New WTO Accession Negotiations: New Hopes?

New WTO Accession Negotiations: New Hopes?

The next round of bilateral consultations between World Trade Organization (WTO) and Azerbaijan started in Geneva on June 03, 2013. The negotiation round will be completed on June 07, 2013 . “They are expected to involve representatives from 10-12 countries. Full-fledged bilateral negotiations will be held with some of them and talks on specific issues with others”- Ministry of Foreign Affairs (MFA) reported.

“At the meetings in Geneva it is also planned to discuss the issue of subsidies to agriculture. First of all, the issue of subsidies will be discussed with countries that are major exporters of agricultural products, from which as a result it will depend on the level of agricultural support which Azerbaijan will be able to get when joining the WTO,”- MFA added. These talks are part of preparation for multilateral negotiations at the level of working groups of Azerbaijan and the WTO, the next round of which is scheduled for the third quarter of 2013.

It should be reminded here that the Government of Azerbaijan officially applied to the WTO Secretariat to become the WTO member in June 1997. Ten official meetings of the Working Party have been held since 2002, including two meetings in 2012. However, the negotiation progress has been slow. Bilateral protocols have been signed with Oman, UAE, Turkey, Georgia and Kyrgyz Republic. Bilateral negotiations between Azerbaijan and some of main trading nations like the USA, the EU, Canada, and Australia have so far not been completed yet. The formal argument related to the protracted negotiations is simple: Azerbaijan wants to join WTO on more favorable terms. Nevertheless, recent experience showed that the WTO has toughened up the accession requirements on new members. Therefore, shelving the process does not imply accession on easy terms. Within Doha round, ministers from the WTO’s member governments approved a declaration that requires elimination of agricultural export subsidies by 2013. This deadline certainly cancels out the presumptive “concessionary accession”.

It is mutual understanding of both who are satisfied and dissatisfied with WTO activities that there is no alternative to Azerbaijan’s WTO accession. Azerbaijan is not going to run behind global economic and trade integration. The way to accelerate this integration goes through the WTO membership. The WTO accession will enable the country to make its trade policy more predictable, increase transparency, start co-operation with more international trade partners, and handle trade disputes constructively.

The tariff schedule of the Republic of Azerbaijan consists of 97 Chapters (HS2002) disaggregated into 10661 ten-digit tariff lines. As of the end of 2012, the average import tariff rate was 10.6% assuming 15% ad valorem rate for specific tariffs. (The World Tariff Profile of WTO indicates that Azerbaijan’s average tariff is 9.0%, the agriculture is 14.1 and non-agriculture is 8.2%). Key principle used in development of tariff schedule proposal was to shield sectors vital for Azerbaijan’s economy by setting high bound tariff rates for these products and to set low bound tariffs for other sectors so that average tariff rate is preserved.

Minimum bound tariff rate is proposed at 0%, while the maximum is 80%. Maximum rate is imposed for only one product, namely industrially produced chicken meat. Duty free imports are proposed for farming livestock, sow seeds, child food, and import for scientific-research purposes. Initially proposed bound import tariffs on alcohol and tobacco products envisage double increase in specific tariff rates. According to estimates done by the State Customs Committee, ad valorem equivalents of these imports tariffs are equal to 25-30%.

As of April 2013, the Working Party on Azerbaijan’s WTO accession has consisted of 36 member states, including the EU representing interests of 27 countries. Russia has not yet joined Azerbaijan Working Party, but it could do so.

The list of countries that joined Azerbaijan’s Working Party includes the USA, Australia, Argentina, Brazil, Canada, China, Croatia, Dominican Republic, Ecuador, Egypt, the EU, Georgia, Haiti, Honduras, India, Japan, Jordan, Korea Republic, Kyrgyz Republic, Malaysia, Moldova, Norway, Nigeria, Oman, Pakistan, Panama, Paraguay, Philippines, Saudi Arabia, Sri Lanka, Switzerland, Taiwan, Tajikistan, Thailand, Turkey, Ukraine, and Viet Nam.

Bilateral negotiations with Turkey, Oman, Georgia, UAE and Kyrgyzstan have been completed and protocols signed. On the tenth meeting of the Working Party on the Accession of Azerbaijan in December 2012, the Head of the Azerbaijani delegation and Deputy Minister of Foreign Affairs Mahmud Mammad-Guliyev reported about the conclusion of bilateral negotiations with China.

In 2012 Azerbaijan held several rounds of bilateral talks with the USA, the EU, , Canada, Norway, and Brazil, and also one round with Japan, Ecuador. According to official information, the member countries requested Azerbaijan to reduce offered bound tariff rates on some agricultural products, for instance dairy products, pork, and tobacco, and on non-agricultural goods, in particular by joining to sectoral initiatives on Paper and Civil Aviation.

In talks regarding market access to services, the WTO member countries welcome improvements in several services sectors (computer and related services, finance and auditing services, distribution services); however, they requested to make more liberal commitments in postal and telecommunication services, and to take obligations in mining and audiovisual services. Also, applied quota on hiring of foreign specialists under the fourth mode of service supply (movement of natural persons) has been discussed.

In the framework of multilateral talks, Azerbaijan has continued working on adjustment of its national legislative base to the WTO requirements as well as on improvement of the current trade regime. To implement the WTO norms into Azerbaijan legislation, about 50 legislative acts should be harmonized, out of which 30 have already been adjusted.

During the tenth meeting of the Working Party in December 2012, the discussion was focused on a number of trade-related issues including elimination of export bans, harmonization of excise taxes to implement national treatment principle, ban on usage of export subsidies in agriculture, clarifications concerning fees and charges for services rendered, TBT and SPS related legislation.
One of the most sensitive issues of Azerbaijan’s WTO accession process is the country’s status – developing or developed – that affects the level of permitted de minimus agriculture support, as well as treatment in other areas. Azerbaijan has insisted to join to the WTO with developing country status, while the WTO has offered developed country status. The terms of accession of other former Soviet Union countries – Kyrgyzstan, Moldova, Armenia, Georgia, Ukraine and Russia – conforms to the terms of the developed countries rather than those of developing countries.
According to the Ministry of Economic Development of Azerbaijan, the special weight of oil sector that makes up 53.1% of the GDP, 84% of merchandize exports consisting of raw oil and petroleum products, strong potential for “Dutch Disease”, occupation of 20% of Azerbaijan lands, refugee status of one out of eight persons in the country serve as important arguments substantiating developing status of Azerbaijan. According to the IMF classification, Azerbaijan belongs to the group of low-income countries with emerging market and developing economies (EMDEs).
During the round of multilateral negotiations on agriculture held in December 2012, Azerbaijan requested 10% de minimis right and application of support on the amount of USD 2 billion per year in agriculture sector.

Summing up, negotiations on the WTO accession of Azerbaijan have progressed quite slowly. The country has moderate success in bilateral talks. By the end of 2012, it signed bilateral protocol with Kyrgyz Republic, and concluded negotiations with China. However, negotiations with key trade nations including the USA, the EU, Japan, Australia, and Brazil have been under way.

Multilateral negotiations have faced challenges related to the status of the country (developing or developed) and associated issues of agriculture support (10% or 5% de minimus). Talks on the level of the AMS have also been quite difficult.

The WTO membership and liberalisation-induced economic boost could not realise until there is a strong political will for reform. It is hard to say then this political will would push talks given important de-motivating factors like high oil prices ensuring resource-based economic growth and monopolisation of the economy.

© CESD, 2013

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