One of the major missing pieces has been finally inserted into the big puzzle picture of the World Trade Organization. At the eighth Ministerial Conference in Geneva from Dec. 15-17, Russia was accepted by the WTO as a new member of the global trade body, ending Moscow’s 18-year bid since 1993 involving changes and amendment of more than 300 laws and regulations. Russia has been the only major country that has been left outside the global trade body.
Approval of Russia’s accession was hailed as one of the two tangible results of the Ministerial Conference, the other being members’ agreement on the amendment of the Government Procurement Agreement. And to those who are weary of the never-ending impasse at the DDA, hopefully these achievements were the two dim lights for the future path of the multilateralism.
Russia’s entry is the most important accession since China’s in November 2001. As Russia is not as much of a manufacturing powerhouse as China is, the accession would cause less turbulence in the global trade, but the addition of the last big market to the global trade regime would not come without its own share of impact.
Quite a few countries have been gearing up for the competition in the Russian market, expecting Russia’s integration into the global trade regime. The sheer size of the country has made it attractive to all manufacturing industries.
Areas in which fierce competition is particularly expected are civil aircraft and automobile industries. Foreign corporations have had keen interest in these industries for a long time and a new horizon of opportunities is now looming. Competition among foreign corporations will become much fiercer. Since these are also areas where Russian domestic industries have had strong bases, competition between domestic industries and foreign corporations will become equally intense.
In the automobile sector, the Korean manufacturers look forward to increased sales in Russia once the tariff rate for automobiles is slashed to 15 percent from the current 30 percent as a result of Russia’s WTO accession. The actual outcome, however, will pretty much depend on how Korea fares in the new competitive environment
The European Union and China are also known to be anxious to expand their presence in the Russian market taking advantage of their geographical proximity..
Accession to the WTO means that exports and imports of all items are now subject to the WTO rules, which further means a member country should administer its export and import policies within the confinement of the terms and conditions of the agreement.
One of the important implications flowing from the requirement is that other countries’ access to the vast pockets of Russia’s natural resources will become more predictable and stable because exports of natural resources should also follow the rules of the agreement. The recent dispute between the United States and China over Beijing’s alleged restriction on the export of natural resources proves how sensitive this issue could be. Although many things are still uncertain, Russia’s WTO accession will at least ensure increased access to Russian raw materials, which is a critical benefit to other countries.
Among the former Soviet Union republics, Kyrgyzstan, Moldova, Georgia and Ukraine have already joined the world trade body since late 1990s. Other republics have been working hard to accede to the world trade body, most notably Belarus, Kazakhstan and Azerbaijan.
Now that Russia has registered its name on the members’ roster, in all likelihood entry negotiations for other CIS republics will also be accelerated. Most of these republics are inherited with sizable amounts of all sorts of natural resources, and have been approached by many countries seeking a stable line of energy supply.
Russia, Belarus and Kazakhstan already established a trilateral free trade agreement among themselves in 2010, and expect this FTA to become a magnet for the remaining CIS bloc countries in the future. Thus, regardless of individual accession to the WTO, these former CIS republics are also planning to pursue integration of their own economies. It would be indeed interesting to see how Russia’s accession (and accession of these republics) would change the topography of the WTO and how economic integration among the former CIS republics would affect the already complex equation of global trade.
By Lee Jae-min
Lee Jae-min is a professor of law at the School of Law, Hanyang University, in Seoul. Formerly he practiced law as an associate attorney with Willkie Farr & Gallagher LLP. ― Ed
