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. Last Updated: 07/27/2016

Gref Calls WTO Top Priority This Year

MTEconomic Development and Trade Minister German Gref greeting visiting U.S. Commerce Secretary Carlos Gutierrez at a news conference on Wednesday.
Joining the World Trade Organization before next year's presidential election is a top priority for the government, Economic Development and Trade Minister German Gref told visiting U.S. Commerce Secretary Carlos Gutierrez at an investment conference Wednesday.

Gutierrez, in response, was upbeat about Russian-U.S. economic ties, but laid out three conditions on intellectual property rights violations, which have been a key stumbling block in bilateral talks on Russia's accession.

Russia should crack down on factories that produce counterfeit optical disks, better define the restrictions on imports of encryption technology and close down the music download web site Allofmp3.com, Gutierrez told reporters on the sidelines of the American Chamber of Commerce's eighth annual conference.

The conference weighed a bullish view of Russia-U.S. trade ties with looming legal restrictions on foreign investment in strategic sectors.

In answer to a question from a U.S. company representative about when Russia would complete WTO accession, Gref said Russia's own "political calendar" required that it happen by Jan. 1, 2008.

"It's critically important to complete the negotiations this year so that we start the next political cycle as a WTO member," he said. "It's important first of all from the perspective of our internal political calendar."

The United States is "very supportive" of Russia's WTO bid and "we want to help in any way we can," Gutierrez told reporters in a joint briefing with Gref. But he named three specific measures that Washington expects Russia to take in combating intellectual property rights violations during the final multilateral stage of WTO negotiations.

"We would like to see the immediate closure and canceling of the licenses for plants and factories that produce optical discs that are counterfeit," Gutierrez said.

He reiterated a call to close Allofmp3.com, a popular Russia-based web site for downloading music that circumvents U.S. laws on intellectual property rights, and said restrictions on imports of encryption technology into Russia were "too broad and need to be defined."

Gref said at the conference that it would be difficult to drastically improve protection of intellectual property rights this year.

Officials at the Economic Development and Trade Ministry could not be reached for comment Wednesday afternoon on how the conditions cited by Gutierrez might be met.

In a sign of Russia's determination to join the 150-member body this year, the draft three-year budget for 2008-10 already stipulates potential losses from lower import duties that would result from WTO membership. The budget would lose 210 billion rubles ($8 billion), over the three years, Gref said, but would also earn extra revenues -- yet to be calculated -- through an anticipated growth in capital inflows and trade and a better investment climate.

Gutierrez was upbeat about Russian-U.S. economic ties but said there was much more to do together. U.S. exports to Russia totaled $4.7 billion last year while imports from Russia were worth more than $19 billion, he said. Bilateral trade grew 27 percent on the previous year, apparently unaffected by arguments over the WTO and a chill in political ties.

"We have come ... way too far in building a new foundation for cooperation in mutual interests to turn back the clock," Gutierrez told the conference. "We are entering a golden era of relations between Russia and the United States. I now speak for our president ... that our best days as partners, as friends, are yet to come."

In response to a question about a recent legal ruling against PricewaterhouseCoopers over its audit of Yukos, Gutierrez told reporters that the law should be applied "consistently," not "selectively."

Gref assured the conference that the basic economic policy guidelines would not change after President Vladimir Putin's term ended. "It would be simply impossible," he said. "The past six years have shown that we've been conducting the right economic policy and we would have to pay a very high price for any deviations."

Setting the tone for the conference, Gref and Gutierrez repeatedly called each other good friends.

At one point Gutierrez said: "Someone said to me that you only become friends after you have had an argument, so I believe that Minister Gref and I have earned the right to call ourselves friends." As the translation came through his headphones, Gref broke out into a broad smile.

In another light-hearted moment, the president of Boeing in Russia, Sergei Kravchenko, scurried with a bottle of Coke from his seat on the panel to put it on the lectern in front of Clyde Tuggle, head of Coca Cola's Russian division. To this, Tuggle said: "If you are ever looking for a job in marketing, let me know," prompting laughter.

Gutierrez praised the work Boeing did in Russia, calling it "the best example" of a joint U.S.-Russian effort in research and development.

Kravchenko said Gutierrez had spent an hour Tuesday morning at Boeing's research center in Moscow being briefed on the work of Russian engineers on Boeing's 787 Dreamliner jet and Sukhoi's Superjet-100 commuter plane. Kravchenko said Boeing was happy to help the country revitalize its aging aviation industry but indicated that the firm would like to see more response from Russian authorities. "It's a two-way street," he said in an interview on the sidelines of the conference. "Our products are not in the least worse."

Russian authorities have recently snubbed Boeing, giving a plane order for Aeroflot to its European rival EADS. Aeroflot recently announced plans to sign a $4.4 billion contract to buy 22 of Airbus's new long-distance A350 planes.

A conference participant who spoke on condition of anonymity said he did not expect Gutierrez to be so "positive" about Russia. Gutierrez was much more reserved when he visited Moscow for the first time as commerce secretary in 2005, the participant said.

Thomas Graham, a former Russia adviser to U.S. President George W. Bush, said many people had not yet come to terms with the new, more assertive Russia. "You can't do without Russia, so the question is how you manage relations with Russia," said Graham, senior director at Washington-based Kissinger McLarty Associates.

David Marchik, co-author of the book "U.S. National Security and Foreign Direct Investment," told the conference that Russian investments should not face any major obstacles in the United States. Marchik, who said he advised on the recent acquisition of the Oregon Steel by steelmaker Evraz, said that deal was cleared in 30 days.

"Despite a front page in the Financial Times, the process went smoothly," said Marchik, a partner with Washington law firm Covington & Burling. The paper reported in December that U.S. antitrust authorities might hold up approval of the deal due to Roman Abramovich's ties to the Kremlin. Abramovich controls 41 percent of Evraz.

Marchik expressed concern about the bill that will restrict foreign participation in Russia across a wide range of industries deemed strategic, saying he worried "the list could be too broad. ... I worry that [Russian restrictions] could create pressure in the United States to do the same."

Gilbert Robinson, a representative of AmCham Russia in Washington, said the U.S. Congress would soon have to repeal the Soviet-era Jackson-Vanik amendment. If the amendment were not repealed when Russia joins the WTO, the United States would be in violation of WTO rules.

"If they don't lift [Jackson-Vanik], it only hurts American companies," he said on the sidelines of the conference. "Pretty soon Congress will be hearing from its constituents."