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Russia In WTO: Who Will Benefit Most? – OpEd

Written by

August 25, 2012

By Kirill Bezverkhy

Russia was the 156th country to enter the World Trade Organization (WTO) after nearly two decades of negotiations. The time has finally come to rest on the laurels. Experts say that Russians will benefit most from the country’s membership in the WTO as in the next few years it will send prices down and the quality and variety of goods up.

Many other countries in the CIS, Europe and Asia will experience some benefits, too. The U.S. will probably be the only exception due to the Jackson-Vanik agreement which has not been abolished yet and restricts trade with Russia.

Russia

Russia

In Kazakhstan and Belarus Russia’s accession to the WTO was an especially anticipated event (the two countries are Russia’s allies in the Customs Union). Before Russia was officially accepted in the organization on August 22, Belarusian leader Alexander Lukashenko recommended his businessmen to cut expenses and improve the quality of their goods to be able to compete with foreign products on the Russian market.

Most experts agree, however, that many companies operating in Belarus and Kazakhstan will do face increased competition on the Russian market in the short term. Mr. Sergei Agibalov, who runs the economic department at the Institute of Energy and Finance, thinks that benefits will in the long run outweigh.

“Globally, Russia’s accession to the WTO will have a positive impact on the national economy as well as on the economies of Belarus and Kazakhstan. It will first of all boost competition and result in improved quality of goods, which is surely a positive sign for both consumers and businessmen.”

There are some other CIS member states that will reap the fruit from Russia’s WTO membership: Ukraine, Armenia, Kyrgyzstan and Moldova who were accepted in the organization prior to Russia. Businessmen in these countries now can resort to mechanisms offered by the WTO, for example – independent arbitration – to settle any disputable moments in cooperation with Russia. Firms in Asia and in Europe can also benefit from Russian WTO membership. For Europe this appears to be a particularly attractive option amid the ongoing euro zone crisis. Being one of the most economically promising countries in the BRICS group of nations Russia attracts more and more goods from Europe. If we take car industry we will see that car sales in Europe have dropped by 7% in Jan-Jun of 2012, while in Russia they increased by 15%. Since European car makers have already won their niche on the Russian market, we should expect an increased flow of other kinds of goods into Russia in the years to come. Duties on some goods were reduced earlier this week, but they make up about 10% of all imported goods. These are meat, dairy products fruit and vegetables.

Reduced prices on computers and household appliances will earn foreign suppliers some profit. But not all companies will experience it: Apple and some other US giants are facing a great obstacle to trade with Russia due to the Jackson-Vanik amendment which has not been abolished until now despite some US officials had promised to do this prior to Russia’s accession to the WTO. And nobody can say when this happens. Meanwhile, U.S. businessmen could face billion losses because of the notorious 1974 amendment. Mr. Alexey Kuzmin, chairman of the National Prospects foundation, thinks that there is also another opportunity Americans could miss.

“Russian markets are large enough. Unlike in the previous years when these markets were difficult to access due to high customs duties, now they are likely to be quickly occupied by European and Korean companies, which will be a quite challenging moment for the U.S. to deal with.”

From a long-term perspective, Russia’s accession to the WTO is likely to bring the country only good. The World Bank issued a forecast saying that the WTO membership will boost Russia’s GDP by 10%, or $215 billion. The country’s Economic Development Ministry is more cautious on the issue, describing the impact of the WTO membership on Russian economy as ‘neutral-positive’.


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