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better late than never
On 11 November 2011 the Russian and WTO working parties agreed on terms to pave the way for Russia’s accession to the WTO. Russian lawmakers approved the membership on 22 August 2012.
The road to membership has been a difficult one, to put it mildly. Original talks began in 1993 and have continued ever since.
After his successful presidential election in 2000, Vladimir Putin got behind the accession plans and was a major player in the final outcome. He has shown his frustrations more than once at the negotiations and how the “rules of the game” have been changed to suit the various WTO partners.
Although the WTO is ostensibly an apolitical global trade organization, the delays and obstacles Russia has encountered in recent years have been politically charged.
Prior to the agreement, Vladimir Putin recently said in a Chinese TV interview;
“We would like to join the WTO. This is our goal and our objective. In our opinion this will have a generally positive effect on the Russian economy, as it will increase the level of trust in the economy and on the administrative and within the economy legal procedures. By the way, we have fully adjusted our domestic legislation to WTO requirements. We have done this. We have also resolved major problems with all major partners. I think this is a more It has become a political issue.”
He was less diplomatic when interviewed on Russian TV when he criticized the European Union and the United States for procrastination and the deliberate delay for Russian accession. This back drop comes against the backdrop of open hostility towards Russia by some US lawmakers, who wrote to the US WTO trade representative on 10 November about their ‘significant concerns’ and demanded that Russia be “transparent, concrete and firm” in its adherence to the WTO. Display “Quick Action”. obligations.
“Original” can be used as a Russian accolade but neither ‘transparency’ nor ‘promptness’ are qualities I see much of in the Federation.
The WTO as an organization supervises and liberalises international trade, regulates trade between member countries and provides a forum for negotiation and trade agreements.
Crucial to Russian success and its ability to attract new inward investment, the WTO implements dispute resolution aimed at member adherence to WTO agreements.
The WTO has 153 members and represents more than 97% of the world’s population, so Russia’s absence has been chronological since the collapse of the USSR. With a $1.5 trillion GDP and as the world’s largest oil and gas producer, Russia should have been in the WTO years ago.
WTO membership will not change the business environment or the high risk assessment given to Russia by foreign investors. What it should do is trigger a significant reform and efficiency drive and show the Russian government’s seriousness in combating inefficiency, corruption and cronyism.
The past 12 months saw the closure of hundreds of customs posts, the dismissal of several customs officials and the opening of new import facilities to promote faster, fairer growth, while attracting billions of dollars from the auto and pharmaceutical sectors.
There is no doubt that membership is good for Russia. It brings much needed capital to the Russian markets. Strained relations with the West followed the 2008 five-day Georgian conflict, and in the seven months following the hostilities, investors pulled $300 billion out of Russia. Further outflows reached $70 billion in 2011 against a forecast of $36 billion by the Russian central bank.
According to the World Bank, Russian WTO membership would bring sustainable and incremental annual economic growth of 2% and this success is measured against a backdrop of contraction and uncertainty in global markets. Russia joining the WTO is a ‘good news’ that world markets are watching after the WTO failure in Doha, continued Euro-zone doom and continuous, dismal news from US markets.
Consensus to Join the WTO (The final hurdle fell when Russia and Georgia signed an agreement in Geneva on 9 November approving Russia’s WTO entry, both South Ossetia and Abkhazia with international monitoring of disputed crossings on 24 September came just weeks after Vladimir Putin confirmed his return to the Russian presidency.
Following this consensus, the ruble was the strongest performer among the top 25 currencies, rising more than 5% against the US dollar. The Russian stock market rose more than 15% in the world’s biggest jump, and Russian oil rose 7% over the same period.
Whether WTO entry in the immediate term is good for small or inefficient industries is another story. Fears are rife that cheap imports will flood the market and hurt ‘small’ Russian industry. Who and what these ‘small’ industries are, I do not know. Russia today is a huge importer of consumer goods and distributors may feel they have new competition on their hands but the absence of a cottage industry raises questions.
Russia exported more than $400 billion in 2010, mainly to the European Union, Ukraine, Turkey, China and Belarus. Membership of the WTO opens up new markets where Russian products have historically been blocked. Russian steel and iron makers have been vocal supporters of Russian accession and will be major beneficiaries as trade barriers are lowered and Russian products are allowed access, if not actually welcomed, to new markets. Normal imports were valued at approximately $250 billion
Maxim Medvedkov, the WTO’s chief Russian negotiator, said, “More than a third of our GDP is made abroad … We rank seventh in the world in terms of exports. We need a way to develop trade.” requires a stable estimated means”.
European companies are initially best positioned to benefit from Russia’s WTO entry. EU business predominates in Russia’s external trade and has been integrated longer than other blocs. US opportunities are constrained in the short term due to the Jackson-Vannik amendment, but as Jackson-Vannik violates WTO membership, Russia must be released very quickly. For all the American political bigotry and anti-Russian sentiment, Jackson-Vanik will default or American companies will lose opportunities.
What would be the difference?
Domestic consumer goods producers will face more competition from imports and measures are set to help protect the sector and make it more efficient.
WTO rules require liberalization of the domestic energy market and the elimination of monopolies and gas subsidies. This means greater competition in Russia’s domestic gas market and easier access for independent producers, with domestic prices coming closer to export prices.
Given the effort the Russian government has made to attract inward investment in both R&D and manufacturing, it is no surprise that protection for nascent and emerging industries will last for seven years. The agricultural, automotive and aviation manufacturing sectors are ring-fenced.
Exporters will face fewer barriers in terms of import duties and quotas, which will be phased out gradually rather than subscribed overnight.
The main terms of the WTO agreement are:
The average import duty will be reduced from 10% to 7.8% with the agreement to reduce tariffs to 33% from the date of accession. 25% of tariffs would fall after a three-year deadline while other tariff changes (such as motor vehicles and aviation) would fall after seven years. Agricultural charges are protected for eight years.
The average agricultural import duty will be reduced from 13.2% to 10.8%. Dairy import duty will be reduced from 19.8% to 14.9% and cereals from 15.15 to 10.0%.
Import tariffs for poultry products would be protected for eight years and total Russian government agricultural subsidies would be capped at $9 billion in 2012 and then reduced to $4.4 billion by 2018.
Average manufactured import duty to be reduced from 9.5% to 7.3%
Automotive import duty would be reduced from 15.5% to 12.0%, but with a seven-year safeguard period. Preferential tariffs for automakers making large investments in Russian-based production will be cut until 1 July 2018, within the Decree 166/566 agreements.
Import duty for chemicals to be reduced from 6.5% to 5.2%
Russia has agreed to develop market-based pricing for the domestic market, but will continue to regulate prices for domestic and non-commercial users, in line with its social programmes.
The foreign equity ownership limit of 49% for the telecom industry will be abolished in 2016.
100% foreign-owned banks will be allowed to open in Russia for the first time, but with an overall 50% cap on foreign bank control of the region.
Nine years after Russia joins the WTO, foreign insurance companies can open owned branches 100% foreign-owned companies will be able to operate in the wholesale, retail and franchise sectors immediately after membership.
In short we can say ‘better late than never’ and appreciate that the accession marathon was not a waste of time (for Russia) as the terms negotiated by Russia are beneficial. They guarantee Russian access to foreign markets (“most favored nation” status) and enable Russia to use the World Trade Organization to settle any trade disputes. Membership creates a better foreign investment climate and provides greater Russian opportunities for investment in WTO member countries.
Russia can now better protect its economic interests in negotiating international trade agreements.
Of utmost importance are transition concessions that limit the access of foreign goods to Russia while Russia upgrades production and infrastructure to challenge international competition.
Russia has shown that it is not afraid to make the necessary investments and has invested hundreds of billions of dollars in brand new and replacement infrastructure and manufacturing projects. Russia’s entry into the WTO is the biggest step forward in global trade since China joined ten years ago.
If you’re sitting in Strasbourg or Washington DC, you might want to consider that Russia has negotiated unfettered access to world markets while securing its domestic manufacturing base against foreign invasions over the long term, and that He has done it in the worst possible way. Global trade recession in modern history. You might not respect the trauma of the genius who negotiated access to new markets while ensuring his own safety. This negotiating skill will mean that not only do Russia’s leaders know what they are thinking; They also know what everyone else is thinking.
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