Russia becomes the newest member of WTO after 18 years of negotiations

After 18 years of negotiations, Russia joins the World Trade Organisation (WTO) as its 156th member today. This accession is particularly important for the world economy as Russia can now freely trade with 155 member nations, based on multilateral rules and obligations for their mutual trade.

“…. WTO accession is a major step for Russia's further integration into the world economy", said EU Trade Commissioner Karel De Gucht. "It will facilitate investment and trade, help to accelerate the modernisation of the Russian economy and offer plenty of business opportunities for both Russian and European companies. I trust that Russia will meet the international trading rules and standards to which it has committed."

The WTO accession will have a positive impact on the conditions of trade and investment between Russia and the world. The geographical position of Russia and the importance of its market in terms of volume and growth make it a very important trading partner. As a consequence of the WTO accession, Russia will amongst others lower its import duties, limit its export duties, grant greater market access for WTO member nations services providers and facilitate rules and procedures in many areas affecting bilateral economic relations. Of particular importance will be regulations on customs procedures, the use of health and sanitary measures, technical standards and the protection of intellectual property.

Russia will be subject to WTO rules in all these areas, including its monitoring and enforcement mechanisms. The EU, together with its international partners, is in contact with Russia to ensure that it respects these WTO commitments. Certain recently implemented or proposed legislation seems to be at odds with Russia's commitments and would stand in the way of other WTO members fully realising the benefits expected from Russia's WTO accession. The EU is particularly concerned about the proposed new legislation providing for a car recycling fee which could discriminate against imported vehicles and hopes that this legislation will not be adopted.

Background

The economy of Russia is the ninth largest economy in the world by nominal value and the sixth largest by purchasing power parity (PPP).[1] Russia has an abundance of natural gas, oil, coal, and precious metals. Russia has undergone significant changes since the collapse of the Soviet Union, moving from a centrally planned economy to a more market-based and globally integrated economy. Economic reforms in the 1990s privatized many sectors of the industry and agriculture, with notable exceptions in the energy and defence-related sectors. Nonetheless, the rapid privatization process, including a much criticized "loans-for-shares" scheme that turned over major state-owned firms to politically connected "oligarchs", has left equity ownership highly concentrated. As of 2011, Russia's capital, Moscow, now has the highest billionaire population of any city in the world.

In late 2008 and early 2009, Russia experienced the first recession after 10 years of experiencing a rising economy, until the stable growth resumed in late 2009 and 2010. Despite the deep but brief recession, the economy has not been as seriously affected by the global financial crisis, compared to most of Europe, largely because of the integration of short-term macroeconomic policies that helped the economy survive.

In 2011 Russia’s gross domestic product grew by 4.2 percent, the world’s third highest growth rate among leading economies. The government expects it to grow 3.7 percent in 2012.  The main changes related to the WTO accession of Russia concern market access improvements for goods and services. The import duties for goods will decrease from a current average of 10% to an average 7.8%. In some important sectors, such as automotive, the import duty reductions are more significant (decreasing from currently 30% to 25% upon accession and to 15% after 7 years).

Although, in the past Russia is interested in developing economic relations with Africa, but has not done much on that front. Let’s hope that the accession to WTO will encourage trade Interest of Russian Investors to Africa’s vast natural reserves make the continent an increasingly attractive investment destination for Russia’s energy and other natural resource industries. On account of its strong economic growth, large external assets (US$ 480 billion in foreign exchange reserves), increasing outward direct investment, and politico-strategic ambitions.