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- Policies Affecting Foreign Trade in Agricultural Products
  1. The representative of the Russian Federation said that policies in the Russian agricultural sector needed first and foremost to address the problems that had accumulated over the years of planned economy and notably the sectoral imbalance in prices and revenues, which was a major adverse factor in agricultural sector; of low profitability; and, underdevelopment of production and social infrastructure.
  2. In response to questions from some Members, the representative of the Russian Federation said that the following normative legal acts had been adopted to resolve these accumulated problems in the agriculture sector:
  • "Major Guidelines of the Agri-Food Policy of the Russian Federation Government for the Years 2001-2010", approved by the Government of the Russian Federation on 27 July 2000;
  • Federal Law No. 264-FZ of 29 December 2006 "On Development of Agriculture" (as last amended on 24 July 2009); and
  • Resolution of the Government of the Russian Federation No. 446 of 14 July 2007 "On the State Program of Development of Agricultural Sector and Regulation of Markets of Agricultural Products, Raw Materials and Food for 2008-2012".



  1. The representative of the Russian Federation also presented a detailed explanation of the programme provided for in Resolution No. 446. This programme was a result of implementation of Federal Law No. 264-FZ and was to be realized at both regional and Federal levels. The main objectives of the programmes provided for in Resolution No. 446 were to ensure sustainable development of rural territories, increase in employment and standard of living, as well as to increase the competitiveness of Russian agricultural products on the basis of financial stability and modernization of agriculture. The implementation of the programme was financed from the Federal and regional budgets according to planned expenses for each successive three-year period on a rolling basis. The representative of the Russian Federation concluded that thus the measures provided for in Resolution No. 446 were the basis for realization of key long-term policy objectives of the Russian Federation in the agricultural sector aimed at ensuring sustainable development of rural territories and establishing of effective and competitive agro-industrial production.
  2. The representative also stated that the successful realization of these measures created terms for stable development of agriculture, and were the grounds for increasing the financing of those programmes that had no, or at most minimal, trade-distorting effect or effects on production.
  3. During the negotiations on accession, the Russian Federation provided data (support levels and explanations of programmes) for domestic support to agriculture, starting from the year 1989 through most years to the period 2007-2009. The Russian Federation also provided answers to specific questions from interested Members. The provided data demonstrated significant decrease of domestic support in the Russian Federation during the period from the year 1989 to the period 2007 2009.
  4. Some Members requested further information on implementation and the mechanisms for provision of subsidies at Federal and regional levels. In particular, these Members wanted to know if the same types of subsidies were provided to a commodity by both Federal and regional authorities. In response, the representative of the Russian Federation stated that data concerning the sources of support for all programmes was presented in the Supporting Tables of the Russian Federation, the last revision of which had been provided to the Working Party in August 2011. He noted that some support measures were implemented only at Federal level and some only at a regional level. Some programmes were financed both at Federal and regional level, being financed partially from the regional and Federal budgets. In any case, funds were calculated separately. Specifically, for measures financed from the Federal budget, the funds could be transferred to the regional level, but any such transfers were included in the calculations as Federal level support. The calculations for regional measures reflected only those measures which were financed from regional budgets.
  5. In response to specific concerns raised by Members, the representative of the Russian Federation noted that support, under some aspects of programmes it had initially described as falling within the "green box" provisions, would need to be counted in Aggregate Measurements of Support (AMS). These included: (i) subsidies for the delivery of seeds to the disadvantaged areas; (ii) subsidies for provision of seeds from the Federal Fund of Seeds on free of charge basis (referring to the Programme "Creation of the Federal Fund of Seeds"); and (iii) provision of compensation for use of mineral fertilizers, costs for maintenance of land reclamation, and land amelioration systems as well as scheduled operational and maintenance expenditures within the "Federal Task Program on 'Fertility'".
  6. In respect of the operation of the Programme "Creation of the Federal Fund of Seeds", the representative of the Russian Federation confirmed that the Federal Fund of Seeds of key agricultural plants was formed to ensure availability of an adequate supply of seeds to producers affected by natural disasters and emergencies. The Fund could be used for supply of seeds to regions that did not produce seeds or had a limited capacity for their production. The representative of the Russian Federation drew attention to the fact that in the Programme "Creation of the Federal Fund of Seeds", purchases by the Fund of Seeds were made at market prices. Within that programme, one element involved the above-mentioned provision of seeds on free of charge basis. He explained that such free delivery of seeds shall be carried out, upon the special resolution of the Government, only in certain emergency situations which entailed the devastation of the crops. In all other cases, sales of seeds from the Fund were made at market prices. In this latter element of the Programme, the support in favour of agricultural producers would be in the form of a service provided by the Government. As this measure did not fully fit the policy-specific conditions set-out in paragraph 2 (General services) of Annex 2 of the WTO Agreement on Agriculture, it was classified under a heading "Other" in paragraph 2.
  7. In response to a question from a Member of the Working Party, the representative of the Russian Federation stated that external reference prices for calculating price support for milk were determined on the basis of the calculation of milk equivalent reference prices. The calculation of the milk equivalent unit import value was based on trade data of the Russian Federation relating to the volume and import unit prices of butter and skim milk powder, taking into account technical conversion factors. The representative of the Russian Federation referred Members to non-paper No. 36 "External Reference Prices for Milk and Calculations of the Aggregated Measurement of Support (AMS) in the Russian Federation for the Period of 1993-1995", dated 22 September 2004.
  8. Some Members posed questions about restructuring of debts and debts writing-off. The representative of the Russian Federation replied that these measures included in Supporting Tables had been undertaken by the Government of the Russian Federation in order to support agricultural producers in case they had debts owed to the Government related to credits. These measures were implemented according to Federal Law No. 83-FZ of 9 July 2002 "On the Financial Recovery of the Agricultural Producers" (as last amended on 23 July 2008), (hereinafter: Federal Law No. 83-FZ), Laws on Federal Budget for corresponding years and decisions of regional authorities.
  9. Federal Law No. 83-FZ established the legal foundations and the terms and conditions for the restructuring of agricultural producers' debts, covering any debts, including debts to budgets of all levels of government, with a view to improving the agricultural producers' financial condition.
  10. Restructuring of debts and debts writing-off were based upon the annual laws on Federal budget. Following the recommendations of the Ministry of Finance of the Russian Federation, regions of the Russian Federation annually carried out similar work with regard to agricultural producers.
  11. For the purposes of domestic support calculation, the only amount of loss of the Governments' revenue, caused by restructuring of debts owed to the Government, related to credits provided to agricultural producers from Federal and regional budgets (value of accumulated debt including accumulated interest rates, fines and penalties multiplied by annual average interest rate of the Central Bank of the Russian Federation) were taken into account. The following debts owed to the Government related to credits were restructured: (i) centralized credits (1992-1994); (ii) commodity credits (1995-1996); (iii) credits from Special Fund for soft crediting (1997-2000); and (iv) credits at expenses of regional budgets for spring-agricultural works and harvesting operations.
  12. Domestic support calculations also included debts related to credits that were written-off on centralised credits over the years 1992-1994, on soft loans granted over the years 1997-2001, as well as on commodity credits over the years 1995-1996.
  13. Some Members posed questions on the operation of the system in the Russian Federation to provide soft credit to agro-industrial producers on concessionary terms (the "soft crediting system"). In response, the representative of the Russian Federation explained that, starting from 2000, a subsidy granting system had been implemented for partial subsidization of costs associated with interest payments on loans received by agricultural producers from lending institutions. Soft credits were provided from the Federal Budget through compensation of the difference in interest rates on loans obtained from lending institutions. Subsidies to cover the difference in interest rates on loans obtained from lending institutions were provided monthly for the specified share of the refinancing rate of the Central Bank of the Russian Federation.
  14. Some Members stated that they disagreed with Russia's classification of a number of programmes as being non-product-specific in nature. These Members noted that the WTO Agreement on Agriculture defines "non-product-specific support" as support provided in favour of agricultural producers in general. These Members further noted that, in their view, Russia's replies to questions had demonstrated that support under a number of programmes classified as non-product-specific in Russia's historical support tables did not provide support in favour of agricultural producers in general. These programmes included: (i) Other livestock output subsidies; (ii) Other livestock production subsidies; (iii) Elite seed subsidies; (iv) Pedigree livestock subsidies; (v) Subsidising the establishment and care for perennial plants; (vi) Other plant production subsidies; and (vii) Subsidies for the delivery of seeds to disadvantaged areas.
  15. Some Members noted that the placement of these programmes in the
    non-product-specific section of Russia's historical tables shall not be construed as implying their acceptance of such classification. Further, some Members stressed their expectation that the Russian Federation would take steps to rectify the classification of its support programmes according to the relevant provisions of the WTO Agreement on Agriculture in its notifications of such programmes to the WTO Committee on Agriculture and in calculating its Current Total AMS.
  16. In response to the questions of some Members in respect of the classification of certain support programmes as non-product specific, the representative of the Russian Federation explained that those programmes, in accordance with the respective resolutions of the Government, were designed so that any product covered by the programmes could be subject to the support and it was implemented that way.
  17. These programmes covered the wide range of products and, in his view, their classification as being non-product-specific corresponded to the classification stipulated by the WTO Agreement on Agriculture.
  18. In respect of "Elite seed subsidies", he further explained that such subsidies were provided to subsidise the purchase of elite seeds of any agricultural plants for the purpose of reproduction of plants, variety turnover and renewal. Subsidies for the delivery of seeds to the disadvantaged areas were provided for the compensation of costs of seeds for agricultural producers in the north and mountain areas where such seeds cannot be produced. These programmes were not limited to the support of any particular product and therefore corresponded to the criterion for non-product-specific support set-forth in the WTO Agreement on Agriculture.
  19. In respect of "Other livestock output subsidies", he further explained that these subsidies covered such products as bee-breeding, venison (reindeer meat) and fur-farming. It included support for purchasing of equipment for processing of products, packing equipment, etc. "Other livestock production subsidies" programme was aimed at technical modernisation of livestock industry (milk production, meat production, egg production, wool production and other livestock production). Both types of subsidies were granted by the regional authorities.
  20. The representative of the Russian Federation drew the attention of the Working Party to the fact that share of "Pedigree livestock subsidies" in Total non-product-specific support was very small. In current and future agricultural policy, the major tools of support for livestock and crop sector were soft crediting of agriculture. In 2009, the share of this measure was about 51.3 per cent of Total non product specific support and about 45 per cent of Total AMS. He further stated that the Russian Federation planned to maintain soft crediting as the major instrument of support for the livestock sector.
  21. Some Members of the Working Party noted that an exclusive tariff-rate was currently provided for transportation of agricultural products in the Russian Federation. These Members asked whether national treatment was granted when the exclusive tariff-rate was used and whether the exclusive tariff-rate covered both export and import. In response, the representative of the Russian Federation stated that preferential tariff-rates for transportation of agricultural cargoes were granted to particular goods according to special decisions of the responsible governmental body. Such decisions did not differentiate between domestic and imported goods.
  22. While recognizing the possibility of the Russian Federation having recourse to the
    non-exempt measures under the WTO Agreement on Agriculture, some Members considered that while determining its requirements and level of commitments, the Russian Federation should give emphasis to the use of measures of Annex 2 that could achieve the desired reform objectives pursued by the Russian Federation in the field of agriculture.
  23. The representative of the Russian Federation confirmed that the Russian Federation would comply with all provisions of the WTO Agreement on Agriculture and the commitments on domestic support and on export subsidies for agricultural products which were contained in the Schedule of Concessions and Commitments on Goods annexed to the Protocol of Accession to the WTO. The Working Party took note of these commitments.
  24. The representative of the Russian Federation confirmed that the Russian Federation would, in addition to the commitments inscribed in Part IV, Section I, of its Schedule of Concessions and Commitments, ensure that, from the date of its accession to the WTO through 31 December 2017, in any year, the sum of all product-specific aggregate measurements of support does not exceed 30 per cent of the non-product-specific aggregate measurement of support, where the terms "product specific aggregate measurement of support", "non-product-specific aggregate measurement of support", "basic agricultural product" and "year" had the same meanings as in the WTO Agreement on Agriculture. The Working Party took note of this commitment.
  25. Some Members stated that in view of recent accessions to the WTO, they considered it inappropriate for any country to accede to the WTO with the right to use export subsidies. These Members stressed the need that the Russian Federation should bind its export subsidies at zero. In this respect, these Members also stressed that programmes 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.
  26. The representative of the Russian Federation confirmed that by the date of accession the Russian Federation would bind its export subsidies at zero level. The Working Party took note of this commitment.

- Trade in Civil Aircraft
  1. Some Members asked that the Russian Federation enter a commitment to join the Agreement on Trade in Civil Aircraft upon accession. These Members also requested that the Russian Federation implement the Agreement without exceptions and without recourse to any transitional period. Some Members also stated that the Russian Federation should ensure that all internal taxes would be applied to the sale or lease of civil aircraft in a non-discriminatory fashion between imported and domestically produced goods and between goods imported from third countries.
  2. Some Members of the Working Party also requested that the Russian Federation provide additional information on how its current customs requirements for imports, e.g., licensing and tariff suspensions, particularly with regard to its participation in the Customs Union, might operate to increase market access in the Russian Federation for aircraft.
  3. In response, the representative of the Russian Federation stated that capacity utilisation for manufacturing facilities in the aviation industry in the Russian Federation had been improving, and now averaged 35 per cent, up from only 10-15 per cent in 2001. At that time, most enterprises in the aviation sector had suffered operating losses, thus substantially limiting the possibilities for financing the modernisation of facilities and introducing modern manufacturing and servicing technologies. As the situation had improved in the aviation sector of the Russian Federation, aviation enterprises had secured financing to purchase and lease new equipment, much of it imported. He recalled that Government Resolution No. 574 of 2 August 2001 "On Certain Issues of Regulation of Temporary Imports of Foreign Made Aircraft" had superseded Government Resolution No. 716 of 7 July 1998 "On Additional Measures of State Support for Civil Aviation in Russia" and had cancelled the exemption from customs duties and taxes in this sector, but subsequently, tariff and tax exemptions had been made available on a case-by-case basis, both for leasing and for purchases of imported aircraft.
  4. The representative of the Russian Federation explained that under the Customs Union Common External Tariff (CU CET) the previous tariff of the Russian Federation of 20 per cent had been eliminated on imports of certain small aircraft (i.e., those with fewer than 50 seats and weighing less than 20,000 kg). The CU CET was also zero per cent for imports of aircraft with 50-300 seats weighing 90,000-120,000 kg and of large aircraft, (i.e., those with more than 300 seats or weighing more than 120,000 kg. Zero tariff rates applied to both purchased aircraft and those imported temporarily for leasing. The VAT of 18 per cent was normally collected on all such temporary importations (leases), but the VAT could be paid in 34 monthly instalments after importation. For all other civil aircraft imports into the Russian Federation, the CU CET of 20 per cent was applied, but with a temporary exception for aircraft imported for leasing that had either 111-160 or 219-300 seats weighing 20,000-120,000 kg. The leasing contracts must have entered into effect prior to 31 December 2013 and the term of lease provided for in the contract must end by 31 December 2018. In these cases, pursuant to CU Commission Decision No. 411 of 20 September 2010, all such aircraft weighing 20,000-120,000 kg could be exempted from the VAT as well as the CU CET. In cases where the term of the leasing contract extended beyond 31 December 2018, the customs procedures of temporary importation could be extended by up to 34 months. After 31 December 2018, however, a partial exemption from customs duties and taxes would be applied to such goods (i.e., the fees equivalent to 3 per cent of the customs duties and taxes which would be levied on such goods for each complete and incomplete calendar month of their stay in the customs territory of the Russian Federation). This exemption was also applicable to such temporary importations of aircraft by Belarus and Kazakhstan.
  5. The representative of the Russian Federation further explained that Belarus and Kazakhstan had sought additional tariff exemptions to cover the categories not already exempted when the CU CET was established. The CU Commission Decision No. 328 as of 16 July 2010 provided for an exemption from import duties for import of certain civil aircraft imported into Belarus and Kazakhstan prior to 1 July 2014. This exemption covered any aircraft weighing between 90,000 and 120,000 kg or weighing between 20,000 and 90,000 kg and with 51-300 seats. It also covered imports of aircraft engines and aircraft-related spare parts and equipment necessary for maintenance and repair into all CU Parties, including the Russian Federation.
  6. Some Members also requested that the Russian Federation provide information on its current plans of restructuring and consolidation of the domestic aviation industry.
  7. In response, the representative of the Russian Federation informed Members that the intentions of the Government to revitalize the Russian aircraft industry, as well as to keep and develop its research and development (R&D) potential, and to concentrate intellectual, industrial and financial resources on realization of the perspective programmes for aviation engineering, were defined in Presidential Decree No. 140 of 20 February 2006 "On Open Joint-Stock Company 'United Aircraft-Construction Corporation'" and the follow-up Resolution of the Government of the Russian Federation No. 224 of 20 April 2006. By these legal acts, the Russian Federation and shareholders of the Russian aircraft construction enterprises established the open JSC "United Aircraft-Construction Corporation" (UAC). The share of the Russian Federation in the authorised capital of the UAC amounted to not less than 80.29 per cent. Shares of the enterprises, which were in Federal property, were invested into the nominal capital of the open JSC by the Russian Federation as assessed contribution. According to Presidential Decree No. 140, the Federal SUEs "Russian Aircraft Constructing Corporation 'MiG'" and "The Kazan Aviation Production Association Named after S.P.Gorbunov" also were transformed into open JSCs, with 100 per cent Federal ownership. Presidential Decree No. 140 recommended that the private shareholders of 13 large JSCs of the aircraft sector contribute to the nominal capital of the UAC with their shares which amounted to 19.71 per cent of the authorised capital. At the end of 2010, after the JSC the UAC had performed additional emission 81.75 per cent of authorised capital belonged to the Russian Federation, 10.6 per cent to the Vnesheconombank and 7.64 per cent to the private shareholders. The share of the companies joining in the UAC amounted to about two thirds of the overall production of aircraft in the Russian Federation. The priority activities of the UAC were defined as development, manufacture, sale, and service of aviation engineering for military and civil aircraft purposes in the interests of domestic and foreign states and other customers. The role of the State in the UAC consisted primarily in controlling realization of programmes of development of the Russian aircraft industry.
  8. In response to questions from Members on subsidies in the aircraft sector, the representative of the Russian Federation stated that the aircraft industry had been hard-hit by the financial crisis between 2008-2009 and a number of State-supported rescue packages had been provided to aircraft manufacturers. In 2010, the authorised capital of the UAC had been increased by RUB 10 billion (US$312.5 million) for the restructuring of its debts and by RUB 2.77 billion (US$86.5 million) for provision of subsidies on R&D programmes. In order to offset financial risk, RUB 290 million (US$9 million) had been allocated in the Federal budget to partially compensate Russian aircraft engine producers over a period of five years for high interest rates they incurred in borrowing between 2008-2010 for the purposes of re-equipment. An additional RUB 709 million (US$22.1 million) had been allocated in the Federal budget to partially compensate companies affiliated with the UAC over a period of five years for high rates of interest on credits and partial compensation for lease payments under 2006 contracts and later on re-equipment. Under these programmes, both Russian and foreign equipment was eligible for the subsidized credits or lease arrangements. He also added that, in 2009, under the Federal Specific Program "Aircraft Industry Development," initiated in 2005, State support totalling RUB 12.96 billion (US$405 million) was provided for R&D projects and RUB 6.48 billion (US$202.6 million) for capital investments and infrastructure development. He also noted that in order to promote competition on the domestic market in the area of financial conditions for the purchase of domestic and foreign aircraft, the Government had enacted Resolution No. 466 of 26 June 2002 "On the Framework of Partial Compensation to Russian Airlines of Lease Payments for Russian-made Aircraft due to Lease Contracts with Russian Lease Companies, and Partial Compensation of Rates of Credits taken in 2002-2005 in Russian Credit Organizations on Purchase of Russian-made Aircraft." Under this Resolution, Russian airline companies could apply for State funding for partial compensation of their lease and credit payments for the purchase of domestic aircrafts, including guarantees and insurance. Only Russian-made aircraft were eligible under this programme.
  9. A Member noted that Government Resolution No. 466 appeared to encourage the purchase and lease of Russian-made aircraft by lowering the leasing costs of Russian-made aircraft to Russian airlines. This Member noted that the programme appeared to constitute a prohibited subsidy pursuant to Article 3:1(b) of the WTO Agreement on Subsidies and Countervailing Measures and asked the Russian Federation to provide more information on this leasing programme. In response, the representative of the Russian Federation stated that this programme currently covered only Russian made aircraft; however, prior to accession, the programme would be changed so that foreign made aircraft would also be covered. He explained that only Russian credit organizations could grant loans to leasing companies to buy aircraft. Interest rates were set by the credit organizations themselves. The Government support provided could be up to one half of the interest costs incurred by the leasing company in purchasing the aircraft.
  10. The representative of the Russian Federation further stated that the current situation in the aviation sector prevented the Russian Federation from joining the WTO Agreement on Trade in Civil Aircraft and implementing its requirements.
  11. The representative of the Russian Federation confirmed that Government Resolution No. 466 would be amended prior to accession so that the purchase of foreign-made aircraft by a leasing company would qualify for benefits under the programme and that the programme would be administered in compliance with the WTO obligations of the Russian Federation. The Working Party took note of these commitments.