Unlike its neighbors in the South Caucasus, Azerbaijan does not hurry in joining the World Trade Organization, explaining its position that all the pros and cons of this step should be carefully considered. In principle, all post-Soviet countries that undergone or have been undergoing quite a difficult process of accession to the WTO in recent years, consider the benefits of membership in this structure as highly controversial. For some countries, such as Georgia, Armenia, Kyrgyzstan, etc. - it is a matter of prestige - WTO is hardly to have a real effect on the economy of these countries, but all the neighbors know that the republic is part of the globalizing world economy. But a state such as Russia has been trying to become a WTO member since 1993, as it considers the question of its entry into the organization so thoroughly, as if it dared to enter NATO.
Procedures for joining the organization usually take five to seven years.
In principle, Azerbaijan is also overcautious in the matter and it has a logical explanation - as has been said in addition to benefits, WTO membership will bring a lot of "minus" points to the country.
Now Azerbaijan is preparing to the eighth round of negotiations with the WTO. This meeting could be held, possibly in July. Fixing of date of the next round of talks depends on the submission of proposals on goods by the Azerbaijani side for bilateral negotiations, and proposals on services have already been sent to the WTO secretariat.
Deputy Foreign Minister and Negotiation Group Head Mahmud Mammadguliyev said the bilateral talks may be held with 10 countries, which will depend on the interest shown by the WTO member countries. The Governmental Commission on preparations to join the WTO prepared proposals in the service sector for the U.S., EU, Japan and South Korea.
The February meeting of the Governmental Commission of Azerbaijan considered state of bilateral and multilateral talks, the need for improvement "Bound" tariffs on certain agricultural and fish products.
After the July [in 2009] meeting with the WTO Working Group [the sixth round of multilateral talks], along with U.S. and EU, questions and comments from Australia, concerning the schedule of domestic support and export subsidies which will be used by Azerbaijan, from Brazil - on tariffs, South Korea - both on tariffs and on services have been received.
During the previous talks on international trade regime, some countries proposed to reduce customs tariffs, setting them below 15 percent, which today are the maximum rate of customs duty in Azerbaijan. The proposals by the Azerbaijani Government, mostly customs duties estimated at 30 percent, but there are also higher. ["Bound" rates offered by Azerbaijan are envisaged on unexpected contingencies in order to protect local production].
Tariff commitments are also key in the process of bilateral talks with the EU and the U.S.. In addition to the tariff policy, their requirements also include to the liberalization of services on intellectual property. They offer opening markets in the financial, communications sector, in the sphere of distributor service, the distribution area.
At present, Azerbaijan holds talks with the U.S., Japan, Brazil, Ecuador, Sri Lanka, European Union, Norway, India, South Korea, and Taiwan Province of China. In 2009, Switzerland was also included in this list.
At present, negotiations have completed and protocols with Turkey, the Sultanate of Oman, United Arab Emirates, Georgia have been signed. The country is on the stage of signing the protocol with Moldova, which still considers the document, and Kyrgyzystan has already agreed to sign.
Recently, the WTO Secretariat has expanded the composition of working group on Azerbaijan including four more countries - Ukraine, Brazil, Ecuador and Switzerland in it. As a result, the total number of members of the working group reached 32, including 27 EU countries.
WTO recommendations - good and not very
The General Agreement on Tariffs and Trade (GATT is one of the WTO legal bases. The GATT, which was established in 1947, is the predecessor to this worldwide organization. Subsequently, the GATT and the whole framework of this organization were transformed into WTO, but beyond a general agreement, there are other (TRIPS), which develop and expand the individual articles of the GATT agreement on the licensing of the import value.
One of the WTO recommendations to the Azerbaijani government is the elimination of ad valorem system in relation to fees for customs clearance of goods. The country charges 0.15 percent of the value of the goods for customs clearance and international experts propose to replace it with a fixed fee. This would remove barriers to trade and business relationship. WTO experts offer to introduce a fixed fee not exceeding $1,000. The Azerbaijani State Customs Committee Management believes the fees for customs clearance exists in all countries, including EU countries, but rates may vary. The Azerbaijani customs authorities direct the funds to the budget, and then get them out of the treasury for specific purposes (development of Customs).
Azerbaijan yet made a step for clearance of equipment and materials used for oil and gas activities in the export purposes, that is, as before taxes will be charged at a rate of 0.15 percent, but the maximum amount of customs fees must not exceed $ 275.
The second recommendation is to ensure transparency in licensing. WTO asked to clarify the actual cost of licensing. Under the organization's requirements, the licensing fee should not exceed the actual cost of services (for the used paper, pens, etc.), since the licensing is not of a fiscal goal in the economic theory, but is intended to regulate a particular area. Today, the licensing fee set at $4,000-$5,000 in Azerbaijan. WTO describes this as a technical barrier to trade.
The requirement not to subsidize the agricultural sector also should be marked among the WTO conditions. Developing countries - the organization's members should assume the obligation to eliminate all forms of preferences for agricultural exports, liberalizing trade and services.
Some countries resort to export subsidies to reduce production costs and thus increase its competitiveness. Azerbaijan does not apply them today and should not in accordance with the WTO Agreement on Trade.
In negotiations, Azerbaijan seeks to enter WTO with the status of a developing country, which will allow the country to provide greater financial support to the agricultural sector, as in this case, the country will be able to keep subsidizing at the level of 10 percent of GDP produced in agriculture. At present, subsidies to the agricultural sector of Azerbaijan are on average of 14-15 percent, taking into account tax benefits. Incidentally, WTO insists on eliminating the tax breaks for farmers in Azerbaijan, considering that it affects the price and distorts competition in the market. The government has already introduced exemption from taxes, except land tax, for the fourth term. The government extends tax breaks for the development of this sector, otherwise the prices of agricultural products will rise or farmers can not survive the competition in the market. Rising prices, in turn, leads to dissatisfaction of the population, and a macroeconomic approach, - inflation. In this regard, such assistance should be continued in the future. In addition, it is also possible in the status of a developing country.
Based on the data of the past six years, the amount of subsidies in the first year was at 49 percent, which was achieved due to cancellation of all debts in agriculture,
but fell to 13-15 percents in later years.
Under the present conditions, when the share of the agricultural sector in GDP was about 6.7 percent as a result of 2009, it needs to maximally support this sector for further development. Since 2007, the government has been providing subsidies for the agricultural sector to compensate about 50 percent of the cost of fuel and chemical fertilizers purchased by farmers.
Given the great need of support to the country's agricultural sector, Azerbaijan refuses to join the WTO as a developed country, especially on which the U.S. insists, as it will provide an access to subsidies at the level of five percent.
Restrictions imposed on subsidies that affect the regulation of prices of agricultural products, and unlimited support can be provided for the reclamation and scientific and technical works.
During negotiations, the WTO will have questions to Azerbaijan regarding preferential loans to entrepreneurs. The organization considers it discrimination against other entrepreneurs and banks that do not fall in this list. However, to support entrepreneurship in the country, which is especially necessary during the global financial crisis, the government does not intend to give up this support.
In 2002-2009. The National Fund for Entrepreneurship Development received from the public budget 364 million manat, including 74 million manat - last year. Given the repayment of earlier loans, by the end of 2010 the credit portfolio of the Fund may reach 570-580 million manat, which will open new opportunities for business development.
Of course, all these questions can not be resolved by the next round of talks, but in such cases, the WTO has a transit period [after the entrance to the WTO] designed for 3-5 years depending on how the countries justify their needs and improve legislation.
Given these conditions, Azerbaijan should determine the need to accelerate the process of joining the World Organization and firstly should evaluate the positive and negative consequences.
According to the Deputy Minister Mahmud Mammadguliyev, the global crisis has intensified the processes of accession to the WTO, as it provides additional opportunities for trade.
Definitely after the entrance to the World Trade Organization, the prices of goods and services will reduce in Azerbaijan. The impact of accession to WTO is divided into three main groups: the impact on budget revenues, the producers and consumers. And in this sense, the last group will gain mostly. There will be certain problems for local producers, and these risks should be evaluated to avoid them, and the government must defend its position in negotiations with member countries and the organization itself.