As Modern Russia reported previously, the conclusion of Russia in WTO talks on 16 December sparked numerous positive reactions from international officials hailing the accession of the world’s 6th largest economy as a milestone for the organization, which has now become truly global.
But what will be the likely impact of Russia in WTO for investors and businesses, both in Russia and abroad? To answer this question, Modern Russia spoke to a number of renowned financial and economic analysts who gave us their views on the macroeconomic benefits that can be expected from Russia in WTO.
Respondents were generally upbeat, explaining how lower tariffs and other barriers will boost trade, but also how Russia’s membership in the global trading club will strengthen legal security for businesses and thus improve the country’s investment climate. However, analysts also underlined that Russia’s integration into the WTO is a gradual process that will take years before its benefits can be fully felt. Transitional protection measures will initially remain in place in several economic sectors, and aligning Russia’s business environment on WTO practices will require significant regulatory and cultural changes.
Stay tuned to see, in our upcoming editions, what international business leaders expect from Russia’s accession for their activities there.
Roland Nash, chief investment strategist, Verno Capital
“The WTO provides solutions for two of the biggest concerns Russia has for investors: a weak legal system and the absence of an institution to which grievances can be addressed.”
“Joining the WTO gives Russia institutional credibility by allowing it to borrow from abroad. It's the sovereign equivalent of listing in London or New York for companies.”
“The message that membership sends is that Russia wants to be, and is accepted as, a full member of the international business and trading community. This is true, even though much of what Russia produces countries don't want to keep out. Natural resources tend not to face barriers to trade. So the immediate impact for Russian companies will tend to be smaller than for other countries.”
“It's been 15 years coming, and it shows how determined the Putin government is to get over all the hurdles, both political and economic, to membership of the world's international business and trading community.”
Yaroslav Lissovolik, chief economist and head of research, Deutsche Bank Russia
“Russia's WTO accession is one of the most significant breakthroughs in Russia's economic policy in the past several years. It bodes well for greater competitive pressures that are likely to generate efficiency gains amongst Russian producers and lower prices for Russian consumers. The trade effects, however, are likely to accrue in the medium- to longer term, while the short-term implications will mostly relate to higher FDI and portfolio investment inflows.“
“WTO accession will raise the quality of Russia's economic policy, including trade policy, and allow Russia to build FTAs and other trade alliances across the globe, thus giving rise to further rounds of trade liberalization. The positive implications associated with greater inflows of foreign investment may be dented in the near term, however, due to the unfavourable conditions in global financial markets. Still, WTO accession sets the right vector of change in Russia's economic policy towards economic liberalization and competition.”
Alexey Moiseev, deputy head of research, head of macroeconomy analysis at VTB Capital, head of fixed income research at VTB Capital, in an article on ModernRussia.com published on 20 December 2011
“In fact, it’s not even clear who lost out more: Russia, in not having access to WTO trade arbitration mechanisms; or the WTO, as, with Russia out, it lacked credibility in such important areas of trade as metals, agriculture, intellectual property rights. But now the long story is over, and Russia is set to join.”
“For Russia, WTO accession will enhance competition and reduce the cost of imported goods, which is ultimately beneficial for Russian consumers and may encourage industries to modernize. It should also spur Russia to improve its institutions, in particular customs regulations and government procurement. Clearer rules on investment and resolving trade disputes could stimulate investment in the medium term.”
Angelika Millendorfer, head of emerging market equities, Raiffeisen Capital Management
“Russia’s accession to the WTO will not have an immediate impact on the Russian economy, but in the medium term, it could be a catalyst for economic reforms and increased efficiency in the country’s industrial sector.”
“Improving the investment climate is one of the most important challenges for Russia’s political leadership in future years, and from that point of view WTO membership, with the additional reform pressure it creates, can only be helpful. WTO accession can therefore also lead, in the medium term, to a lower risk premium on Russian assets, which in many sectors are still accompanied by a substantial discount.”
“The Kremlin already made clear that it will apply transition periods for a number of years to protect certain economic sectors such as the automotive industry, the pharmaceutical industry and agriculture from foreign competition. Such measures are not unusual. In the medium term, however, the Russian economy must accept that it must face global competition and become more competitive.”
Sylvie Matelly, head of research in international economics, French Institute for International and Strategic Relations (IRIS)
“For the Western countries, there is a strategic element to Russia’s accession to the WTO, which is to limit China’s increasingly important role on the international scene.”
“For the WTO itself, the accession of Russia, i.e. of the only BRICS country still out, is positive news in the context of a deadlocked Doha Round.”
“In the long run, being a WTO member will provide a strong incentive for Russian authorities to modernize and diversify the country’s economy, making it more competitive and developing its industrial sector.”
Julien Vercueil, assistant professor in Economy, member of the Observatory of Post Soviet States, INALCO
“Becoming a WTO member is obviously a strong signal to the investment community, both in Russia and abroad: it means that even though significant disparities between the organization’s members remain, their legal frameworks for doing business are converging and are even governed by a number of common rules, which is a great source of security and stability.”
“If it is well managed, Russia’s accession to the WTO therefore has the potential to boost foreign direct investments in Russia, which could have very significant positive spill-over effects given the size of Russia’s domestic market.”
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