Andrei Slepnev, Minister for Trade of the Eurasian Economic Commission, explains the impact of Russia’s accession to the WTO on Russian businessmen and consumers.
Russia in the WTO: Seeking long-term benefits. Photo: Reuters
Just as the experts anticipated, accession to the WTO has not brought any dramatic changes for Russia. For example, there has been no sharp rise in imports, as some domestic producers feared. On the whole, imports of goods into the Customs Union territory increased by a mere 5.2 percent in the period from September 2012 to May 2013.
Yet imports of some goods have risen at twice this rate. For instance, imports of foodstuffs have gone up by some 12 percent and of clothing and footwear by about 10 percent, which is apparently a result of the cut in the customs duties on these goods. On the other hand, there have been no major changes in the dynamics of imports in the automobile sector and other sectors.
Why has Russia not reaped benefits from WTO membership?
Although consumer prices have not dropped, the position of producers has not improved to any appreciable degree. Why?
The rules of the World Trade Organization, the inertia of our economy and the terms on which Russia joined the WTO are such that the effects of our membership will not kick in immediately but only in the medium- and long-term. The benefits and costs of participation in the international trade system are essentially strategic.
One should not forget that it is impossible to determine with absolute certainty where we are looking at the effects of WTO membership and where at the impact of other factors. This is especially true now during a time of economic instability.
For example, the reduction in tariffs under our WTO obligations last year amounted to about 1.5 percent. But in the spring and summer of last year, the ruble weakened by 10 percent so this more than offsets the effect of the reduced tariffs.
Such important business factors as affordability of credit for enterprises and fluctuations in demand should also be kept in mind.
For example, metallurgists had expected WTO accession to boost their export-orientated sector. But the advantages they gained in foreign markets from WTO accession are more than cancelled out by the disadvantages from the drop in the global demand for metal products.
Similarly, it would be wrong to expect prices to fall significantly solely due to our accession to the WTO. The reduction in the customs tariff has been more than made up for by currency fluctuations, both last year and this year. One can hardly expect short-term effects there. In the medium term, price growth may slow down due to a systemic growth of competition.
How is Russia adjusting to the WTO rules?
With accession to the WTO, a number of measures that restrict access by Russian goods to foreign markets were automatically dropped. Russian businessmen are already enjoying these advantages. Regarding other measures that significantly constrain Russia’s foreign trade and cause tangible damage, consultations are under way with WTO institutions. We hope these measures will soon be dropped as well.
At present, it is more important that Russia now has an opportunity to influence the development of new rules governing the multilateral trade system and to oppose adoption of decisions that might discredit producers from all the Customs Union countries due to their geographical position, natural resources, etc.
Within the next few years, more than half of all global trade will be regulated not only by WTO rules but also by numerous bilateral preferential agreements that are in the pipeline. This creates the risk that incompatible standards and regulations these agreements might create would face us with a still greater number of trade barriers. The task facing the WTO is to form universal standards for such agreements so that, for all their diversity, they are compatible and do not create additional trade barriers.
The opinion of the author may not necessarily reflect the position of Russia Direct or its staff.