Moscow - After 18 years of negotiation,
Russia on Wednesday entered the World Trade Organisation (WTO), which
restricts import duties and subsidies in an attempt to create a level
playing field for international trade.
Analysts and politicians hope that
Russia, which has long proven a formidable market to foreign
investors because of its byzantine bureaucracy and protectionist
tariffs, would be transformed by its entry into the WTO.
one of the last major global economies to enter the group, which has
long included other developing nations like China.
While consumers here will benefit from
the lower cost of imported goods, some worry that struggling
industries long coddled by state subsidies, such as agriculture or
the automobile industry, will suffer from foreign competition.
Russians often complain about the
burdensome cost of Western-imported consumer products, which range
from refrigerators to jeans. With its entry into the WTO, the country
will cut its average import tariff by 5.9%, making those imports
M Video, one of Russia's largest
electronics retailers whose shelves are packed with foreign-made CD
players and American movies, said Russia's entry into the WTO would
bring more customers into their stores.
"We believe that (entry into the
WTO) is going to be a very good decision for our customers in the
future, because they will be able to purchase goods with prices
harmonised with other economies," said Enrique Fernandez, chief
commercial officer of the company.
But uncompetitive domestic goods, which
have long been propped up by Soviet-style subsidies, could be
threatened by the invasion of higher-quality imports.
major business leaders and industry groups including dairy and meat
producers signed a petition earlier this summer addressed to the
ruling United Russia party, asking that its deputies vote against
ratification of the WTO treaty.
Agriculture, the automobile industry,
and Soviet-style "Monogorods," or towns which revolve
around a single factory or industry, are bound to suffer next to
foreign competition unless they can reform quickly.
are based in regions that have often displayed the most support for
President Vladimir Putin, but could easily turn into a hotbed for
protest if already fragile industries were to collapse.
At a car dealership in Moscow,
63-year-old engineer Alexei Tarakanov said he doubted that
low-quality Russian cars could win on an open market.
"I already have a negative
attitude towards our (Russian) cars," said Tarakanov, who was
buying a Renault. "I doubt that they can win the preference of
the modern buyer."
Because state-subsidized industries
proved such a pivotal issue in Russia's WTO negotiations, financial
aid to struggling sectors will be gradually phased out, rather than
abruptly cut off, over the course of seven years.
"The industry will not collapse
immediately, (major Russian car-maker) AvtoVaz is going to continue
steadily producing its 700 000 cars per year," said Ovanes
Oganisyan, an analyst at the Moscow-based investment bank Troika
"But eventually there's going to be more competition,
and if AvtoVaz doesn't change in seven years it will have to go out
In addition to the challenges faced by
unreformed industries, the Russian government expects to take a
short-term financial hit from the loss of income from import duties
But the government emphasises long-term gains, and the
World Bank has estimated that WTO membership could increase Russia's
GDP by an extra 3.3% a year in the next three years.
While the WTO will significantly open
up the Russian market to foreign producers, the US faces the threat
of paying higher tariff rates than other WTO members to sell goods in
Russia, leaving American producers at a competitive disadvantage
compared to European or Asian industries.
The reason for the disparity is the
Jackson-Vanik Amendment, a law passed by Congress during Soviet times
that denies Russia normal trade relations with the US.
The US president has been granting
Russia annual waivers since 1992, but Moscow insists it will not
lower its tariffs for the US as much as for other countries until
the law is scrapped.
"The last thing that America needs
right now is for foreign companies to have lower tariff rates than
American companies," said Andrew Somers, president and CEO of
the American Chamber of Commerce.
Vice-President Joe Biden lobbied for
the repeal of Jackson-Vanik in 2011, as have previous presidential
administrations, but Congress has so far proven intransigent to
Congress has increasingly taken fire at
the Russian administration for its human rights record. In June, the
US House of Representatives passed the Justice for Sergei Magnitsky
Act, a bill named for a Russian lawyer who died in a Russian prison
last year after allegedly being abused at the hands of Russian
This week, President Barack Obama
expressed his disappointment after the three participants of Pussy
Riot, a punk band who sang an anti-Putin prayer in Moscow's Cathedral
of Christ the Saviour, were convicted to two years in prison.
"Business hates uncertainty,"
said Somers, "If the Jackson-Vanik Amendment remains on the
books and the US continues not to have normal trade relations with
Russia, who knows what will happen."
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