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Wednesday, March 21, 2018

Four years the WTO has not brought Russia anything

Since the official recognition of Russia as a member of the WTO four years have elapsed, but no business representatives or independent experts still do not see any benefit from this step to the domestic economy. Moreover, the future of the WTO was called into question in the process of formation of the USA a large macro-regional blocs far from the principles of free trade.

“Because of the stagnation of the Doha round of the WTO loses credibility, loses its status as the sole universal negotiating platform for developing the rules of world trade, – said Vladimir Putin on the sidelines of the G20 summit, held in Chinese Hangzhou. As a result, gaining momentum the processes of creation of closed associations – for example, Transatlantic and Transpacific partnerships that complement and seek to substitute the WTO. We believe that this is the answer to some of our partners on the challenges we faced during the negotiations in the WTO. But this is not the best way to solve problems, the best way is still to negotiate, to come to a compromise.”

“The EEU is now like a sieve, you can carry on the Russian market of Chinese goods through Kazakhstan customs, about Belarusian shrimps we’ve heard”

Concern about the fate of the organization, for membership in which Russia has spent nearly two decades, the Russian authorities have expressed before. For example, in may this year, state Duma speaker Sergei Naryshkin and President of the PRC XI Jinping during a meeting in Beijing criticizes US plans to create the TRANS-Pacific partnership (TPP), which was not invited either Russia or China. “Universal rules for world trade should be discussed by the WTO with the participation of all interested parties,” Naryshkin said, noting that the negotiations on the establishment of TTP are in the atmosphere of secrecy. The head of the Duma Committee on international Affairs Alexei Pushkov said that the agreement on creation of TPP concluded in Auckland new Zealand between the USA and 11 countries, is an attempt to narrow upholding the interests of one power. And stressed that the joint position of Russia and China.

“WTO goes into the trash

According to the head of the Center for economic research Institute of globalization and social movements Vasily Koltashov, disturbing Putin about the future of the WTO is more than justified. At the time of the accession to the organization was started in order to protect Russian raw materials producers on foreign markets (and at the same time to support the shops), he recalls. But now the situation moves on to new sanctions against Russia, which could affect supplies to Europe and other commodities – grain, metals, chemicals and chemical products. The first signs of this was the blocking of the EU gas project “South stream”, the uncertain prospects for the Nord stream – 2″, anti-dumping investigation against Russian steel companies. The situation with the sanctions and falling oil prices forced a review of the principles of economic policy of Russia in favor of import substitution, although at the time of accession to the WTO felt that the current export-import model will last long.

At the same time Vladimir Putin, defending the principles of the WTO reflect the interests not only of Russia. “The President speaks as a conservative politician appealing to the same conservative policies in peripheral and semi-periphery countries experiencing fear in relation to the return of protectionism. The manufacturing industry they did not build, and the prices for their raw materials fell, and politically she became vulnerable in her relationship, you can enter any protective duties, accusing producers of dumping, for example, as a result of the devaluation of the national currency”, – said Koltashov. In this situation a return to the principles of the WTO seems logical for countries with a significant share of commodity exports, and these principles are something of a Kantian categorical imperative in the world of sharks of capitalism.

However, the Koltashov doubt that this will have the desired result, because the actual owners of the WTO are Americans who can carry out any policy in respect of goods from other countries, changing the rules of the organization at any time. Besides, even in the past decade, the WTO began to show signs of serious crisis, for example, in 2008, the failed Doha round of negotiations, which lasted more than seven years. The stumbling block was the question of reducing customs duties on agricultural products in developing countries in exchange for the reduction in subsidization of agriculture in developed countries.

In 2013, the negotiations on the Doha round resumed, but over the past five years, world trade has clearly shifted from globalization towards the formation of regional blocs and free trade in the direction of increasing protectionism, as many economists warned during the financial crisis of 2008. “Adieu, globalization! Out of the crisis in regionalization” was the title of the report of the scientific Director of Laboratory B. analysis of economies at the Sorbonne Frederick Lordon read to them in September 2009 at the conference “the Return of political economy” in Moscow. Seven years ago the French economist said that the WTO is only a platform for clarification of balance of interests and not a real regulatory framework, and now his view is shared by increasingly more experts.

“WTO objectively exhausted, worn out. WTO is going to the dump”, – says Koltashov. According to the Russian economist, the era of the WTO should follow the continental blocks with deep integration, but not the type of European Union – it is about creating equal conditions of major markets with protectionist policies and the development of the local industry, primarily the manufacturing industry. However, now emerging alliances on both sides of the Pacific ocean is not yet very consistent with this setup. “Our raw materials producers was not satisfied – they wanted everything to remain as before. The EEU is now like a sieve, you can carry on the Russian market of Chinese goods through Kazakhstan customs, about Belarusian shrimps we have already heard. There are plenty of opportunities to use the EEU as a convenient mechanism for smuggling in Russia is clearly not what was supposed to happen and what we need for development. But the TRANS-Pacific partnership can also be unsustainable, short-lived Association – simply because the American economy to grow and pull of the economy, which it is politically United”, – the expert believes.

“To be like everyone else”

Doubt that the mechanisms of the WTO can help the Russian goods on foreign markets, increase if to assess the overall effect of accession for the Russian economy. According to some experts and business representatives, this effect was, at best, zero.

“The resulting export opportunities is weakly affected by the Russian industry, – said the head of RSPP coordination Council of North Caucasus Federal district Vladimir Guryanov. – Even the two industries were the most active lobbyists for WTO accession – metallurgy and chemistry – continue to periodically fall under anti-dumping sanctions, and the rest very little is felt. The reduction of customs duties in the short term is beneficial to consumers – decrease the retail price. But the falling budget revenues from import duties, decreases the share of domestic products on the market. Then starts a predefined logical sequence of effects: compression of industrial production, lower employment, lower incomes. As a result, many industries helped only the devaluation of the ruble.”

According to Guryanov, the accession to the WTO clearly does not apply to those cases where Russia showed its negotiating power. This is especially evident if we compare the conditions of our accession with other countries. For example, joined the WTO in 1995, India in addition to import duties at 10%, impose countervailing duties (12%) and sales tax to Finance secondary and higher education (2+1%), that is, the government restricts the import list of goods produced in India, and even earmarked funding educational programs. “It turns out, so can you. And Russia was signed under totally different conditions, since the conditions of accession of each state member of the WTO individually” – stressed the Deputy foreign Minister, Recalling that partners of Russia in the EEU, Kazakhstan and Belarus – while generally refrain from this step.

Independent expert Alexander polygalov does not see clear results of Russia’s accession to the WTO: “it is Unclear why we entered there, except to “be like everybody else”. Indeed, this fact was the main critic of Russia’s accession to the WTO: not announced any meaningful reasons for us to do, in addition to a textbook considerations, “we can’t modernize our economy without accession to the WTO”. But it is obviously a bit replaced causes and consequences. Developed countries first sought to modernize their economies, making them stronger than most others, and then later joined the WTO, securing existing competitive advantages of their economies due to the fact that the less developed country WTO members could not defend itself.”

According to Polygalova, no foreign trade through mechanisms of the WTO Russia can not be resolved, moreover, he had not heard that we actually tried to do something similar. “Now in the WTO we have a funny position: we try to act so that nobody could accuse us of “violating WTO principles,” but not even particularly trying to use the WTO mechanisms to improve their terms of trade,” adds polygalov.

“The last three years has dispelled many illusions”

“Welcome to the real world. Since the nineteenth century, the principles of international trade has changed,”

The most obvious proof of the correctness of skeptical of Russia’s membership in the WTO became the “sanctions war”. As with the introduction of Western sanctions against Russia and Russian retaliatory countermeasures nobody even tried to appeal to the WTO principles in the first place out of pure politics.

“The last three years has dispelled many illusions, – said Guryanov. – Welcome to the real world. Since the nineteenth century, the principles of international trade has changed. If you want more information you can remember about the reasons for the Opium wars or to search the Internet about what is copenhagenbased” (episode of the Napoleonic wars, when Nelson without a Declaration of war Denmark burned the Danish fleet and bombarded Copenhagen, is considered the first modern preventive bombing – approx. OPINION).

An example of the fact that resources spent on accession to the WTO, has proved inadequate to our results, can serve as a Georgian-Russian economic relations. After Moscow’s recognition of independence of Abkhazia and South Ossetia in September 2008, the Georgian side insisted that the condition of Russia’s accession to the organization should be recognized “internationally recognized borders of Georgia”. In autumn 2011, Russia has gone in this question on concessions – had produced a compromise solution, whereby the monitoring of goods turnover at the checkpoint in Abkhazia and South Ossetia will carry out an independent third party (the mediator were further selected Swiss logistics operator SGS).

This agreement removed the last obstacle to Russia’s accession to the WTO, which soon happened: December 16, 2011, the Russian package of documents was approved at the WTO Ministerial conference, and on 22 August of the following year took place the official entry. However, the question of external control on “internationally recognized borders of Georgia” so still not resolved – largely because of the position of the leadership of Abkhazia and South Ossetia, which are not WTO members, but recognized by Russia as sovereign States. The Abkhaz side which year pulls on the brakes and the issue of restoration of railway transit in Georgia and South Ossetia holds on the lock entry from Georgia in the Transcaucasian highway, which is considerably more convenient than standing regularly because of snow and mudslides in the Georgian Military road.

But all these circumstances do not in any way interfere with the restoration of Russian-Georgian trade turnover, sagging dramatically during the presidency of Mikhail Saakashvili when Russia introduced an embargo on delivery of Georgian wines and mineral water. In the first quarter of this year, Georgian exports to Russia in comparison with January–March 2015 increased by 41,5% (38.5 million dollars). In late June, in Batumi at a regular meeting of Russian and Georgian experts in the framework of the dialogue, organized by the International center on conflict and negotiation (ICCN) and the Russian international Affairs Council, said that the vast majority of goods from Georgia is already committed to the Russian market, one of the last exceptions remain grape alcohol and chacha. “Apparently, the Russian and Georgian authorities have done almost everything that could have been done in the existing political situation, for removing institutional barriers in mutual trade,” – noted experts. However, the key driver of this process was not Russia’s accession to the WTO, and the change of power in Georgia.


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