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Monday, Jan. 16, 2012
Russia as a WTO member
A ministerial conference of the World Trade Organization in mid-December unanimously approved Russia's request to join the world trade body. It also approved Samoa's and Montenegro's entry. It took 18 years for Russia to become a WTO member.
This is the first time since 2001 — when China joined the WTO — that a large trading country has joined. As of 2010, Russia was the world's No. 12 exporter and No. 18 importer.
With Russia added, the WTO's members will account for 95 percent of world trade. As Russian Foreign Ministry spokesman Alexander Lukashevich said, Russia's joining the WTO "will usher in a qualitatively new stage" in its endeavor to integrate itself into the global economic system.
WTO membership will help Russia make its business environment transparent and expand its exports. This will benefit both Russia and its economic partners. Russia should strive to make its behavior worthy of its membership in the WTO.
There is also the fear that an increase in the number of WTO members will make it more difficult for the world body to make decision. The WTO is expected to have 157 member countries and regions in 2012.
Russia was known for its opaque and complicated rules related to export and import, and whimsical and frequent changes of rules. In 2009, Russia suddenly raised tariffs on imported cars, devastating Japanese firms exporting used cars to Russia. In 2010, it stopped export of grains, citing crop failures caused by drought. This caused turbulence in global grain markets.
Russia must not repeat its past problematic behavior. If it takes inappropriate decision in trade-related matters, other WTO members will file complaints against it and take the cases to the WTO.
Although Russia's joining the world trade body was a bright aspect of the WTO conference, it was accompanied by a setback. The conference chairman and Nigerian trade minister Olusegun Aganga made it clear in the chairman's statement that the WTO has given up on concluding the Doha round of multilateral trade rules negotiations in the near future. As EU trade commissioner Karel De Gucht said, the WTO's "credibility has been seriously damaged" by its failure to conclude the Doha round.
While giving up an early conclusion of the global trade rule talks, the WTO decided to simplify the procedures for late-starting developing countries to join the organization and to "more fully explore different negotiating approaches" to overcome the deadlock on the Doha round of negotiations.
The Doha round was launched in 2001. But developed and developing countries failed to strike compromise on cutting farm subsidies and lowering industrial tariffs. Especially the United States and China clashed with each other fiercely. Although China's economic growth and development have raised its status in the world trade system, the U.S. is irritated over China's slowness in opening its own market.
To become a member of the WTO, Russia has to complete its own ratification process. It is expected that Russia will formally join the WTO in April at the earliest, following the presidential election in March, in which Prime Minister Vladimir Putin is expected to win.
Shortly after the WTO approved Russia's request to join the trade body, U.S. President Barack Obama phoned Russian President Dmitry Medvedev and congratulated him on Russia's acceptance into the organization.
Russia applied for the WTO membership in 1993. International politics played a role in the WTO's accepting Russia as a new member. The U.S. strongly supported Russia's application. It apparently wanted to improve its relations with Russia, which have become shaky over such issues as the missile defense system in Europe pushed by the U.S., the nuclear disarmament and Iran's nuclear programs.
The biggest obstacle to Russia's attempt was its war with Georgia in 2008. Georgia, a WTO member, had power to veto Russia's application. In November at last, Georgia, in bilateral talks, agreed to Russia's joining the WTO.
Once it joins the WTO, Russia needs to align its economic and trade laws to the international standards and improve the investment environment for foreign enterprises. Russia is an economy that greatly depends on domestic natural resources. It relies on revenues from export of oil and gas for about a half of its budget. Those efforts, which will contribute to increasing investment in Russia by foreign enterprises, are indispensable for the modernization of the Russian economy.
Russian leaders should realize that their arbitrary operation of economic rules have been the greatest obstacle to healthy development of economic and trade ties with other countries, including Japan.
Russia plans to reduce tariffs on cars from an average 15.5 percent to 12 percent and those on electronic items from an average 8.4 percent to 6.2 percent and abolish those on information technology products. Some economic sectors in Russia, including car and aircraft manufacturing industries, will have a difficult time.
It is hoped that increased economic competition and opening of the market will lead to reforms in other areas such as increased political freedom and eradication of corruption.
For their part, Russia's political leaders should depart from authoritarian approaches. This is the way to maximize the benefits of joining the WTO.