MAGNITOGORSK, Russia -- Prime Minister Vladimir Putin said on Friday that Russia will not give up its new rules for vehicle assembly for major global manufacturers in order to win entry into the World Trade Organization.
"We are continuing an difficult dialogue with the European Commission and the United States in the process of WTO accession," Putin told workers at steelmaker Magnitogorsk Iron & Steel Works.
Putin said the EU and the United States are insisting that Russia drop assembly requirements aimed at boosting local production.
"We have said that our position has not changed. This is a red line which we cannot cross," he said.
Russia's new rules require automakers to boost their local production to at least 300,000 cars a year within four years and to achieve 60 percent local content in monitored steps over six years. In exchange, companies will be allowed to import components essentially tax-free for re-assembly in Russia until 2020. The new rules take effect Jan. 1, 2013. Companies failing to meet the targets will revert to paying 15 percent or higher duties on parts imports until the shortfall is corrected.
The hoped-for payoff: Major market-share gains in one of the world's fastest growing markets. The big risk: Russia's pending entry into the WTO will result in sharply lower tariffs on imported vehicles, undercutting much of the rationale for big investments in local assembly.
Driven by Putin, the carrot-and-stick policy aims to modernize Russia's outdated, Soviet-era auto industry by prodding foreign automakers away from kit assembly.
The carmakers committing to the plan include Renault-Nissan, Volkswagen, Daimler, Ford and General Motors.
Source: Reuters with contributions from Douglas A. Bolduc