WTO Membership Nets Few Benefits for Russia

July 8, 2013
http://goo.gl/aq8Cf

One year ago, Russia entered the World Trade Organization. The WTO has been the gateway of economic modernization for many nations in the last two decades, and it took Russia 18 years to be accepted into that organization. Russia’s accession to the WTO was a benchmark policy of the Obama administration’s U.S.-Russian “reset” ¬†— and one of the main drivers of Congressional repeal of the Cold War-era Jackson-Vanik amendment which restricted trade with Russia on human rights grounds. However, several published surveys suggest that a year after being admitted to the WTO, Russia’s membership has netted¬†little to no economic benefit:

“The majority of Russian businesses have felt little or no change following Russian accession to the WTO in 2012,” Global Counsel, a consultancy belonging to Peter Mandelson, a former British politician and EU commissioner for trade, said in a report released at the St Petersburg International Economic Forum on June 20-22. “The Russian authorities expect that the impact of new competition will begin to be felt after three to five years, but the full impact could take much of this decade to emerge.”

In the spring, the Strategy Partners Group (part of state-owned banking giant Sberbank) surveyed 2,000 owners and top managers of Russian companies with annual turnover of more than $100m. More than half of them said they had expected a positive impact of WTO accession on the Russian economy immediately following accession, but now more than 50% think that there has been no impact at all, with 32% thinking that the impact was negative.

The reports, summarized by Business News Europe, suggest that one reason for the lack of growth is that the economy is still too reliant on state support. Systems that were put in place before the WTO that were crucial to making Russia self-reliant, like high tariffs, have either delivered serious blows to Russia’s industries once they were removed, or have remained barriers to engagement with international markets.

But the problem goes deeper. Corruption and mismanagement have warded off international investors. Even Putin seems less optimistic this year than in the past. At the end of last month he unveiled a new plan for international investment, but he also warned that “there is no magic wand which could change the situation with one wave.”