In August 2005, as compared to the previous month, the prices for ferrous metals did not change, while in January-August 2005, in comparison with the respective period of 2004 they were higher by 17%.
In the first half of August the rise in prices for aluminum, copper and nickel is explained by raising of the world oil prices and depreciation of the U.S. dollar against the world’s leading currencies, which heightened an interest of investors in non-ferrous metals. The important factor of rise in prices for non-ferrous metals remained very low level of their reserves at the London Metal Exchange. In addition, a growth of demand on the part of China and India was observed on the copper market, owing to which the prices for this metal reached its maximum.
In August 2005, as compared to the previous month, the prices for non-ferrous metals went up on average by 4,4%, including aluminum went up 5%, copper - by 5,1%, copper - by 2,1%. In JanuaryAugust 2005 in comparison with the respective period of 2004 the prices for non-ferrous metals were higher by 12% (aluminum was higher by 10%, copper – by 23%, nickel – by 13%).
Monthly Average World Prices in August of Corresponding Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 Oil (Brent), USD/ barrel 21.04 18.25 12.5 20.2 29.4 25.7 27.2 29.9 42.8 61.Natural gas, USD/1 mln BTU 2.856 2.121 1.858 2.8 4.437 2.91 2.999 4.888 5.212 9.Gasoline, USD/gallon 0.6299 0.5941 0.4128 0.6476 0.9021 0.776 0.834 0.935 1.152 1.Copper, USD/t 2001.4 2481.7 1627.4 1646.6 1941.7 1499.4 1480.0 1731.0 2835.8 3800.Aluminum, USD/t 1480.1 1563.7 1345.4 1421.1 1546.4 1374.9 1292.0 1457.0 1694.3 1868.Nickel, USD/t 7100.4 6737.3 4137.1 6430.8 8092.9 5554 6720.0 9365.0 13723 Source: calculated according to the data of London Metal Exchange (Great Britain, London), International Petroleum Exchange (London) Therefore, in January-August 2005, in conditions of exclusive state of affairs on the foreign market 90% of increment in the volume of goods in value terms was achieved due to price increase and only 10% - as result of mounting physical volumes, including with regard to fuel and energy resources the price increase accounted for 93,2%, while metals and items from them – 73,7%.
Considerable increase in imported deliveries is explained by remaining preferences of imported goods in increasing of enterprises and population’s incomes and low competitiveness of domestic products (particularly in the production of equipment and transport means). As before, more than a half of growth of the domestic demand is satisfied by means of import, though its share in the structure of sources of covering the increment of internal demand in January-September 2005 decreased reduced to 51,2%, in comparison with 59,7% over the respective period of 2004.
The growth of import in January-August 2005 was provided largely due to increase in the volume of imports (72% of increment of import in value terms), including by food products and agricultural resources – 92,9%, chemical industry products, machines, equipment and transport means -100%.
According to the forecasts, built in IET on the basis of the time series models, an average increment of the indicators of export, exporting to and out of CIS countries, importing and to and out of non-CIS countries in November and December 2005, and January 2006, against the respective period of 20042005, is expected at the rate of 32%, 34%, 21% and 33% correspondingly.
The average forecasted increment in the balance of foreign trade with all countries and with nonCIS countries over November and December 2005, and January 2006 against the respective period of previous year constitutes 42% and 35% correspondingly. The forecasted volume of the balance of foreign trade with all countries over November and December 2005, and January 2006 make up USD 38 bn.
At an annual rate, the forecasted increment will amount roughly 24,0% as an indicator of the total volume of export, and 19% - for the total volume of import. For indicators of the volume of export to non-CIS countries and the volume of import from non-CIS countries the forecast of annual increment will be 30 and 28%, correspondingly.
In October 2005, in Geneva the 29th session of the Working Group for accession of Russia to WTO was held, during which the work was continued on the third wording of WG report on Russia’s WTO accession. Within the framework of a regular round of negotiations for Russia’s WTO accession, held on October 14-21, 2005, Russian delegation conducted, in particular, bilateral negotiations on access to the markets of goods and services with representatives of the USA, Australia, Canada and Brazil.
In the meantime the sessions of working groups were organized in Geneva on system questions – agriculture, veterinary and phytosanitary activities. The major result of the round became completion of negotiations with Brazil and Argentine.
Eventually eight countries are left as yet, which Russia could not agree with - USA, Canada, Australia, Columbia, Malaysia, Philippines, Switzerland, Uruguay. Most of these countries insist on the right to open in Russia direct branch banks. The RF does not agree to concede, because it would lead to the rise of problems with the Russian banking system.
It’s clear already that Russia will not be able to join this organization at the 6th ministerial WTO conference scheduled for mid-December this year.
There is another problem for Russia, if Ukraine will join WTO earlier than Russia, Russia will have to conduct bilateral negotiations also with Ukraine, which is undesirable because there are many points at issue Russia-Ukraine foreign trade relations.
Thus, for example, in order to protect domestic producers, special duties were introduced in October this year for a number of confectioner's goods imported into Russia from Ukraine. In particular, the starch rate for molasses was established in the amount of EUR 6.0/kg. For jams, sweets with filling or without it, high cooked candies and similar sweets rates are varied from 20% of customs duties (but not less than EUR 0.25/kg) to EUR 6.0/kg.
The confectionary war between Russia and Ukraine started even in 2000. The Ministry of Economic Development and Trade conducted antidumping probe then, that resulted in introduction early in a special customs duty in an amount of 21%. Importation of Ukrainian candies at once contracted almost by a factor of 5, falling down from 72 thou. tons in 2001 to 15,6 thou. tons in 2003. Fighting for the Russian market the Ukrainian confectioners found ways to get round the customs barriers. Taking advantage of the rule that only sugar products, that do not contain cocoa fall under duties, they began to add to high cooked candies half-percent of cocoa powder. This allowed to exporting high cooked candies as chocolate production, that did not fall under the effect of duties. As a result, the export of Ukrainian high cooked candies started quick expansion. In 2004 when the effect of customs duties lost its force, the Ukrainians occupied a quarter of the whole Russian confectionary market.
In 2004 the Association of Confectioners applied to the government commission for protective measure in external trade and custom-pricing policy with a request to establish again duties for imported high cooked candies, including one containing a cocoa. As a result of inquiry, special customs duties were introduced again.
N.Volovik Prospective provisions of WTO Doha Round Agricultural Agreement and their implications for Russia (the market access aspect) As stated by the head of Trade negotiations department in the RF Ministry of economic development and trade Maxim Medvedkov, Russia can become a WTO member not earlier than in June-July 2006. One of the key WTO agreements that Russia will have to join is the Agricultural Agreement signed in the course of GATT Uruguay Round in 1994. However, in 2001 a new round of multilateral negotiations on trade in agricultural commodities (“the millennium round”) began. While we negotiate with WTO members the terms of our entering the prior agreement, a new one with more rigid provisions may come into force. We need to contemplate the prospective provisions of this new agreement to accordingly adjust our negotiation position. This can have the strongest effect on one of the three parts of Agricultural Agreement – market access, i.e. protective measures against import. The following survey focuses on just this topic.
Negotiations on agricultural agreement within the new Doha Round were the most problematic. In Cancun they actually reached a deadlock and only 10 months later – in July 2004 – the 147 countries adopted a Framework Agreement establishing modules (procedures) of the future Agricultural Agreement.
Negotiations on the Agreement’s section “Access to markets” are perhaps the most difficult since these issues concern all countries without exception and are the most sensitive topics for intra-nation discussions. Moreover, it’s admitted that without further liberalization of the world agrifood markets the progress in liberalization of the world trade at large is unfeasible. At present tariffs on agricultural commodities exceed those on industrial products five fold and are a serious factor distorting the world trade and the world production of agrifood products. Studies show that in case there is any positive effect from liberalization of trade, lowering of tariffs accounts for 92% of this effect, smaller domestic support – for 6% and reduction of export subsidies – for only 2%. The effect is due to lower tariff protection in the country concerned rather than to reduction of protective measures by other countries12.
The scale of tariff lowering in the course of agricultural negotiations within Doha Round will be the basic indicator of this Round’s success at large. Experts assess that the negotiations may be considered really successful if the tariffs are reduced by 50-60%.
In the Framework Agreement the section “Access to markets” is the least developed as compared with other sections. This means that heated debates on these issues are still ahead and much effort will be needed to work out procedures in this part of the Agreement. So far, countries have reached the following agreements.
The new Agreement establishes the tiered (or banded) approach as the basic principle for lowering import tariffs suggesting that higher tariffs will be cut more than lower ones. This approach is supposed to overcome the unfairness of 1994 Agricultural Agreement according to which countriesmembers had to reduce the level of tariff protection by the same rate meaning that the difference in access to their domestic markets persisted although at a lower level. The reduction of tariffs in that case was done by a linear formula: t1=ct0, where t0 is the initial tariff rate, t1 – the final tariff rate and с is the percent of supposed tariff lowering. According to WTO regulations the reduction under each tariff line should be not less than 15%, i.e. the maximum с value is 0.85. The new approach in the Framework Agreement promotes better tariffs’ harmonization by the end of implementation period.
Anderson, K., W. Martin and D. van der Mensbrugghe (2005), ‘Market and Welfare Implications of Doha Reform Scenarios’, Ch. 12 in Agricultural Trade Reform and the Doha Development Agenda, edited by W. Martin and K. Anderson, Washington DC: World Bank (forthcoming).
Still, even within the tiered approach there remains a problem of choosing a concrete formula of tariffs’ reduction to be further negotiated. An example of harmonized method of tariffs’ liberalization is the Swiss formula: t1=at0/(a+t0), where a is some coefficient showing the maximum rate of final tariff and established in the process of negotiations between WTO members.
The Framework Agreement requires the tiered formula to take into account different structure of tariffs in different countries. For instance, the US and the EU use very many high tariffs and many relatively low tariffs. As a result the median and mean tariffs in these countries are relatively low while the tariff dispersion is very high (Table 1). On the contrary, tariff dispersion in developing countries is very low although there are differences between these countries as well. For instance, in Brazil mean and median tariffs are quite low while in India both these indicators are very high (Table 1). An interesting case is Kenya where all agricultural tariffs are bound at a single, rather high level.
Table Structure of bound tariffs in some countries: basic statistical indicators US EU Japan Brazil Mexico Kenya India Mean 11.9 20.5 80.1 35.6 44.4 100 Median 3.8 10.9 12 35 36 100 Minimum value 0 0 0 0 0 100 Maximum value 378.7 218.5 2553.6 55 450.7 100 Standard deviation 33 29.4 203.3 11.2 42.1 0 52.Variation coefficient 2.8 1.4 2.5 0.3 0.9 0 0.Number of tariff lines 1769 2200 1806 942 1080 665 Source: IPC data.
So, regardless of the accepted formula, there are still issues to be discussed: 1) how many tariff rate groups (bands) should there be; 2) how to establish band boundaries; 3) how progressive should be the reduction by groups. Obviously, the more groups are formed - the smoother will be tariff harmonization. But too many groups will complicate the working out and control over tariffs’ reduction.
The Framework Agreement specifies some exceptions for so called sensitive commodities, i.e.
commodities significant for a country’s economy and eligible for special protection. Tariffs thereon are not subject to the common reduction formula. The list of commodities that a country can designate as sensitive ones should be coordinated with other WTO members. However, a special regime in respect of these commodities does not release countries from the commitment to expand their imports as compared with the former volumes. This expansion can be facilitated by the mechanism of preferential tariff quotas.
The selection of sensitive commodities lies within the competence of countries-members. No common criterion can be established for such commodities. The choice will be determined by a country’s domestic policy. The matter is how many such commodities can be designated and whether this limit should depend on their share in trade or in domestic production.
In October 2005 the US and the EU made their propositions as to parameters of the new agricultural agreement. As regards the access to markets these propositions are as follows:
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