Russia is likely to join the World Trade Organization (WTO) next year.
The WTO was founded January 1, 1995 and is the successor to the General Agreement on Tariffs and Trade (GATT) established in the wake of the World War II in 1947. Its goal is to liberalize global trade and to streamline trade and political relations between its member countries. It uses both tariff methods toward this end, gradually decreasing import duties, and the elimination of non-tariff barriers.
At this point, the WTO has 153 members.
Russia first applied for WTO (GATT) membership in 1993. It usually takes between five and seven years to join the organization, but Russia has been negotiating its entry for 16 years, longer even than China, which joined the WTO after 15 years of talks.
To join the organization, Russia needs to get approval from all of its members, which is why the process is so complicated. Talks are often put off because the various parties cannot agree or they try to ensure preferences for their producers. In the case of Russia, the negotiating members criticized it for raising timber duty and supporting its automotive industry and the agrarian sector.
For example, Finland was dissatisfied that Russia raised its export duty on rough timber, which badly affected Finnish paper producers.
After Finland reconciled itself to the change, Lithuania accused Russia of redirecting commodity distribution from Baltic to Russian ports.
Moscow broadly hinted a year ago that it would not negotiate the WTO entry endlessly. In June 2009, the prime ministers of Russia, Kazakhstan and Belarus agreed to notify the WTO of their decision to join the organization as a single customs territory. They suspended bilateral talks and held consultations to coordinate a common entry stance for their Customs Union.
However, this is easier said than done and has been hampered by problems, such as a recent dairy war between Russia and Belarus, when Russia banned the marketing of a number of Belarusian dairy products.
It became clear in October 2009 that the three countries would have to join the WTO individually but would coordinate their stances. This seems like the best approach for Russia. Maxim Medvedkov, Russia's chief negotiator in the WTO accession talks, estimated Russia was 95% of the way through the negotiations, Kazakhstan 70% and Belarus less than 50%.
A joint entry meant that Russia would have to wait several more years while its partners coordinated their positions with the WTO members. Acting separately, Russia could join the organization in 2010. Presidential aide Arkady Dvorkovich said the other day in an interview with the Vesti television channel that Russia was "optimistic about [an early] conclusion of the negotiating process."
Why does Russia want to join the WTO? As a WTO member, it will have easier access to foreign markets bypassing tariff and non-tariff barriers that currently deter trade. Now, Russia loses up to $2.5 billion annually from discrimination practices in foreign markets. Open access to these markets could also encourage the production of knowledge-based products in Russia, which its authorities have long been advocating.
Another positive aspect is participation in the development and reform of international trade rules. So far, Russia cannot take part in this process, which means that the rules the other countries adopt may contradict its interests in terms of competition, investment and energy policy.
On the other hand, the opponents of joining the WTO argue that as a member Russia will be unable to approve prohibitive duties allowing foreign goods to replace some of its commodities. They also say that the strictly outlined tariff policies of the WTO member countries will lower budget revenues from import duties.
The consequences of joining the WTO would differ from one economic sector to another. For example, the Russian chemical and steel sectors expect huge benefits because the other member countries will have to lift their antidumping customs duties currently protecting their markets from Russian goods.
The sectors competing with foreign producers, above all mechanical engineering, food and light industries, and agriculture, are fiercely opposing WTO entry because open competition with foreign producers may bankrupt them. The Russian financial structure also fears competition with foreign banks.
However, Russian consumers would certainly benefit from WTO membership because this would open the Russian market to foreign banks, construction and food companies, and would also lower duties on imported cars.
And lastly, open competition with foreign companies may force Russian producers to lower prices by cutting both outlays and profits, if they want to survive.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
MOSCOW. (RIA Novosti economic commentator Maria Selivanova)
