12:35 GMT +318 October 2017
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    WHAT WILL WTO MEMBERSHIP MEAN FOR RUSSIA'S REGIONS?

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    MOSCOW. (RIA Novosti economic analyst Vasily Zubkov)

    Russian experts are continuing to discuss the pros and cons of the country's accession to the World Trade Organisation (WTO). The only thing is obvious at the moment: Russia's admission to the WTO will hit various economic sectors hard.

    At a recent Moscow international conference, "The Competitiveness and Modernisation of the Economy", economists noted that the introduction of WTO rules would mean positive socio-economic consequences for some Russian territories, but negative ones for others. This can be explained by their uneven economic development. The latest research suggests that several most developed Russian regions account for the bulk of this country's GDP.

    The economist Leonid Grigoryev from the Institute of the Global Economy and International Relations claims that Russia's seven most developed territories had boosted their national economy share from 35.2% to 47.6% between 1995 and 2001, while there was a 79-fold gap between them and the seven least developed regions.

    The group of leading regions includes oil and gas producing territories, Moscow, St Petersburg, as well as some central Russian regions and those in the Urals. They export the lion's share of Russian goods and receive over two-thirds of all foreign investment.

    Russia's north-western and central regions account for over 33% of the country's industrial output. They closely resemble or even surpass the central and eastern European countries set to join the European Union in terms of many economic parameters. Professor Boris Shtulberg from Moscow thinks that Russia's projected WTO membership will create more favourable conditions for Russia's export-orientated regions during various anti-dumping investigations. According to him, Russian corporate exporters will reduce their export-reduction losses by 30-40% as a result.

    True, these calculations have nothing to do with fuel and raw materials exports, which are not subject to serious global market restrictions, and which are regulated by supply and demand alone. Hence the following conclusion: Russia's accession to the WTO will not seriously affect its oil producing regions.

    In Shtulberg's opinion, Russian metallurgical enterprises and metallurgical regions, i.e., the Urals, Siberia's Kuzbas, the Vologda region and some others, might obtain certain advantages during the revision of anti-dumping restrictions. Indeed, there are about ten Federation members that specialise in ferrous and non-ferrous metallurgy.

    However, WTO membership will mean fewer state subsidies for Russia's agrarian regions. Consequently, most regional agro-industrial sectors will require tariff protection because many of them are not competitive enough due to adverse natural conditions.

    Many economists believe that general WTO membership terms will negatively affect agricultural output because the arable and livestock sectors will become less profitable. Natural differences will play an increasingly greater role in agricultural production. The North Caucasus, the Black Soil Region, the Middle Volga region and South Urals will benefit after Russia joins the WTO, because they enjoy the most favourable natural conditions and have ramified transport infrastructures.

    Unfortunately, most Russian agrarian territories, which are listed among high-risk farmlands, will require protection in the form of high import tariffs on most agricultural produce categories. Many analysts predict rocketing food prices and so point to the need to cushion the impact of this rise for the Russian population, especially for low-income families. Although the number of poor people is continuing to fall considerably, the government estimates that about 12-15 million people will still be below the poverty line three years from now.

    Increased import tariffs should be introduced during the adaptation period, helping Russia's machine-building and agricultural enterprises to stay afloat, and enabling regions to expand their import-substituting sectors.

    Russian scientists have singled out about 30 out of 89 Russian Federation members, whose economies would benefit as a result of WTO membership.

    If Russia's WTO negotiations end successfully this year, its leading regions could increase their GDP by 1% in 2005 through expanded import-substituting production facilities alone.

    Naturally, this will happen, if projected Russian import tariffs considerably exceed those existing in current bilateral relations.

    Russian regions are closely following the current Russia-EU debate, and the European Union's demands that Russian internal and external gas prices be the same. Russian President Vladimir Putin recently said that gas was sold in Russia at prices lower than gas production costs, thus considerably facilitating the growth in other economic sectors. Gas prices must be manipulated in an extremely cautious manner. According to Putin, domestic selling prices will grow, but not overnight and not by much.

    In point of fact, this would seem to suit regional elites, as they have more time to adapt to the new conditions.

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