of meat and food products.  All other 
tariffs will be lower as of January 1, 2010, and, according 
to Medvedkov, the table represents a 1% decrease in Russia's 
real effective tariff rate in comparison to 2009. (See ref B 
for a more detailed discussion.)  For this reason Russia's 
 
MOSCOW 00003084  002.2 OF 003 
 
 
trade negotiators believe that it will be easy for Russia's 
accession process to pick-up where it left off in June 2009, 
and few, if any, Market Access Agreements will need to be 
re-opened. 
 
¶6. (C) This was a position echoed by Russia's leading private 
sector representatives during a December 2 meeting with U/S 
for Economic, Energy, Business and Agricultural Affairs 
Robert Hormats.  Leading Russian businessmen told Hormats 
that the RBKCU will not be a stumbling block for WTO 
accession because the other countries will just conform to 
Russia's standards, and therefore, automatically, be in the 
same stage of accession as Russia.  Russia will then quickly 
solve the "four old problems from last June" and all three 
RBKCU countries will be able to enter together.  (Refs C and 
D) 
 
¶7. (C) The only contradictory voice post has heard was Senior 
Presidential Advisor Dvorkovich, who told U/S Hormats, "Well, 
maybe when the time comes for Russia to enter, if the other 
countries aren't ready we'll just go in without them."  (Ref 
C) 
 
For Belarus and Kazakhstan ) Different Stories 
--------------------------------------------- - 
¶8. (SBU) The tri-country negotiating team will be formally 
requesting to the WTO a re-start of Belarus' accession 
process.  According to Medvedkov, Russian trade specialists 
are currently working with the Belarussian team to identify 
legislative changes Belarus will have to make in order to be 
"WTO ready," and will propose Russian legislation as models. 
As Belarus' tariff schedule "was always close to Russia's, 
and therefore has not changed much with the RBKCU table," 
Medvedkov believes the RBKCU will actually help significantly 
Belarus' accession.  Belarus should have easy market access 
negotiations, as long as members are willing to complete 
agreements close to Russia's existing agreements. 
 
¶9. (SBU) According to the National Trade Estimate for 
Kazakhstan (Ref E), Kazakhstan has completed market access 
agreements with 21 of 40 members of its Working Party, 
including Canada, Malaysia, Brazil, and Israel.  It is still 
negotiating its agreements with the U.S., and the EU, among 
others (Ref E).  According to Medvedkov, the RBKCU WTO 
negotiators hope that Working Party members will accept 
wholesale the Kazakh tariff table which resulted from the 
RBKCU negotiations.  He stated that "it is a wash, as 3,000 
lines went up and 3,000 lines went down."  If the Working 
Party does not accept these changes and requires new market 
access negotiations, Medvedkov admitted that the Kazakh 
accession process would be set back quite far.  As noted in 
Ref E, Kazakhstan's real effective tariff rate will go up, 
already 13% in 2009, as a result of the RBKCU harmonized 
tariff table.  (See Ref B for more details on the Kazakh 
tariff changes.) 
 
EU Mission Thoughts on the RBKCU and WTO 
---------------------------------------- 
¶10. (C) During a November 30 meeting with the Ambassador, 
newly arrived EU Head of Delegation Fernando Valenzuela 
stated that the further deferral of Russia's entry into the 
WTO "would delay the EU Partnership and Cooperation Agreement 
(PCA)," but in his view there was not much left to negotiate 
on WTO.  This was a view echoed by Timo Hammaren, the EU 
Mission's Senior Trade Officer during a December 18 meeting. 
Hammaren pressed econoffs for details on what the U.S. felt 
was still missing for Russia's accession, and asked how many 
of these were "technical issues or political ones?"  He asked 
if there was "a U.S. determination for Russia to join the 
WTO?"  He added that the PCA negotiations were being held up 
by the slowed down WTO accession.  This did not mean, 
however, that the EU is pleased with the RBKCU.  Hammaren 
noted that by their calculations the RBKCU tariff table 
contains over 850 million Euros in new tariffs in comparison 
to 2009, which the EU considers "a serious set back" for 
trade liberalization.  Valenzuela stated that Russian WTO 
membership is important to counter such increases. 
 
Comment 
------- 
 
MOSCOW 00003084  003.2 OF 003 
 
 
¶10. (C) Despite the claims of many of our Russian 
interlocutors that the Customs Union should not really affect 
the WTO accession processes of any RBKCU members, we believe 
that just the changes to the tariff tables are sufficiently 
large enough to present complications for Russia and 
Kazakhstan.  These will probably require the renegotiation of 
completed bilateral agreements with members of the respective 
Working Parties, as well as re-starting on-going 
negotiations.  And this is before the RBKCU's harmonized 
position on other non-tariff regulations is clear. 
 
¶11. (C) As stated in refs A & B, the Customs Union still has 
no harmonized position on SPS or IPR and other major WTO 
trade issues.  The form these regulations take in the next 
few months, will then allow everyone to make a more realistic 
assessment of a time frame for eventual accession. 
Complicating the matter further is the insistence, at least 
from the Russian position, that "all of Russia's WTO 
commitments will only be implemented from the date of 
accession." 
 
¶12. (C) Maxim Medvedkov has also noted that the RBKCU is an 
evolving project that will continue to change.  This could 
provide WTO members an opportunity to try to influence the 
content of RBKCU harmonized regulations on SPS, IPR, 
investment policies, valuation, and many others.  In fact, 
the RBKCU secretariat has requested technical assistance from 
the EU on issues such as standards and customs procedures. 
This moment could actually be an opportunity to help all 
three countries, simultaneously, to take on international 
regulations, laws, and standards that could facilitate WTO 
accession. 
Rubin