Deep divide on accession - Russia inches towards WTO membership

Russia's entry into the WTO looked more certain with its accession having been ratified by the Parliament by a slender majority. The majority 238-208 vote itself showed the sharp divide domestically to the accession to the WTO. It also shows internal domestic pressures with respect to multilateral trade rules and this dichotomy will continue even s Russia becomes an active member of the WTO.The Bill would now move to the upper chamber of the Russian parliament and would then have to be signed by the President for it to become law.


(Courtesy Reuters/Denis Balibouse)

The accession news was widely reported in the BBC, Reuters, Chicago Tribune, The Moscow Times and the RT. The official U.S. reaction to the Duma approving the accession came from the USTR:

"U.S. Trade Representative Ron Kirk welcomed the news of the Russian Duma’s ratification of Russia’s World Trade Organization (WTO) accession package.

“We are pleased to hear that Russia has completed this critical first step in its domestic process for approving the terms for becoming a Member of the World Trade Organization. Russia’s membership in the rules-based global trading system of the WTO will contribute to Russia’s economic growth as well as provide us with new opportunities to guide and grow our bilateral economic relationship. We reiterate our call on Congress to act now on Jackson-Vanik and Permanent Normal Trade Relations legislation,”Ambassador Kirk said."

This piece in The Moscow Times offered the rationale for viewing WTO membership as being positive for Russia:

"But maybe the biggest and most important benefit that WTO membership will bring is that it should bring the cost of goods down.

The cost of living in Russia (and especially Moscow) is famously high. Journalist Yulia Latynina once poignantly asked why a cup of coffee in Moscow cost as much if not more than the same in London or New York when the average income was less than half of those in the West.

The reason, of course, is the closed nature of the Russian market, which allows big companies to charge huge margins with impunity and has lead to the astronomical growth and creation of a super-rich class filled by all businessmen that have successfully set up and captured a market niche. That will start to change.

This will also have important political consequences. Going into the Duma elections last year, a survey found that the No. 1 biggest concern among voting Russians was the high cost of living. WTO-inspired competition could start bring down prices from this year to a level more appropriate to Russia's income levels. Making life more affordable will make life better and so make President Vladimir Putin more popular. If he does have ambitions to stand again for the presidency in 2018 (the gossip in the Kremlin is that he won't, but that could change), then he will be able to point to lower prices as a real and significant (and vote-winning) achievement of this term in office."

There is a recognition that WTO membership will be a trade-off and there will be benefits with costs. there will be winners and losers in the process. How Russia will address the loss and cope with the challenges would be interesting considering that a large segment of the democratic process were not in favour of the accession.

On the other side, what is the validity of the Jackson Vanik Amendment of the U.S. in relation to the PNTR status for Russia. Will address this issue in another blogpost.