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Trade liberalisation and overall relationship

14 - Trade liberalisation with Russia

Grade: B-
Unity 4/5
Resources 3/5
Outcome 5/10
Total 12/20
Scorecard 2012: A- (16/20)

The EU is more united than in the past though there remains a disagreement over Siberian flyover fees. Russia took some steps towards liberalisation but also imposed new tariffs.

The EU still does not have a free-trade agreement with Russia. The EU wants liberalisation to promote regulatory convergence and to expand opportunities for European business (an estimated three-quarters of FDI is already from the EU). However, Russia has strong protectionist lobbies and few exports that would benefit from the removal of tariffs, and therefore imposes technical barriers on imports. Russia’s World Trade Organization (WTO) prospects have been delayed by Prime Minister Vladimir Putin’s decision in June 2009 to apply alongside Belarus and Kazakhstan as a customs union.

Member states are now generally united about the need to conclude a new Partnership and Cooperation Agreement (PCA) – the legal basis for the EU’s bilateral trade and investment relations with Russia. In fact, Poland, which was once an opponent is now one of the main advocates. However, they devote few resources to achieving it. On the EU side, there is also still disagreement over Siberian flyover fees: in October, the European Commission wrote to France, Austria, Germany and Finland, questioning bilateral flight agreements that are not applied to all EU carriers equally.

The EU did have some impact in 2010. An EU-Russia Partnership for Modernisation was announced at the Rostov-on-Don summit in May/June, but it has yet to produce practical results. By the end of the year, 12 full negotiating rounds on a successor to the PCA had been held. An apparent breakthrough in Russian accession to the WTO was reached in November, when Russia agreed to phase out tariffs on raw materials such as timber and to changes to export duties and railway fees. At the EU-Russia summit in December, the EU threw its weight behind WTO membership for Russia and declared that it hoped to see Russia join in 2011. However, Russia also imposed several new tariffs on new cars and meat imports, leading the European Commission to complain in October that Russia was “clearly engaged in an import substitution policy”.