REPORT ON THE IRT PLENARY DISCUSSION
Brussels, 7 December 2010

The EU-Russia Industrialists’ Roundtable (IRT) held a plenary discussion “Partnership for Modernization: Innovative Opportunities for Innovative Businesses” as part of activities associated with the EU-Russia Summit in Brussels on December 7, 2010. The plenary discussion was attended by over 90 European and Russian business leaders, European Commission officials, representatives of regional governments of the Russian Federation and leading think tanks. Key speakers were the co-chairs of the IRT Anatoly Chubais (General Director of Rusnano) and Peter Löscher (President and CEO of Siemens AG), as well as Alexander Shokhin (President of the Russian Union of Industrialists and Entrepreneurs), Herbert von Bose (Director at the Directorate General for Research of the European Commission), Dmitry Pumpyansky (President of TMK) and Peter Gruss (President of the Max Planck Society). Discussion was led by Staffan Jerneck (Director of the Center for European Policy Studies). The event focused on the recommendations presented by the IRT to the EU-Russia Summit, in particular on the set of joint EU-Russia business initiatives to provide real content to the Partnership for Modernization announced by political leaders of the EU and Russia. Anatoly Chubais opened the first panel on EU-Russia relations in a global context stressing that the agreement between the EU and Russia on the terms of Russia's accession to the WTO allows for a radical upgrade of the EU-Russia relations. Indeed, the expected accession of Russia to the WTO could serve as a starting point for moving forward towards the most important strategic goal, which is to create a single integrated economic space between the EU and Russia based on principles of free trade in goods and services as well as free movement of capital and people. Peter Löscher stated that relations between the EU and Russia have indeed created a basis for a transition to a new level of cooperation, with both political and business leaders showing willingness to work in this direction. A striking example of this willingness was the recent address by Russian Prime Minister V. Putin to the German business community, where he outlined the idea of creating a EU-Russia free trade area. As was stressed by Mr. Löscher this idea had been welcomed by German business. Talking about specific ways to deepen economic cooperation, Alexander Shokhin mentioned the role of attractive investment climate. In Russia, key measures in this field should include improvements in the institutional environment as well as active investment promotion both at federal and regional level - one evident option being the creation of regional investment promotion agencies. European partners should also take steps to open up their markets to Russian investors in manufacturing and energy sectors on the basis of the reciprocity principle. Dmitry Pumpyansky drew attention to the harmonization of technical standards, which is one of the key initiatives proposed in the IRT recommendations to the EU-Russia Summit. Starting from January 2012, Russia and other Customs Union members will increasingly adopt common technical regulations based on the socalled "new approach" of the EU. This is fully consistent with the goal of creating an EU-Russia single integrated economic space. Now it is time to make the next step: Russia and the EU should adopt a unified approach in the field of product certification by recognizing certificates issued by the other party. Herbert von Bose spoke on innovation and development, which is the focal point of the Innovation Dialogue proposed in IRT recommendations. Innovation is the key to overcome the consequences of the global crisis and improve competitive position of the European economy. Cooperation between the EU and Russia in the field of innovation can thus give new impetus to economic development. Investment in knowledge brings high returns, and regulators should work together with business leaders to support the mechanism which creates knowledge with money, and then produce money with knowledge. This view was further developed by Olli-Pekka Kallasvuo (Chairman of the Board of Directors of Nokia Siemens Networks), who stressed that innovation is not an option but an absolute necessity for business, being the part and parcel of successful competitive strategies in global markets. Vladimir Kargopoltsev (Director of SEC of the United Aircraft Corporation) gave specific examples of mutually beneficial cooperation between the UAC and its European partners. He voiced support for the IRT initiative to strengthen protection of intellectual property rights, which is the key to commercialization of
jointly produced innovative results. The Governors of the Novosibirsk and Yaroslav regions, Vasily Yurchenko and Sergey Vakhrukov, informed participants on measures taken in their regions to improve investment climate, develop innovation infrastructure (including technological parks) and support joint EU-Russian innovation projects. The second panel was devoted to Business priorities in industrial policy. In his opening remarks, Anatoly Chubais emphasized the role of the IRT initiative to abandon visa barriers between the EU and Russia. Cooperation in the field of modernization is impossible without extensive contacts between professionals. Visas raise costs of such contacts dramatically, especially for small business. A. Chubais noted that positions of Russia and the EU on this issue are asymmetric. Russia puts forward practical solutions, being ready to examine proposals from the EU, while the latter seems to be unwilling to do its part of the job. Peter Löscher also stressed that innovation requires the exchange of ideas, which in turn requires free movement of people. He stated that liberalization of visa regime would benefit not only Russia but also the EU, and the position of European and Russian business articulated in the IRT recommendations is crucially important for progress in this field. Herbert von Bose confessed that it is often quite difficult to agree on multidimensional project packages, while targeted initiatives have more chances for success. Proposals from the business community, such as that on liberalization of the visa regime, could help achieving real progress on the Partnership for Modernization. The panel also addressed a number of issues referring to sectoral cooperation between European and Russian companies. The issue of energy efficiency raised by Peter Löscher fueled strong interest among discussion participants. In particular, Peter Gruss addressed two key factors that make energy efficiency extremely relevant for EU-Russia cooperation. On one hand, the demand for energy worldwide is growing at such a pace that it is increasingly difficult to meet it given the current level of energy efficiency. On the other hand, increased attention to environmental priorities, including climate change, creates demand for improved technologies in power generation as well as energy consumption. Alexander Shokhin stressed the need for positive incentives to support energy saving technologies, including incentives for investors who bring these technologies to the market. He believes that restrictive measures only (e.g., with bans on the use of standard electric bulbs) are not enough to stimulate the development of truly innovative energy-saving technologies and raise energy
efficiency by 20 per cent in the EU and by 40 per cent in Russia. Anatoly Chubais said that European and Russian companies share common interest in development of energy-saving technologies and protection of property rights associated with them. In particular, global market for light emitting diode bulbs is now flooded with cheap Chinese products working for at most two or three weeks. IRT initiative on intellectual property rights protection can change the situation radically. The third panel Joint projects: the driving force of cooperation started with a speech by the governor of the Tomsk Region, Victor Kress. In his words, real
breakthrough in economic cooperation between the EU and Russia requires a priority shift from the national to the regional level. By the date, only few European investors dared to "cross the Urals” despite the fact that the Eastern part of Russia abounds with natural resources and hosts important innovative centers. A
wide spectrum of incentives is used to invite innovative foreign investors to the Tomsk region, which can become the flagship of the new regional projects initiative. Alexei Mordashov (General Director of Severstal) suggested that the IRT could contribute to deeper EU-Russia investment cooperation by informing authorities in Brussels and Moscow of cases where the rights of investors are violated. Yuri Prokhorov (Director General, Russian Satellite Communications) urged greater support for projects where Russian and European companies work together to develop new products and/or train professionals. It is time to shift from transferring and adapting European technologies to joint projects focusing on new technological developments. The space communications industry is just one sector where such cooperation could be promising. In their short presentations, several discussion participants supported IRT recommendations to the EU-Russia Summit, stressing the role of such priorities as lifting customs barriers, liberalizing visa regime, protecting investment and intellectual property rights. Summarizing the discussion, Staffan Jerneck expressed the general opinion that IRT initiatives proposed in recommendations to the EU-Russia Summit - i.e., harmonization of technical standards, strengthening protection of intellectual property rights, and elimination of visa barriers - fit perfectly into the agenda of the EU-Russian Partnership for Modernization. Further steps should be taken now to create a single integrated economic space between the EU and Russia. The most important among these steps has to do with free trade in goods and services, as well as creating attractive climate for mutual investment and joint innovation projects.

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