Study removes WTO doubts

As the countdown shortens before Russia makes its momentous entry into the World Trade Organization in July, a debate rages about how beneficial membership will actually be. Since Russia’s accession deal to the global trade body was signed in December after a record-breaking 20-year negotiation period, dozens of business representatives have taken stands against the destructive effects increased competition from abroad will have on their sectors. In apparent reaction to the backlash, Deputy Prime Minister Igor Shuvalov hailed the WTO membership in a speech to the Federation Council last month, highlighting the benefits it will bring to the country’s economy and investment climate. In a controversial footnote to his speech, he also criticized the politically motivated vetoing of imports by the country’s food sanitary watchdog, saying that WTO entry would bring such practices to an end. “Trade will become more liberal and we will no longer be able to fiddle with sanitary control measures,” Shuvalov said. “This is entirely within our interests.” Recent embargoes have targeted Ukrainian cheese, American chicken, and Georgian and Moldovan wine. The results of a study carried out by the New Economic School and presented in Moscow last week support Shuvalov’s claim that the economy will be the real winner of membership in the trade club. The study, which assesses the effect of WTO rules on all sectors of the economy, has found that entry to the organization will boost economic growth by around 0.5 percent. “In the long term, WTO accession will benefit both domestic production and the investment climate in this country,” Sergei Guriyev, director of the New Economic School, said at Thursday’s presentation. The study found that consumers will benefit from a decrease in prices, while anti-dumping measures will mean that Russian goods will have no barriers to foreign markets. he economists also found that entry to the trade body will lower customs duties by 22 percent to around 7.8 percent, and ease entry to the Russian market for foreign companies. A general increase in foreign investment is also expected due to a forced reduction in red tape and an increase in transparency, in accordance with the rules of the trade body. “Russia’s entrance to the WTO and Customs Union [with Belarus, Kazakhstan and Ukraine] may bring investors to Russia who are interested in investing in Central Asia,” said Natalia Volchkova, economist at the New Economic School. The authors of the study admit that some industries and regions will be hit worse than others. Many of these, such as the agriculture, pork production, and machinery sectors, are being given a longer period to adjust to the new system – in some cases, up to eight months. However, the Higher School of Economics experts said that WTO membership would not mean that Russia loses all of its powers of protectionism. “If a big American or European company wants to protect itself against a foreign rival, it hires experts to prove that, for example, the Chinese economy is not a free economy and Chinese goods are sold at prices that are too low,” Volchkova said. “The whole process takes a year or a year and a half on average, and if the accusations are proved to be correct, the country is allowed to introduce additional customs against the company or a country,” she added. The study found that Russia’s many single-industry towns, or “monogorods,” will be hit hardest by entry in the trade organization. The country currently has 450 such towns, which the experts said will become hotspots of unemployment and depopulation as a result of the new trade laws. The closure of various factories during the 2008-2009 global economic crisis, sparked unrest in several such towns, including the widely-publicized Pikalyovo workers’ strike near St. Petersburg. “Production in monogorods that are not involved in the natural resources sector may plummet and unemployment will increase,” Volchkova told the news conference. “This will spark a f low of workers to more prosperous cities.” The research found that Moscow and the Moscow region will benefit most from WTO entry, with consumption there expected to rise by as much as 0.88 percent. Meanwhile, consumption in St. Petersburg and the Leningrad region is expected to rise by 0.85 percent. On the other side of the scale, consumption in Siberia and the Urals is expected to decrease by 0.14 percent and 0.06 percent respectively.