By Ksenia Balueva: «I See Many Advantages in the Customs Union establishment» Business Partner, Moscow Chamber of Commerce and Industry, №4 (43), 2010

The Customs Union establishment is perhaps the key economic achievement. It may and must be regarded from two angles. Firstly, it is the impact produced by the Customs Union establishment on the global and economic situation of Russia, and secondly, such event will undoubtedly affect participants in trade and foreign economic relations. We asked Ms. Ksenia Balueva, General Manager, “ALIANS KACHESTVA” (QUALITY ALLIANCE), to express her opinion on the impact of the Customs Union establishment on Russia and Russian businessmen. The Company's comprehensive services imply the knowledge of regulations in goods registration and certification.


I heard about the willingness to establish stronger trade relations with neighboring countries as early as in 2000. These were just superficial conversations, plans and outlines then. The Customs Union establishment process was not easy. All countries have their ambitions and requirements, their own position in WTO or they are at their particular stage of accession negotiations.  I would also like to note that the Customs Union establishment is not an economic step only. Such unions are based on political interests that may vary only. All this resulted in substantial protraction of the single customs space creation. Though protraction is not cancellation. The Customs Union was established, and my Company and I see a lot of advantages in it.

Firstly, we are involved in issue of different registration and certification certificates. The Customs Union law envisages more thorough drafting of documents but simplifies the document issue procedure. Secondly, the goods turnover inside the Customs Union will be facilitated. Thirdly, the registration certificate issued by the Customs Union will be valid indefinitely and cover the member states.


Which advantages will Russia have in cooperation with Belarus and Kazakhstan?


The Customs Union commission was established at the Union level, where 57% is held by Russia and 21.5% by eacn of Belarus and Kazakhstan. It is worth noting the achieved parity of interests of the three parties.

The Russian Ministry of Economic Development has noted many times that introduction of the single customs tariff since 2010 will entail the reduction in the weighted average duty on Russian import by approx. 1%, but no changes are expected in Russian duties for the key goods items.

The Russian Institute for National Economy Forecasts estimates Russia's profit from the Customs Union establishment at USD 400 billion, but it is the forecast on 2015. We will live and see! Speaking about economic advantages, we should remember other aspects. The Customs Union for Russia is largely the way of maintaining its prevalence in the post-Soviet space. Besides, it serves as a good tool of protecting national interests in negotiations with Western countries.


Ksenia Yurievna, what is, in your opinion, underdeveloped in Russia's cooperation with Belarus and Kazakhstan?


There are still many questions, but we are gradually solving them. Customs payment allocation to national budgets has always been and is still one of the most disputable issues for the Customs Union member states. Two scenarios are negotiated. In the first one, the payment administrator was the Russian Treasury. The second one proposed by Kazakhstan (and supported by Belarus) envisages sharing of customs duties among member states in a certain proportion, no matter in which country they were paid.

In addition, in January 2010, Minsk's and Moscow's negotiations on oil export duties were deadlocked. Belarus accused Russia of pressurizing and violating the fundamental agreements as part of the Customs Union. However, Russia said that, in connection with the failed negotiations on the conditions for oil supply to Belarus, Russia will sell oil to Belarus from January 1, 2010, including 100% standard export oil duty into the supply price. After that, Minsk opted for purchasing an oil batch in Venezuela. Venezuelan oil costed USD 656/ton, or almost twice as high as Russian oil price, to Belarus. The fact is that Belarus did not take into account the specific features of oil transportation from South America when calculating oil costs. As a result, the negotiations got rolling again.


Don't you think that the number of the Customer Union member states should be greater in the post-Soviet space?


We are absolutely lacking Ukraine. I mean by "we" all of the Union members, not only Russia. But settlement of the conflict with Ukraine will be more difficult than addressing the duties on oil supply to Belarus. Ukraine is heavily influenced by Western countries, it is a WTO member, so Kyiv is expected to take a political decision, first of all.

In the near future, Kyrgyzstan and Tajikistan may join the Customs Union, besides Russia, Belarus and Kazakhstan. Kyrgyzstan applied for accession to the Customs Union immediately after the Treaty was signed. However, that country is also a WTO member and has global liabilities. Its accession to the Customs Union will not be easy, in the context of political instability, too. Armenia also took initial steps to join the Union, but its accession is complicated by Russia and Armenia having no common borders.


Do you think the international trade relations of the Customs Union member states with other countries will change?


Foreign businessmen are waiting for further developments, and some of them are concerned about the Customs Union establishment. For instance, the Association of European Businessmen (BUSINESSEUROPE) is concerned about the rate of duties within the common customs tariff, which will be higher than the earlier applied ones.  Regarding the single customs tariff as protectionism, BUSINESSEUROPE warns that the tariff will take its toll on the Customs Union itself and the investment environment in the member states.

Ukrainians are not excited either. Experts believe that the Customs Union will complicate Ukraine's trade relations with the Union member states. It should be added that the Customs Union establishment deprived all prior negotiations on the member states' accession to WTO of any sense. It is for more than 10 years already that Russia has negotiated its WTO accession. 20+ meetings between Russian negotiators and WTO representatives have taken place since July 1995. Bilateral negotiations with 60 partner countries finished. Kazakhstan's negotiations on WTO accession began on February 26, 1996. They managed to reach agreement with 22 out of 153 countries since then. Belarus finalized bilateral agreements with 10 countries. Obviously, Russia has come the closest of all to WTO accession. But the plans to get consolidated in the Customs Union changed the situation  - now the Union member states will jointly negotiate WTO accession and, perhaps, will opt for accessing as the whole Union. It is an unprecedented case in WTO's history. The Union is likely to become another way of dragging the feet with the member states' WTO accession, which is disadvantageous for monopolists.

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