EU and Russian Federation have signed four bilateral trade agreements which contain additional commitments of RF:
Agreement between the European Union and the Government of the Russian Federation on trade in parts and components of motor vehicles between the European Union and the Russian Federation
There may be some concerns about the RF’s approach to the WTO on the impact it may have on the regime for investments in the automotive sector. This arrangement allows investors that establish car manufacturing facilities to produce cars in the RF to lower custom duties on imports of auto parts and components in exchange for the obligation to fulfil the requirements for home ownership and other requirements for localization. According to the agreed conditions of the accession of RF this regime will be exempt from RF’s obligations until the 1st July 2018 to ensure compliance of laws, regulations and other investment measures RF with the provisions of the WTO Agreement on investment measures related to trade (TRIMS). In order to reduce the risk of such a regime in the transitional period, the relocation of production parts and components of motor vehicles in the EU, EU and RF concluded a bilateral agreement on trade of parts and components of motor vehicles.
The aim of the agreement is to establish a compensation mechanism, which is designed to ensure that exports of parts and components of motor vehicles in the EU in RF would not be reduced as a result of the program of investment in the automotive sector.
If the export of parts and components from the EU to RF in a given year will fall below a specific threshold, the RF will have to allow the import of parts and components originating in the EU at lower customs duties, in amounts equal to the reduction of imports from the EU. This compensation mechanism will be initiated on the basis of 3-percent reduction in exports from the EU in the 12-month period, compared to a threshold which is determined on the base value of exports from the EU to RF in 2010. Compensatory mechanism will be used after initiation for at least 12 months and then, if necessary, reviewed every 12 months. In exceptional economic conditions that will result in a significant reduction in the total number of new vehicles sold in the RF starting year in comparison to the year before, the compensation mechanism will not apply. RF compensation quota will be managed by a system of import licenses that will be shared under a FCFS (first come first served). When compensatory quota is being used by investors who under the program of investment in the automotive sector concluded investment agreements will be such imports deducted from the total annual production of those investors in the relevant year, subject to the general requirement for home ownership in the framework of the investment in the automotive sector.
Agreement in the form of an exchange of letters between the EU and the Russian Federation on the introduction or increase of export duties on raw materials from the Russian Federation
In the course of the accession of RF to the WTO, RF was committed to gradually reduce or eliminate the current export duties. Obligations in respect to the rates of export duties have been included in the list of concessions and obligations of RF in relation to goods, which are attached to the Protocol of Accession to the WTO of RF. However, since that list includes only materials for which RF currently applied export duties and an understanding of RF inputs, which are not included in the list is not a subject to any restrictions on the export duties, EU in order to reduce the risk related to the use of new export duties in the future, concluded a bilateral agreement that requires RF to make every effort to prevent the introduction or increase of export duties on raw materials from the list included in an annex to the agreement. RF is also obligated to consolidate with European Commission about mentioned export duties and taking into account its position. List of raw materials includes raw materials, which are not listed in the list of concessions and obligations in respect of goods for which the Russia accounts more than 10% of world production and exports, which has or would have a major EU import interest or for which there is a risk of disruption in the world care.
Agreement in the form of an Exchange of Letters between the EU and the Russian Federation on the administration of tariff quotas for exports of wood from the Russian Federation to the EU and the Protocol between the EU and the Russian Federation on technical modalities pursuant to an agreement
RF was in the course of accession to the WTO committed to reduce its current export duties on products made from natural wood. RF agreed that for certain types of wood, (wood of certain conifers) tariff quotas for export will open and assign a specific portion of quota for the EU. Rates of duty and tariff quota as well as the share of quota allocated to the EU are included in the list of concessions RF, which is attached to the Protocol of Accession of RF to the WTO.
The agreement includes general provisions on the implementation of the share of tariff quotas for the EU. The agreement also states, that EU manages tariff quotas from those that belong to EU and that the RF issues export licenses on the basis of the import documents issued by the EU. The Agreement also foresees that the EU and RF prepare the technical details for the administration of tariff quotas, which are included in the protocol established between the EU and the Government of the RF. The Protocol sets out rules regarding the management of export tariff quotas and export under those quotas, including provisions relating to participation of the competent bodies of the EU and the RF Government to ensure the proper functioning of the system.
Agreement in the form of an Exchange of Letters between the EU and the Russian Federation regarding the preservation of commitments on trade in services contained in the current Agreement on Partnership and Cooperation Agreement between the EU and Russia
RF on accession to the WTO entered the General Agreement on Trade in Services (GATS) and assumed the comprehensive multilateral commitments on trade of services with all WTO members. These obligations generally meet or exceed current commitments in trade of services with the EU on the basis of the current Agreement on Partnership and Cooperation Agreement between the EU and the RF. EU-RF agreement will go further than those that was made within the GATS multilateral framework in only two service sectors, namely maritime trade and the temporary movement of natural persons for business purposes. The agreement states that Russia will apply for a most favoured nation (MFN) exemption from its GATS commitment, and on the basis of that exemption will continue to give the EU more favourable treatment in these two sectors on an exclusive basis. The bilateral agreement details the preferential treatment that is to be granted exclusively to the EU.
This will ensure that the RF current obligations on market access will not be more restrictive for EU service providers from the current.
RF Membership in the WTO is a prerequisite to further strengthen trade relations between the EU and the RF.
The current legal framework of trade relations between the EU and Russia is set by the Agreement on Partnership and Cooperation Agreement (PCA). PCA is a non-preferential agreement that contains specific rules of trade. It confirms MFN treatment in the field of tariffs and quantitative restrictions prohibiting the introduction of the bilateral trade. It contains provisions on establishment and operation of businesses and the general provisions on the approximation of the laws and standards, including technical regulations, sanitary and phytosanitary requirements, intellectual property rights and customs matters.
Between the EU and the RF an agreement is in place on the subject of trade in steel and Council Regulation (EC) no. 1342/2007 on the implementation of the agreement, which provides quantitative restrictions on imports of flat-rolled and long products of steel. The agreement will expire on the date of entry RF into the WTO, so that import of products will no longer be under any quantitative restrictions. Also the Council Regulation (EC) no. 1342/2007 will expire. The European Commission has sent a proposal for the annulation of the regulation to the Council and the European Parliament.
Since the existing PCA falls behind the needs that are being dictated by the increased trade relations with Russia, negotiations 2008 have been in progress since 2008 to prepare a new agreement that will replace the PCA. The agreement was to be non-preferential, and should include additional commitments – WTO + provisions in the various fields of governing trade and investment. The long-term goal is to conclude a free trade agreement between the EU and Russia (FTA).