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Azerbaijan’s thorny path to wto

Politics Materials 16 January 2008 12:04 (UTC +04:00)

The prospects of Azerbaijan's entrance to the World Trade Organization (WTO) are foggy. Despite the intensive activities of the Government to bring national legislation into conformity with the WTO demands, it was failure to complete this process in 2007. The plans envisaged devising more than 40 new legislation acts and amendments to the active normative-legal acts. However, Azerbaijan's Cabinet of Ministers approved only five new documents and several of them were adopted by the Parliament of Azerbaijan. In addition, the projects of 17 documents for harmonizing national legislation with the WTO demands have been presented to the consideration of the WTO.

Stumbling-block between Azerbaijan and WTO, which presented obstacles to hold the fifth round of the talks with the WTO members, is the proposals regarding tariffs for the commodities. Although the maximal rates of the custom tariffs are 15% and the average tariffs not higher than 5.8%, Azerbaijan suggested the tariffs at the level of 30%, 40% and 50%, and the WTO members oppose it. The Government of Azerbaijan considers that it is not prepared to decrease the tariffs from average 40%. Currently analysis are being made to determine the commodities that are in need of protection.

The efforts of Azerbaijan Government to by the end of 2007 hold at least bilateral talks with several WTO participating countries appeared failure. Postponing the dates to 2008 was linked with the preparation of the documents to hold bilateral talks. Organizing bilateral talks will be possible during the fifth rounds of the multilateral talks. The interest in holding bilateral talks with Azerbaijan is being demonstrated by the USA, Japan, Canada, China and the European Union. The bilateral talks have been completed with Moldova, Georgia and Oman and even a closing protocol has been signed with Turkey.

Moreover the fifth round of the talks with the WTO working group remained unrealized in 2007. According to the Governmental sources, the fifth round will be possible not earlier than February 2008 and it makes it impossible to complete the talks on terms of membership by the end of 2009. up to now, Azerbaijan has held four meetings with the WTO.

Other important issue which Azerbaijan should protect in entrance to the WTO is the decision of Azerbaijan to acquire status of developing country from the WTO. This status will enable Azerbaijan to receive preferences in ten directions, including subsidies in the agriculture, antidumping measures, protection mechanisms.

As known after Azerbaijan's entrance to the WTO and simplification of the trade barriers, the commodities will flow into the country, which may exceed the internal commodities for their quality. It will bring a hard blow to the internal production which is not prepared to compete with the foreign markets. In addition, Azerbaijan needs to pass a long period of adaptation to the protection mechanisms. Thus, the State Commission on Azerbaijan's entrance to the WTO devised new grounds to maintain the level of the agrarian subsidies at no lower than 10% of the prices of the commodities. In addition to the claim for the status of developing country, the Commission continued to change the base period for the accounts of the real level of subsidies. Earlier the base periods were 2001-2003, but now, this figure is intended to be extended up to the end of 2006.

Although the WTO principles envisage decreasing subsidies, the Government of Azerbaijan does not intent to refuse subsiding agricultural production at high level. In addition, the Government is not going to abandon the practice of 50% subsidy for the combustive-lubricating material and fertilizers acquired by the farmers. Azerbaijan's Minister of Finance, Samir Sharifov, said that the process of allocating AZN 80mln for this purpose will be continuing in 2008 as well. If the program is realized efficiently, the Ministry of Finance may increase this amount.

The Government of Azerbaijan is trying to maintain current instruments of support to agriculture. Thus, next year the farmers will receive privilege leasing of agricultural equipment (AZN 40mln) according to standards of Agrolizing JSC. AZN 5mln more is envisaged to be allocated for privilege credits in this sphere.

It needs to note that in talks with the WTO, the issue of transition period is not raised for the insurance and banking sectors of Azerbaijan. Considering it, the Parliament of Azerbaijan demonstrates isolationist position in the process of country's entrance to the WTO. The Chairman of Azerbaijan Parliament's Commission for Economic Policy, Ziyad Samedzade, said that it needs to protect the host insurance market from the foreign insurers, and therefore, the foreign insurance companies can not open their branches in Azerbaijan. The same ban is being imposed on the foreign physical entities. "In addition, it needs to keep the ban on foreign legal and physical entities' acquisition of lands in Azerbaijan's property," Samedzade said. Yet the share of the foreign capital in Azerbaijan's insurance market is 8.5% and the large world insurance company (AIG), not participating in Azerbaijan's market, highlights absence of commercially effective volume of the risks in Azerbaijan.

One more uncoordinated issue is Azerbaijan's joining the sectoral initiatives envisaged by Uruguayan agreement. Although this issue is voluntary, practically the WTO participating countries are interested in joining this initiative. Therefore, the Government of Azerbaijan should concretize its position in selecting the initiative. The initiative participating countries voluntarily assume to maximally liberalize the access to the relevant sectors of the national markets ('harmonizing trade of chemical products', 'textile harmonizing').

As a result, since the summer of 2007 Azerbaijan have not been able to transfer from the status of observant to the rank of full-right member of the WTO. It means that still there are problems and Azerbaijan should pass s serious of negotiation processes and long work to meet the WTO demands

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