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Russian WTO accession – done deal? Who would win and lose?

In Russia, Russian economy on November 3, 2011 at 11:17 pm
Russia’ WTO accession is yet again in the limelight. Russia still is the world’s biggest economy outside the global trading order. Since I have started analysing the matter 5 years ago, almost every end of autumn, there has been the announcement of an imminent agreement on Russia”s WTO accession. Each time, however, there has been an ensuing disappointment. Yet despite everything, in terms of the paperwork in Geneva and the number of bilateral agreements it has to sign, Russia has continued inching closer to the goal. One major final hurdle was Georgia’s potential veto on Russia’s accession due to their territorial disputes over Abkhazia and South Ossetia. This hurdle has just been cleared. My take on the whole issue:
  • Winners in Russia of WTO accession will be first of all its consumers. Average tariffs on imports of goods are due to drop to 8 per cent, down from more than 13 per cent today. Hence prices of many goods will go down. The other winners will be Russian exporters of metals and chemicals, who will face somewhat lower tariffs on their exports and less antidumping duties.
  • Russia’s uncompetitive industrial sectors that have never been substantially reformed since the fall of the Soviet Union are likely to shrink: food processing, light manufactures, construction materials and other industries such as automobiles. See more on winners and losers in Russia here.
  • The big international winners will be Western exporters of sophisticated manufacters and food processors, the world’s car exporters, Asian light manufacturing exporters, and Western investors in the field of services such as business services, telecommunications firms, or banks. Russia’s high tech sector is likely to receive a boost in FDI and exports as its intellectual property regime improves with WTO accession.
  • The energy sector is not covered in the WTO, hence Russia’s energy sector will remain closed and underinvested.
  • Russia’s WTO accession, even if it is formally approved in December this year, is not yet a done deal. Russia would need to do away with its 2008 legislation on “strategic sectors” to comply with the commitments it has made in the field of telecommunications or banking. There are no signs that the present government, let alone the returning president Vladimir Putin, is ready to do so. Russia has been one of the most protectionist G20 members since the onset of the global financial and economic crisis.
  • The current attempt to rush through WTO accession is a sign of internal battles in Russia over the matter. But Russia still needs to ratify the deal after signing it: there is no guarantee it will happen easily or quickly. Even if accession is ratified, correct implementation of its commitments will remain a major issue and cause continued frictions with Russia’s trading partners.

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