World Trade Organization and Russia

As we know, one of the most important long – term goals of Russia is achieved – since the August, 22^nd we are full members of World Trade Organization. This means, we are allowed to enjoy special rights and principles, but on the other hand to cope with consequences, which are not always to our advantage.

The information I brought has great importance, because current situation after two months in the Organization sets a lot of questions, how can our country go forward, and also generate good economic results. The following issues would be observed:

1. Which purpose had Russia from the very beginning of bargaining

2. Benefits or obstacles – what have the WTO really brought with

The idea of the WTO is regulation of trade – political relationship between member countries, based on Uruguay round agreements. It` s not a secret, that the WTO provides opportunities for diversification and consolidation of economy, also achieving trade benefits and avoidance of trade discrimination.

So, let me start with the idea of the accession and attitude of different institutions to this idea. The Working Party on the Accession of the Russian Federation was established on 16 June 1993, when Russia announced it`s transition to the country with market economy. But it took about 20 years to discuss different trade and law principles to be finally welcomed.

Now I would like to make a comparison of suppositions one year ago and present facts.

1. THEN One year ago was no common opinion in terms of advantage of this accession. The great amount of experts disclaimed prompt economic issue in the short run. But, according to researchers from Russian School of Economy, in the long run, after stipulated period of transition it would raise investment attractiveness of the economy for foreign investors, what provides the main source of gain after accession. NOW Cooling of business activity in all sectors of economy, even in oil industry. The figure of added – value increase has squeezed from 8,3 in June to 2,4% in October.When we also take into account, that almost 70% of our exports are mineral resources and our statistic is maintained by relative high oil prices (115$), whose movement is not to predict, the investors aren`t fascinated with such a background. Although, all this represents experience of China`s first years, when all their agricultural enterprises fell into decay.
2. Membership in a world organization means compliance with determined rules. Russia has been already observing WTO's terms even though it is sometimes against its interests. For example, one year ago the ambassador of USA in Russia John Baierly mentioned, that WTO – membership would allow Russians to consume goods and services of world – class. But, in WTO Russia won’t be able to take protectionist measures ignoring the signed agreements. According to Anatoly Aksakov, the deputy of State Duma, «If now we can ignore some regulations by raising custom duties, restricting certain imports to give advantage to domestic companies than when we enter WTO we won’t be able to create such advantages for our producers». NOW Russia is used to protect rather than produce, thus not meeting these rules. When it comes to automobile industry, the government plans to raise money from overrated customs and developing utilization. For example, at September 1^st Russia imposed utilization charge for cars and lorries coming abroad. Interesting is, that this charge could be much higher than, for example, in European Union and, according to the projects, could total more than 50000 rubles, and during 2 months it brought 7,3 bln.$.
3. The additional problem in these terms is price reduction on imported goods as a result of customs reduction, what can lead to overflow from abroad and increasing lag in so – called «infants». The good example is Russian agriculture. One year ago some experts believed that Russia’s entry to WTO will first of all negatively affect the agricultural sector. Vladimir Tkachenko, Deputy Head of the Department of Trade Negotiations at the  
   Ministry of Economic Development, does not agree. "Our producers are saying “Let us develop the production”. And this is what we are doing by applying tariff quotas. WTO allows this instrument and our agriculture is not falling into decay. Other thing, we often hear, is that WTO does not allow the governments to provide the support to agriculture and industries. This is not exactly so.The only restriction applies to the amount of agriculture subsidies. The WTO commitments we are planning to observe (they have not been approved yet but we are quite close to it) won’t mean that the state support to the agriculture will be reduced. " NOW There is a problem not of reducing of state support, but of approximation to this figure. The stipulated size of aggregated state support to agriculture equals 9 bln.$, but, as the head of chair of agroeconomics in MSU mentioned, our farmers could enjoy only a half of it. There is no straight governmental policy in these terms, there are only loud projects, which don`t take neglected infrastructure of Russian village and morale along with farmers willingness to work into account.  According to the experience of EU, each farmer gets fixed size of support, which totals huge percentage in his income, what we can`t say about our farmers (they can enjoy only 3% in average).
4. The one player who absolutely benefited during shock times, is speculative financial market. It`s growth exceeded 16% in October, against 5% in June. Governmental financial sector is at the moment good protected. But in these terms Russia isn`t number one. It has rank 127 in terms of development of financial sector. And worldwide accepted banks could, when it would be allowed, to share their experience at our market and also to make investments.

There were always, who are pro and who are against the membership in WTO. The bustle of first months doesn`t represent diagnosis for Russian economy, but reveal weaknesses, which are to be eliminated as soon as possible. It doesn`t mean, that experience of a successful country should be repeated. More exactly: an opinion exists, that Russia could skyrocket as China. In my humble opinion, there is no most right answer. On the one hand, these two countries have had absolutely different input data: China had very underestimated yuan, low level of wages and accessibility to the credits for national manufacturers (2001 they required only 6% pro year). The advantage of China in comparison with Russia was also huge share of process industry products in exports. One of the pillars of China`s success was considered governmental policy, which didn`t mean submission to the rules of the WTO, but a number of claims due to maintaining yuan and so forth. Our country is also undergoing this stage of initial presence. So our government is aimed now to choose the right direction to survive and at the same time to turn this presence to advantage. Who suffers mostly? Everybody. And there wouldn`t be a big push without big investing. There are several forms for accession to the foreign market: investments, franchising, exports and joint enterprise. And the most suitable for Russian reality is the last, because thus we will be able to raise our investment attractiveness due to fulfillment of tasks which foster foreign trade. Such enterprises should exist in each sector and each branch and in each, especially remote, region of Russian Federation.

It is also not to forget, that along with economic productivity the country should owe special mechanism of dispute resolution to defend itself in case of unfairness. Russia is vulnerable spot according to this scale:it`s a new member, it is not competitive in most industries. What`s most remarkable, that it a) uses services of foreign companies with legal power and b) hasn`t mature business culture. That should be also taken into account.

At a whole, Russian membership in WTO is beneficial for other members, because of opportunities for expansion, but it also gives stimulus for Russia to sind out the right way to to cope with the issue, for which it bargained so long.