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Latvia: First Baltic Country Joins WTO

By Katya Cengel

Riga, 24 February 1999 (RFE/RL) -- Latvia -- the first Baltic state to become a full member of the World Trade Organization (WTO) -- is now seeking to find its feet as a fully fledged partner in the international trading system.

Latvia gained membership in the Geneva-based WTO earlier this month (Feb. 10) and is therefore -- along with Kyrgyzstan -- at the forefront of former Soviet republics entering that organization.

The first impression of some Latvians, however, is that membership may make the country's economic situation more complicated in the short term.

Viesturs Kocins -- head of foreign trade documentation in the Latvian Chamber of Commerce -- says that for companies in many sectors of the economy, membership in the WTO means "additional regulations without benefits." His remarks are echoed by Aleksandrs Canders -- head of Latvia's Wholesale Pharmaceutical Association -- who says "the speed of legal changes is too fast for us."

By 2000, Latvia will have to lower import tariffs on meat from 40 to 36 percent and those on grain from 75 to 50 percent. There will also be smaller changes in tariffs on beer and raw materials.

A generally positive assessment, however, comes from Margers Krams, deputy state secretary at the Agriculture Ministry. He says that -- all in all -- Latvia is not facing a "dramatic reduction" in the level of import tariffs.

But even slight fluctuations are a sensitive issue to farmers and manufacturers. Because of Russia's financial problems, Latvia -- like Poland -- has lost a large export market for its goods. This has caused an oversupply of goods on the internal market and a subsequent lowering of prices.

Without the protection of import tariffs, cheap imports now set to enter Latvia might lower prices still further and cause serious problems for local producers. Coupled with the changes in laws and regulations, some question whether Latvia is ready to face such competition.

The government takes a reassuring line. Foreign Ministry spokesman Toms Baumanis says that, of course, membership in the WTO is a positive development. He says Riga is now getting most-favored-nation status in 139 countries, which is particularly beneficial in nations like Japan, Egypt and Mexico, where Latvian goods have markets.

For Latvia, WTO membership means lower custom tariffs in foreign countries, most-favored-nation status with the other members, a prospective inflow of foreign investment, and protection from discrimination in the world market. And because of the way Latvia implemented the required changes, it is also one step closer to European Union membership.

Another advantage of early membership is that Latvia can use its position in the WTO to influence its Baltic neighbors, Lithuania and Estonia, with which it has had recent differences regarding the Baltic Free Trade Agreement.

Kocins of the Latvian Chamber of Commerce says that -- because Latvia joined the WTO first -- Riga will be able to raise any questions regarding Estonia and Lithuania.

Experts say the benefits of WTO membership are likely to become evident first in Latvia's timber and textile industries, while its agriculture sector is likely to face the most difficulties.

The Agriculture Ministry's Krams says that Latvia's farming potential is higher than its internal consumption, so the country needs to orient its agricultural goods more toward exports. Krams says he can't guarantee there won't be problems, but he says he remains optimistic. He says the ministry tries to keep in communication with farmers to prevent demonstrations.

Latvian Farmers' Association secretary Bruno Barons says he does not think strikes or demonstrations are likely -- not because of good communication by the Agriculture Ministry -- but because Latvians are not fond of organizing them. He says his association has received little information about the WTO from state organizations, and that most of what the members know comes from the media.

Barons does not rule out that Latvia could potentially face problems similar to the recent disturbances by farmers in Poland. But he points to an important difference between the two countries -- namely, that Polish farmers receive larger subsidies than their Latvian counterparts. Barons says Latvian farmers now have hardly any subsidies, so they are not afraid of changes brought about by membership in the WTO. Barons says Latvian farmers "have nothing to lose."

In Poland, thousands of farmers went on strike and blocked roads in recent weeks, demanding higher prices for their products. Unable to compete with cheap imports -- mainly from European Union countries -- the Polish farmers are also demanding higher import tariffs as a means of protection, but that's something WTO rules forbid.