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Russia: Economist Discusses Pros And Cons Of WTO Membership

  • Jeremy Bransten

Russia has stepped up its campaign to join the World Trade Organization. But is Russian membership possible in the near future? What would it mean for Moscow, both in terms of benefits and costs? RFE/RL correspondent Jeremy Bransten discussed the issue with Clifford Gaddy, an economist and foreign policy expert at the Washington-based Brookings Institution.

Prague, 27 April 2001 (RFE/RL) -- When he became Russia's president last year, Vladimir Putin declared WTO membership to be one of Moscow's priorities.

Russian Prime Minister Mikhail Kasyanov emphasized that point again during a visit this week to Sweden, which currently holds the EU presidency. Kasyanov's call for EU support for Russia's candidacy comes as Russian negotiators hold talks in Geneva aimed at speeding Moscow's entry.

Russia and China are the only major industrialized countries who are not members of the 140-country WTO. Beijing has a realistic chance of joining later this year. But how ready is the organization to accept Russia and how prepared is Russia to undertake the reforms necessary to join?

U.S. economist Clifford Gaddy specializes in Russian affairs. He says that objectively, the Russian economy -- which is driven to a large extent by the export of natural resources such as oil and gas -- is much less well prepared for global competition than the Chinese market, which has years of experience in exporting manufactured goods on a global scale.

"I think the Russian economy is less well equipped to fully meet the conditions that are required to accede to the WTO. The Russian economy is just inherently less competitive -- so much more would need to be done to bring Russia to that point. And I think that those would be very painful reforms."

Joining the WTO opens markets to new members, meaning a country's products can be more easily exported, without the impediment of trade barriers. But conversely, by joining the WTO, members commit themselves to open their domestic markets to foreign competition -- in the fields of both goods and services. If a country's domestic industry is not able to compete with its foreign rivals, large sectors could face bankruptcy or takeover.

Gaddy says that since the demise of the Soviet Union, Russia has adopted countless laws on privatization and market creation, but true reform has been sparse.

"Russia's never had a problem in adopting reform policies. It's always had a problem, and still does, with accepting -- with full implementation -- those reforms, which means accepting the consequences of reform. The story of Russian reform for 10 years has been to adopt the policy, pretend to carry out the policy but actually not fully implement it because the consequences were simply too dire."

Judging by Russian leaders' statements, Moscow does not seem to be fully committed to undertaking the radical reforms needed to prepare the country for WTO membership. Last month, President Putin urged WTO Director-General Mike Moore not to be too demanding towards Russia as its seeks entry. Gaddy notes:

"A lot of people are assuming that if Russia says it wants to join the WTO, that means it wants to play by the WTO rules and be judged by the WTO referees the same way everybody else is. I think that's not true. What Russia wants to do is join the WTO, ultimately to some extent on its own terms. I suspect that Mr. Putin believes -- until proven otherwise -- that Russia can somehow manipulate the WTO more than the WTO manipulates Russia."

Gaddy says the International Monetary Fund's willingness to bend the rules when negotiating with Russia on new credits may have lulled Moscow into thinking it can achieve the same results with the WTO:

"Reflect back on Russia's interaction with the International Monetary Fund, for instance. Russia has consistently, over this whole period of the '90s and into the next decade, felt that it's been able to somehow play the IMF game but still manipulate the IMF. I don't know how conscious that is or whether that's just an instinct. But I think that's how Russia would look at the WTO. And the difference is that the WTO is much, much more rigid than anything Russia has encountered hitherto."

Many economists -- both foreign and Russian -- believe that working towards WTO membership could prove beneficial to Russia by encouraging needed domestic reforms, as it did in China's case. But Gaddy says that Russia will have to be prepared to play by strict rules once it joins the WTO -- and be prepared to lose some disputes.

"If you like, the WTO is the ultimate paradigmatic set of universal rules for economic behavior. That's really what it's all about. It's the level playing field for all. But even though it is a universal set of rules for everybody, it's a set of rules that favors a particular kind of player -- just like any set of rules does. People adapt to the rules of the game and in the case of the WTO, almost every industrial country in the world is better at playing by those rules than Russia, for very good reasons, because they've been playing by those rules for quite a long time. Russia's completely new to this game."

Gaddy says national pride and the pain of reform may force Russia to abandon its plans to join the WTO -- or aim for a more realistic accession schedule.

"Down the road, if Russia continues its dialogue with the WTO, you'll start to see some conflicts and at some point, maybe Russia will decide: 'Well, we just can't do this. We can't do what they require us to do because the consequences would be so devastating for our own economy.'"

Last week, the Moscow daily "Nezavisimaya gazeta" gave a hint of what to expect when it ran a long commentary entitled "It won't benefit Russia to join the World Trade Organization." The article stressed that joining the WTO would cripple Russian industry, leaving it at the mercy of Western speculators.

Whether Russia takes up WTO membership as a serious challenge or eventually dismisses it as a Western imposition will indicate much about the direction of reform in the country.