European Commission Directorate-General for Trade

Russia

The European Union and the Russian Federation have a strong trade relationship. Bilateral trade and investments continue to grow rapidly.

Russia is one of the EU's key trading partners and trade between the two economies has showed steep growth rates until mid 2008. This trend was interrupted by the economic crisis and the unilateral measures adopted by Russia which have affected our bilateral trade.

The EU is by far Russia's main trading partner, accounting for 47.1% of its overall trade turnover in 2010. It is also by far the most important investor in Russia. It is estimated that up to 75% of FDI stocks in Russia come from the EU Member States. For a long time, at the centre of EU-Russia relations was the ongoing WTO accession negotiations. Now that these negotiations were completed and Russia is expected to formally become a Member no later than in summer-2012, the focus can be fully centered on advancing the bilateral negotiations of a New Agreement to replace the current Partnership and Co-operation Agreement. The Partnership for Modernization is designed to boost cooperation under the EU - Russia Common Spaces.

The New Agreement with Russia will build upon the WTO rules and obligations of the Parties and should strengthen bilateral trade relations by enshrining some basic principles and objectives in the area of trade.  The New Agreement should therefore contain substantial trade and investment related provisions.

The Partnership and Cooperation Agreement

The Partnership and Cooperation Agreement has been the framework of the EU-Russia relationship for more than  a decade. It was signed in 1994 and entered into force on 1 December 1997. The agreement regulates the political and economic relations between the EU and Russia and is the legal basis for the EU's bilateral trade and investment relations with Russia. One of its main objectives is the promotion of trade and investment as well as the development of harmonious economic relations between the parties. The PCA contains special provisions regarding the economic relations between the EU and Russia. EU imports from Russia are to a very large extent not subject to any restrictions.  However the existing rules provide more flexibility to Russia to adopt unilateral tariff measures.

Towards a successor agreement to the current PCA

The EU and the Russian Federation are currently negotiating a new agreement to provide for the contractual framework for EU-Russia relations in the years to come, replacing the 10-year old PCA. This new legally binding agreement should provide a comprehensive framework for bilateral relations with stable, predictable and balanced rules for bilateral trade and investment relations.

The Common Economic Space (CES)

At the St Petersburg Summit in May 2003 the EU and Russia agreed to reinforce co-operation with a view to creating four EU/Russia common spaces, within the framework of the existing Partnership and Co-operation Agreement (PCA). The Common Economic Space (CES) aims at increasing opportunities for economic operators, a further step towards establishing a more open and integrated market between the EU and Russia. The overall objective of the CES is to put in place the conditions for increased and diversified trade and creating new investment opportunities by pursuing economic integration, elimination of trade barriers, regulatory convergence, market opening, trade facilitation and infrastructure development by closer co-operation, exchange of information and sharing of best practices. Working towards regulatory convergence will allow economic agents to operate subject to common rules in a number of fields throughout the enlarged EU and Russia, which represent a market of around 600 Million consumers.

The Roadmap on the Common Economic Space was adopted at the EU-Russia Summit in Moscow on 10 May 2005. The document sets out a number of principles and priority activities. It also sets up dialogues on the following trade related issues: Investment dialogue, IPR dialogue, Public Procurement Dialogue, Regulatory Dialogue on Industrial Products and Industrial and Enterprise Policy Dialogue, Energy Dialogue, Competition Dialogue, Macroeconomic and Financial Services Dialogue, Trade Facilitation and Customs.

Partnership for Modernization

The EU-Russia Summit in Rostov-on-Don of 1 June 2010 launched the EU-Russia Partnership for Modernisation through the adoption of a Joint Declaration.

This new modernization initiative will serve as a flexible framework for promoting reform, enhancing growth and raising competitiveness, and will build on results achieved so far in the context of the Common Spaces, complementing partnerships between European Union Member States and the Russian Federation. The sectoral dialogues will be a key implementation instrument for the Partnership for Modernisation together with a work plan which serves as an informal rolling working tool.

The new "Trade and Investment Dialogue" replacing the Investment Dialogue and Early Warning Mechanism already established under the CES is all part of this work plan. The Dialogue became operational in July 2011 after the signature of its terms of reference.

Facilitating and liberalizing trade in the global economy and enhancing and deepening bilateral trade and economic relations is among other a priority area for the P4M.

Russia's WTO accession

Russia's WTO accession process started already in 1993. In this process, the EU and US signed their respective bilateral market access deals with Russia in 2004 and 2006. In total, Russia concluded 56 such bilateral deals with interested members of the WTO, which were later consolidated to form the overall market access Schedules for goods and Services. However, it was only in November 2011, 18 years from the start of the process, that the multilateral terms of Russia's accession in a broad range of trade related regulatory areas could be finalised and approved by the WTO Working Party on Russia's Accession.

On 16 December last year, these finalised terms of Russia's WTO membership were unanimously approved by the WTO Members at the 8th WTO Ministerial Conference  (results of the negotiations).

Following this WTO decision, Russia will have 220 days (i.e., until 23 of July 2012) to complete its domestic ratification of the Accession Protocol and is likely to formally become a Member sometime before autumn 2012 (30 days after the ratification instruments have been deposited with the WTO).

In the context of Russia's WTO accession, and as part of the terms for Russia's WTO accession, the EU and Russia signed five complementary bilateral agreements concerning raw materials, Russian wood export Tariff Rate Quota regime, co-operation in trade of parts and components of motor vehicles, and preservation of certain services related commitments contained in the current PCA.

The EU has been  a strong supporter of Russia's WTO membership since the very start of the process to the end of it. Russia being the third largest trading partner of the EU, and the EU being the first trading partner for Russia, the value of Russia's WTO membership for both sides cannot be overstated.  It is of fundamental importance for Russia's economic reform, sustainable growth and investment climate. Moreover, the EU firmly believes  that Russia's WTO membership will bring opportunities for a qualitatively new step in EU-Russia economic relations.

Once Russia formally becomes a member, it will also benefit from the rights and obligations set by the multilateral trading system of the WTO, including the possibility of recourse to the intergovernmental trade dispute settlement.

From a broader systemic point of view, Russia has now to implement a number of legislative changes to bring its regulatory system in line with WTO rules and obligations. Furthermore, Russia WTO obligations will become part of the legal framework of the Customs Union between Russia, Kazakhstan and Belarus in force since January 2010 in those areas where Russia has transferred its national regulatory competence to the CU.

Russia's WTO Membership will give a major boost to further development of our economic relationship, including through the conclusion of the ongoing negotiation on a New Agreement to replace the 1994 Partnership and Cooperation Agreement.