Russia’s entry into theWTO on Wednesday has been a long time in coming. Negotiations began soon after the breakup of the Soviet Union and the demise of communism and have been rumbling on — with many setbacks — for 19 years.
Russia is the last major economic power to join the global trading system and was also the only G8 country not be a member. The Kremlin will be hoping entry will provide the sort of boost enjoyed by China after it was admitted to the club in 2001.
However, the economic climate is much frostier than it was in 2001, when the global economy was about to embark on its strongest period of growth since the late 1960s and early 1970s. China’s economy had a strong manufacturing base; Russia is over-reliant on oil and gas. Finally, just as it proved impossible for other EU countries to replicate Ireland’s Celtic Tiger period, so China gained from being the first communist giant to join the WTO.
Nevertheless, Moscow is hoping a surge in foreign direct investment will make Russian industry more efficient. Russia’s exporters will gain to the tune of US$1.5 billion to US$2 billion a year from the dismantling of foreign barriers. Lower tariffs on imported goods should lead to cheaper goods, boosting consumer spending power.
However, dismantling protective barriers means that large chunks of Russian industry may struggle to compete. The Kremlin has sought to make the transition less painful by negotiating a phased-in opening up of markets.
WTO Director-General Pascal Lamy says Russia’s entry is not a “big bang” accession. China’s was a pivotal moment in the history of globalization. Russia’s entry looks more like the tidying up of loose ends.