Accession of the Russian Federation

Organization	RESTRICTED
WT/ACC/SPEC/RUS/34 13 June 2005
	(05-2475)
Working Party on the Accession of the Russian Federation	Original: English

1.  Accession of the Russian Federation

accession of the russian federation

The following submission, dated 9 June 2005, is being circulated at the request of the Delegation of the Russian Federation.

Replies to Members' Comments and Questions with Regard to the Agriculture Section of the Draft Report of the Working Party, WT/ACC/SPEC/RUS/25/Rev.3 of 15 October 2004 (paragraphs 549‑554) and other information on agricultural issues submitted by the Russian Federation to the Working Party.

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Question 1

Descriptive part

We would like to invite Russia to provide updated information for the Agriculture section of the Draft Report in particular as regards domestic support.

Answer:

As it has been already pointed out the Russian Federation firmly believes that the proposed period (1993‑1995) may be considered representative taking into account existing supporting programs and budgetary financing. This was proved by calculations of the domestic support for earlier period (1989‑1992), presented to the Working Party members.

Question 2

Commitment: Further discussions needed

Answer:

Russia does not have any objections against the need of a further discussion.

Question 3

Requests for information or clarifications that should be reflected in the text:

This section will need further revision once more progress is made in understanding Russia’s agricultural policies, in particular, with respect to Russia’s supporting tables for domestic support and export subsidies.

We and other countries have pushed to eliminate export subsidies and there is very little support for Russian Federation to have recourse to export subsidies after accession.

Answer:

The Russian Federation maintains its approach, that the right for export subsidies is vitally important for the country. Refuse of their use is possible only in case if such a decision was adopted by WTO Member States within the Doha round. This issue is one of questions on negotiations and no decision has yet been taken.

Question 4

There should be cross references to the section on Tariff Rate Quotas, i. e. to the description in these sections of measures relating to TRQs.

Answer:

Russia notes that the section of the Working Party Draft Report "Policies Affecting Foreign Trade in Agricultural Products" covers general issues related to the domestic support and export subsidies. Tariff Rate Quotas represents another part of the Working Party Draft Report. We admit having some difficulties in finding an appropriate place for this reference to be made. We, therefore, are ready to follow Working Party Members’ advice as regards the Section of the Draft Working Party Report, where such a cross reference might be introduced.

Question 5

Russian Federation should provide updated supporting tables (beyond 1997), which reflect Members’ technical comments to date. While these tables will not be reflected in the text, they will provide the framework for advancing our work on this section.

Answer:

Russian Federation strongly believes that the proposed period (1may be considered as a representative one taking into account currently existing support programs and budgetary financing. This was also proved by calculation of the domestic support for earlier period (), presented to the Working Party Members.

Question 6

As this section evolves, there may need to be additional information reflected in the text.

Specific Drafting Suggestions: Delete last sentence of paragraph 551

In this respect, these members also stressed that the disciplines contained in the WTO Agreement on Agriculture on export credits, export credit guarantees or insurance programmes needed to be applied by the Russian Federation so as to avoid circumvention of the commitment not to provide export subsidies.

Answer:

Pending

Question 7

Elements of a Commitment: Paragraph 553 is acceptable, provided that the other requests are addressed appropriately.

Answer:

Pending

Question 8

Paragraphs 549 to 554: As stated by some members, it is supported the need to know the domestic support policies of the Russian agricultural sector in a wide and updated way.

- It should be also highlighted that, Russia should indicate how does ensure that domestic support will not cause "serious damage" to the rest of the Members in consistency with the Agreement on Subsidies and Countervailing Measures.

Answer:

In 2003 Russian Federation submitted to the WTO Members information on existing domestic support measures. No serious changes were made in domestic support programs comparing with the period . Mechanism of incentive crediting of agricultural producers has been changed as well as intervention prices for grains aiming at stabilizing internal prices.

The list of supporting programs within green and amber box, which had been presented to the Working Party Members, clearly demonstrated domestic agricultural policy’s succession and stability. This was, as well, proved by the "Main directions of the agricultural policy of the Russian Federation until 2010", which, as well, has been presented to the Working Party members.

Taking into account the absence of any serious changes in supporting programs the Russian Federation believes that, the amounts of domestic support proposed by the Russian Federation do not seriously distort trade and cannot cause any damage to the agriculture of WTO Member States. This assumption in fact was proved by the growth of foreign trade (imports into Russian Federation) in agricultural and food products in this period.

Question 9

Export Subsidies: Argentina requests that Russian Federation confirms its commitment not to apply or introduce any form of export subsidies, as in paragraph 552.

Answer:

The Russian Federation believes that the right to provide export subsidies is vitally important for the country. Refuse of their use would be possible only in case if such decision was taken by all WTO Member State within the Doha round. However, this issue is one of questions on negotiations and no decision has been taken yet.

Question 10

Domestic Support: Amber Box Base Period

The base period should be recent and representative of the Russian Federation policies for the change towards a market economy, especially those related to agricultural domestic support, and not one corresponding to the early post-soviet period (which was a period of very high levels of trade-distorting domestic support).

The base period proposed by Russia is not representative of its recent domestic support policies and will not comply with the existing WTO disciplines. But, to establish an appropriated base period, Russia should submit more recent information ()

Answer:

Russian Federation would appreciate if more detailed reasoning was given to the statement that the "base period proposed by Russia … will not comply with the existing WTO disciplines".

Russian Federation believes the proposed period (1993-95) to be representative, taking into account currently existing supporting programs and budgetary financing. This was proved by calculations of the domestic support for earlier period (), presented to the Working Party Members.

Question 11

Domestic Support: Green and Amber Boxes

We wish to reiterate the comments and issues put forward by us in relation to the Green and Amber Boxes, namely:

Green Box

a) Paragraph 3 related to the constitution of public stocks for food security purposes includes the creation of an Emergency Seed Stock Program, through which it would be ensured the seed supply in case of natural disasters and emergency situations, as well as the seed supply to non-producing or limited production areas.

In that sense, it is appropriate to ask the Russian Federation what the name of the food security framework program established by the national legislation, on which the current Seed Stock Program depends, is; what seeds are susceptible to be delivered under the present program; Which organism determines the seeds to be delivered in case of donation; and to what extent the seed supply to limited production areas is related to stock piling and maintenance. (How it is ensured that the produce is only for self-consumption and is not traded.)

If emergency seed stock is sold at market prices, what is the support to producers in emergency situations or from non-producing areas about? All producers are supposed to purchase seeds at market prices. Also, ask the Russian Federation when the Seed Stock was created and how much stock there is.

b) They are included in paragraph 2 (b) "Subsidies for waste collecting plants." The Russian Federation is asked to explain how this program works and on which laws and regulations it is based. Furthermore, which are the differences with the Operating Payment Program (including the cost of pest and disease control, etc.)? How does the Russian Federation ensure that said subsidy is not used for other purposes?

c) The Russian Federation includes a Program on Credit and Financial Support to the agricultural sector under paragraph 11. We ask the Russian Federation which law or regulation established these credits. Also ask about the requisites for these credits to be granted and the payment conditions.

Answer:

a) In accordance with the Federal Law "On seed-farming" federal seed stocks represent stocks of plants and are to be distributed in regions where there is no production of seeds or there are limited opportunities of seeds production as well as to render assistance to entities and to natural persons involved in farming industry in case of natural disasters and other emergency situations.

As it has been pointed out for several times Russian Federation considers the creation seed stock program as measure which can provide food security with the aim of guaranteeing farming reproduction in regions being exposed by natural disasters and other emergency situations as well as in regions where production of seeds is absent or, there are limited opportunities of seeds production. Thus Seed Stock Federal Program is aiming at providing opportunities of purchasing seed at market prices (this is the sense of the support) by farming-producers in regions where production of seeds is absent or there are limited opportunities of seeds production. Purchasing of seed aiming at next selling has no economic sense, as their potential partners (buyers) also have access to the supply of seeds from Federal Seed Stock at market prices.

b) Mechanism of this program functioning and its difference from Operating payment Program are presented in documents: WT/ACC/SPEC/RUS/23 of 28 November 2001, WT/ACC/SPEC/RUS/26 of 25 September 2002, WT/ACC/SPEC/RUS/27 of 6 December 2002. Beginning from 2001 the realization of this program is regulated by the Resolution of the Government of the Russian Federation No. 272 of 6 April 2001 "On stipulation of the order of subsidizing from federal budget in 2001 aiming at supporting separate farming-production industries" (with amendments of 30 January 2002, 25 February 2003).

c) Description of this program is presented in WT/ACC/SPEC/RUS/23 of 28 November 2001, WT/ACC/SPEC/RUS/26 of 25 September 2002, WT/ACC/SPEC/RUS/27 of 6 December 2002. Description of legislation in the field of realization if supporting programs was presented to the Working Party Members as non-paper in 2002.

Question 12

Amber Box

a) External reference price. Under Annex 3 of the AOA, it shall be fixed. The Russian Federation took the external reference price of each year for which it estimated its AMS, highlighting that those years () are not considered to be representative.

b) De minimis: The de minimis level increased from US$ 64 million in 1993 to US$ 684 million in 1995. This change accounts for a growth of more than 1,000 per cent in the de minimis level in two years. It is appropriate to require the Russian Federation to explain this rise, referring to the specific products to which this increase corresponds and the respective values.

c) Non product specific subsidies and compensations: The level of non product specific subsidies almost doubles in two years (from US$ 5,902 million in 1993 to US$ 11,823 million in 1995). We require the Russian Federation to explain this increase corresponding to the period.

Answer:

a) External reference price is calculated on the basis of FOB price of the unit of agricultural product when Russia is net-exporter, or on the basis of CIF price of the unit of agricultural product, when Russia is net-importer if this product in corresponding year. As stipulated in paragraph 9 Annex 3 of AOA: "…external reference price shall be based on the years 1986‑1988…etc." If this rule is applied to acceding country, the Russian party is ready to submit all necessary calculations.

b) Calculation of the de minimis is absolutely technical procedure and was carried out in the course of preparation of tables on domestic support in agriculture. Bearing in mind presented calculations, one can conclude that the increase of the de minimis level was connected with the share of product-specific support in value of the corresponding cattle-breading product.

c) The Russian party has already commented on the cause of increase of the domestic support in 1995. This boost was explained by the including in calculation the prolonged and written-off debt of farming producers upon centralized state credit.

Question 13

Domestic Support (Non Paper by the Russian Federation)

We welcome the Non Paper provided by the Russian Federation. The tables presented in this paper are consistent with our view that the years provide a recent and representative base period. We thank Russian Federation for its assessment that its agricultural policies haven’t changed, and note that this neither poses any obstacle to the adoption of a base period nor offers any reason why a distant base period should be preferred.

We also note that years more recent than the 1980's or 1990's, such as , more accurately represent:

- how Russia’s agricultural policies are currently applied;

- the context in which those policies are currently applied;

- on average, the level and composition of support currently provided; and

- on average, the level and composition of current agricultural production.

Answer:

As it has been pointed out for several times the Russian Federation Working Party considers the proposed period being representative taking into account existing supporting programs and budgetary financing. This was proved by calculation of the domestic support for earlier period (), presented to the Working Party Members. As was showed in list of programs for period after 1997, the major directions and programs remain the same.

Question 14

Use of Local Currency and US Dollars

Data on support and subsidy levels in agriculture supporting table must be recorded in local currency values. This is the accepted practice amongst WTO Members and we expect all acceding countries to conform to this standard.

As the AMS is designed to be expressed in nominal terms, we are not in favour of the approach of notifying in non-local currency, as a way to deal with excessive inflation. Our preferred approach is to address any periods of excessive inflation during the implementation period, by notifying the WTO membership of the actual rates of inflation being faced. If the inflation rates are deemed to be excessive, the Member will be able to have recourse to Article 18.4 to make appropriate adjustments to the AMS.

Answer:

We believe there is no provision in the WTO Agreements and methodology which is containing any requirements that subsidy levels and data on support must be recorded in local currency. It is up to each acceding country to choose the currency. As it is known from the schedules of acceded countries they used foreign currencies (US dollars and EU Euros (ECU) and even SDR.

Question 15

Green Box (Creation of Seed Emergency Reserves (Annex 2, paragraph 3))

We do not believe this program can be categorized in this Green Box category. This Green Box category is for the purchase and storage of "foodstuffs" for food security purposes. The subsidization of seeds for production is an input subsidy and we ask Russia to please re-classify this program in the Amber Box.

Answer:

In accordance with the Federal Law "On seed-farming" federal seed stocks represent stocks of plants and are to be distributed in regions where there is no production of seeds or there are limited opportunities of seed production, and, as well, in order to render assistance to entities and natural persons involved in farming industry in case of natural disasters and other emergency situations.

As it has been pointed out for several times Russia considers the creation seed stock program as measure which provides food security and aims at supporting farming reproduction in regions being exposed by natural disasters and other emergency situations as well as in regions where production of seeds is absent or there are limited opportunities of seeds production. Thus Seed Stock Federal Program is aiming at providing opportunities of purchasing seed at market prices (this is the sense of the support) by farming-producers in regions where production of seeds is absent or there are limited opportunities of seeds production. Purchasing of seed aiming at next selling has no economic sense as their potential partners also have access to the supply of seeds from Federal Seed Stock at market prices.

That is why Russian Federation believes these measures may be categorized as Green box measures in compliance with the criteria of the AOA (paragraph 3 of Annex 2).

Question 16

Financial Support for & Crediting of Private Farms (Annex 2, paragraph 11)

We do not consider normal operating and start-up costs incurred by producers to be a "structural disadvantage". According to Annex 2, paragraph 11 of the Agreement on Agriculture, the program must be designed according to clearly defined criteria in response to objectively demonstrated structural disadvantages.

Answer:

Description of this program is presented in WT/ACC/SPEC/RUS/23 of 28 November 2001, WT/ACC/SPEC/RUS/26 of 25 September 2002, WT/ACC/SPEC/RUS/27 of 6 December 2002. Description of legislation in the field of realization if supporting programs was presented to the Working Party Members as non-paper in 2002.

Question 17

Amber Box: Eligible Production

While Russian Federation may restrict the quantity of procured product receiving the administered price, this will still have an effect on prices of non-procured quantities of product on the market. As a result prices are not being determined by market forces, and Government intervention effectively provides price support for all production, not just the quantity purchased by the government for intervention. In addition it is important to ensure that the principles and methodologies of calculating the AMS are accurately followed so that a Member is not able to artificially reduce AMS levels of support.

We therefore ask Russia to conform to the accepted WTO practice of using "total production" as eligible production.

Answer:

As well known "total production" is not "eligible production" in all cases. Eligible production might be either total production or, in those situations where a specific quantity is identified as subject to support, the entire amount so designated, regardless of the quantity actually purchased. There may be circumstances where eligible production may be less than total marketable production, as for example where the minimum price support is only available to producers in certain disadvantaged regions. It might be the case of legislatively predetermined, non-discretionary, limitation on the quantity of marketable production that a governmental intervention agency could take off the market at the administered price in any year. It is the case of Russia’s data for particular period of concerned.

Question 18

Amber Box: Calculation of External Reference Prices for Milk

We support the concerns raised by New Zealand that Russia’s calculations of external reference prices for milk are significantly higher than world market prices, and we encourage Russia to adopt one of the methodologies outlined by New Zealand. In years where Russia did not apply an administered price, no market price support should be shown in the supporting tables.

Answer:

For the meeting on 24 September 2004 Russian Federation has submitted documents with calculation of external reference prices for milk using the methodology outlined by New *****ssia has followed the approach of calculating of the "milk equivalent" reference price on the basis of the foreign trade statistical data according to the volume and import value of butter and skim milk‑powder.

Question 19

General Comments:

The section presents opposing arguments from Russian Federation and from Working Party Members with views similar to us. The major outstanding domestic support issue (base period for measuring the base for Russia’s commitment on Total Aggregate Measurement of Support – Total AMS) is not resolved. The view put forth by us and some others, viz., that Russia could have recourse to green box measures rather than large amounts of the more distorting AMS support, is represented in the section. On export subsidies, the two square‑bracketed texts represent the as of yet unresolved status of Russia’s entitlement to any export subsidy commitments larger than zero.

Specific Problems:

Domestic Support. The text represents Russia’s desire to obtain the entitlement to provide large amounts of distorting support in the future within its commitment on Total AMS. Some Working Party members, including us, argue that Russia’s agriculture sector can be reformed with the help of measures meeting the criteria of Annex 2 of the Agreement on Agriculture (so‑called green box).

Russian Federation has been asked to provide data for years later than 1997, in order to demonstrate to Working Party members that 1998 was an outlier crisis year (as claimed by Russian Federation) and to reassure members that Russian Federation has not taken advantage of the prolonged accession process to increase the amount of distorting support *****ssia Fedearion has not provided such later data, indicating that members would use any data for later years to impose a lower commitment on Total AMS than the commitment resulting from data.

- While the arguments of Russian Federation and some Working Party Members are represented in the text, there is no resolution of the base period and the resulting commitment on Total AMS.

- Paragraph 553 refers to a commitment, the basis for and level of which have not been determined. While the paragraph does not refer to (and need not refer to) the underlying "Supporting Tables", they will need to be referred to in the Russia’s commitment (Part IV, Section I). The absence of agreement on the years for which such supporting tables are needed is holding up progress on domestic support in agriculture.

- Technically there are some drafting problems in the text (e. g., an amber box is not defined in the Agreement). However, these minor problems need not be addressed at this stage.

Export *****ssia argues that it needs to be entitled to provide export subsidies in agriculture in the future because the EU and others use them. This, in our view, is not a fact that should entitle Russia to use export subsidies in the future (i. e., Russia would have non-zero commitments on export subsidies). Rather, any non-zero export subsidy commitment for Russia would need to be based on Russia having provided export subsidies in a selected base period.

Possible Solutions and Drafting Proposals:

- The gulf separating Russian Federation and some Working Party members on domestic support and export subsidies is large. It will need to be bridged before appropriate language can be inserted in the report. In general, such language would need to indicate that Russia’s commitments are based on data provided for an appropriate period.

Answer:

As it has been stipulated for several times in documents submitted by the Russian Federation agricultural policy aims at use of green box measures as well as amber box measures. At the same time Russia as other countries considers wider use of green box measures being more appropriate.

At the same time Russian Federation assumes that the usage of amber box measures provides successful realization of the economic reform in the agricultural sector. Besides that the volume of support required by Russia is substantially lower than in many other developed countries.

Russia believes that with reference to the domestic support the presented period is quite representative due to the fact that:

- it does not contradict with requirements of the WTO;

- it contains agricultural supporting programs, which are being used at present time; and

- it reflects an appropriate measurement of Russian commitments taking into consideration the volume of domestic support in the developed countries.

Russian Federation still maintains that the right for export subsidies is vitally important for the country. "Zero" commitment with regard to export subsidies would be possible only and when such a decision was taken by all WTO Member States within the Doha round. This issue is one of Questions on negotiations and no decision has been taken yet.

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