November 20, 06

NEWS / Russia is counting pluses and minuses of WTO membership

MOSCOW, November 20 (Itar-Tass) -- By signing the WTO admission protocol with the United States Russia has entered the last stretch of the marathon race. Its admission to this international organization should be expected next year.

Moscow regards the completion of the twelve-year-long talks as a victory, but many experts are still counting the real costs of the move and discussing whether its plusses will outnumber minuses for the economy and the population.

PLUSES

Finance Minister Alexei Kudrin says that all Russia-produced goods will have free access to the world markets. In his opinion, this is one of the main advantages of WTO membership. Besides, any goods can be brought to Russian territory without any restrictions.

???This will tap Russia??™s own industrial development potential and the resource of foreign capital influx,??? Kudrin said. He believes that Russian consumers will be the first to gain, as they will get access to products of better quality.

???All consumers of food products, services and everything else, all of us, will benefit from this,??? says the daily Gazeta. ???Indeed, the cut in import taxes and of the import VAT by half on the average will inevitably cause consumer prices to go down somewhat and will increase the amount of import goods on offer.???

The daily Vedomisti says the WTO agreement with the United States is also important, because it will create better conditions for trade. Institutional changes and economic reforms will follow.

???Russia will join the WTO at a time when its resources of easy economic growth have been exhausted. In the context of insufficient capacities, high wear and tear of fixed assets, and electric power and gas shortages greater investments and fast upgrading are an urgent need. On the one hand, WTO membership is expected to force the Russian businesses and government to carry out the necessary economic reforms. On the other hand, it will provide the necessary financial and investment tools and instruments.???

Import taxes on manufactures and farm products will go down by three percent. Those on aviation technologies and motor vehicles will be reduced step by step, too.

Taxes on foreign-made cars will be gradually reduced by ten percent.

???Over a period of seven years the taxes on cars will go down from 25 percent to 15 percent, and on aircraft, from 20 percent to 10 percent on the average,??? said Andrei Kushnerenko, a deputy chief of the Economic Development and Trade Ministry??™s trade negotiations department said.

To oil and gas exporters the WTO is of no interest at all. As for the producers of metals and mineral fertilizers, the WTO will give them better protection against anti-dumping procedures. The exporters of clothes (currently faced with a variety of restrictions) and of confectioneries will enjoy support, too.

MINUSES

The Russian Academy of Sciences said in its 2002 survey Russia??™s membership of the World Trade Organization would harm a number of domestic industries. Russian analysts foresee major problems for the furniture, pharmaceutical, metallurgical, chemical, automobile and aircraft building industries.

Mass media warn that foreign exporters will find it far easier to promote their goods to the Russian market, because the average import tax is to go down from today??™s eleven percent to seven percent over a period of seven years. Even though after the reduction the import tax will remain twice that in the United States and in the European Union, growing import would inevitably cause Russia??™s own manufacturing to shrink.

The chief of the Post-Industrial Society Research Center, Vladislav Inozemtsev, believes that the worst slump will affect the manufacturers of high-tech household appliances, while the food industry will be only slightly harmed.

???Russia??™s own automobile industry will have to reduce production, but the effects of WTO membership would be eased by the rather long transitional period,??? Nezavisimaya Gazeta quotes Inozemtsev as saying.

???When Russia has joined the WTO, there may follow a slump and job cuts in such industries as automobile manufacturing, aircraft building and farming,??? the chief economist at the investment company Finam, Olga Belenkaya, told Nezavisimaya Gazeta.

???It remains not quite clear why we are joining the WTO, because there is nothing for us to protect in the foreign market,??? independent State Duma member, economist Oksana Dmitriyeva said.

???The share of machines, equipment and manufactures liable to the operation of tariff and non-tariff restrictions constitutes several percent of Russia??™s overall export. Ninety percent of our export is raw materials and fossil fuels. Their exporters have no problems in accessing foreign markets,??? Gazeta quotes Dmitriyeva as saying.

Foreign businesses will have far wider access to the Russian market of financial services. Foreign insurance companies are the main beneficiaries. They will be allowed to open offices in Russia, and not just create affiliates,??? says the daily Izvestia. ???This means that in their activity they will rely on the laws of the country where they have their head office. Russian insurance companies will have to compete with them on inequitable terms.???

Yet, Russian Academy of Sciences associate member Ruslan Khasbulatov believes that ???one should not be guided by primitive calculations.??? He calls for taking a broader look at the issue.

???For Russia it is inconceivable to stay aloof from the overall process of global integration, which is being carried out, first and foremost, through the instrumentality of this sole universal international trade organization.???

Political Studies Institute Director Sergei Markov is certain that Russia??™s admission to the World Trade Organization will require amendments to economic policies.

???If that does not happen, Russia??™s membership of the WTO will cause a still greater bias towards the raw materials sector,??? Markov told the on-line periodical Politcom.ru.

RATIFICATION

Markov forecasts that the protocol??™s ratification by the US Congress will be very hard to achieve.

???It should not be ruled out that Congress will rise in revolt to say that Bush has made too many concessions to Russia,??? he warned.

The president of the Politika fund, Vyacheslav Nikonov, agrees.

???This protocol is still to be ratified by the US Congress. If Bush fails to submit the document for ratification to the current Congress, where the Republicans will have a majority till January, next year the Democrats will run the show in trading relations with Russia,??? Nikonov said in a live interview on the Mayak radio station. ???They will wage a vendetta against Bush over all issues, including Russian-US relations. I am pretty certain about that.???

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