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How Russia Can Benefit from the WTO

Author: Christopher Alessi
December 15, 2011

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Russia is set to accede to the World Trade Organization at the body's December 15-17 ministerial conference in Geneva, eighteen years after it first applied for membership. Russia will be the last of the G-20 countries -- and the largest economy since China in 2001 -- to join the 153-member multilateral trade association (WSJ).

What's at Stake

WTO membership has the potential to redefine Russia's "relationship with the rest of the world," Susan Stewart of the German Institute for International and Security Affairs told CFR.org. Russia would be part of a "system of rules and regulations" -- including the WTO's dispute settlement system -- which Russia and other member countries could profit from, Stewart says.

The country has long maintained a state-run economy, reliant on oil and natural gas revenues. At the same time, international investors have considered Russia isolationist and hostile to foreign investment. Membership in the world's largest trade body would allow Russia to restore its reputation in the international community and indicate to investors that it has created "more transparency" in the marketplace, Rolf Langhammer of the Kiel Institute for the World Economy told CFR.org.

The Debate

Some journalists like Anna Andrianova of Russia Beyond the Headlines argue that WTO membership would make Russia an "attractive place to do business," in turn fueling growth and economic reform. A 2010 World Bank report (PDF) predicts that WTO membership would help the Russian economy grow by 3.3 percent in the medium-term and 11 percent in the long-term.

Dominic Fean of the French Institute of International Relations says to become a truly open economy, "Russia will need to use WTO membership as a springboard for wider economic change" by reducing protectionism (IHT) and increasing foreign investment.

But Moscow-based economics writer Felix Goryunov argues against Russia joining the WTO because its economy is "inherently weak and uncompetitive." Instead, he says, Russia should focus on diversifying its economy by expanding its export base beyond the extractive industries.

Policy Options

Some observers see China's economic growth -- and continued openness -- since acceding to the WTO a decade ago as a paradigm for Russia. China's "spectacular rise" has come with Beijing "having to increasingly recognize and respect" the legal responsibilities it now faces as a WTO member, EU Trade Commissioner Karel de Gucht recently told the New York Times.

Still, experts caution that the Russian and Chinese economies are inherently different. While China has a strong manufacturing base that undergirds a diversified export sector, Russia "will remain a commodities exporter for the foreseeable future," says the Kiel Institute's Langhammer.

In light of Russia's expected WTO accession, the EU and Russia are holding a bilateral summit in Brussels this week to further negotiations on the establishment of an EU-Russia Partnership for Modernization. Russia's WTO membership should be a catalyst for the United States to grant Russia Permanent Normal Trade Relations status, write Anders Aslund and Gary Clyde Hufbauer in a recent Peterson Institute for International Economics policy brief. Such a move could see U.S. exports to Russia double over the next five years, they say.

Background Materials

Brookings Institution's Joshua Meltzer discusses the legitimacy of the World Trade Organization and current challenges it faces in a changing economic environment.

CFR's Jagdish Bhagwati explains how progress toward international free trade (Project Syndicate) would suffer if the Doha Round negotiations fail.

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