Russia’s Entry into the World Trade Organization Term Paper

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Updated: Mar 2nd, 2024

Introduction

Discussions of the opportunities and obstacles presented by Russia’s accession to the World Trade Organization (WTO) have been ongoing ever since the country entered into negotiations aimed at securing its membership of the world body in July 1995 (Sabelnikov 345; Afontsev 7).

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It is the aim of this paper to critically discuss the opportunities and obstacles resulting from Russia’s entry into the WTO, not only for the country but also for the rest of the world.

Opportunities for Russia’s Entry into the WTO

Opportunities for Russia

Available literature demonstrates that Russia’s accession into the WTO will not only advance the country’s opportunities to participate in international economic cooperation but will also facilitate its incorporation into the formal system of world trade and make its national economy more efficient (Sabelnikov 345).

By joining the WTO, Russia will not only acquire new global trading frontiers and their advantages, but will also get access to international markets, as well as achieve non-discriminatory treatments of Russian exports into the international market (Iudaeva et al 8; Iudaeva et al 9).

It is believed that WTO membership will have a positive effect on the productivity level of the Russian economy due to the increase in the importation of goods and services from other WTO countries, as well as the increase in foreign direct investment (FDI).

As noted in the literature, imported products improve the quality of locally produced commodities; consequently, increased imports and FDI into the Russian economy will not only improve the quality of locally produced products but also the efficiency of producing these products (Afontsev 11).

Additionally, Russian families are also bound to benefit immensely as a result of Russia’s entry into the WTO as available literature demonstrate that the decrease in tariffs, coupled with intense competition, will automatically reduce the prices of commodities and services and, as a result, trigger a decrease in annual spending for average families (Afontsev 9).

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Lastly, Russia is set to benefit from intellectual property protections and market economy awareness upon its entry into the WTO. Particularly, Russia is set to benefit from technology transfer from other WTO member countries, which is likely to fuel further economic growth and prosperity (Sabelnikov 348).

Opportunities for the Rest of the World

Russia’s entry into the WTO will not only improve access to its products and services markets by other WTO member countries (Stewart et al 1), but will also provide a ready market to products and services coming from foreign countries (Afontsev 9).

On November 10, 2011, President Obama noted that Russia’s entry into the world trade body “…will generate more exports for American manufacturers and farmers, which in turn will support well-paying jobs in the United States” (Stewart et al 1).

Additionally, according to these authors, Russia’s entry into the WTO will reduce the tariffs and other taxes imposed on commodities and services from WTO member countries. Finally, entry into the WTO will provide opportunities for international firms to invest in Russia.

Obstacles for Russia’s Entry into the WTO

Obstacles for Russia

Russia must be ready to honor multilateral commitments and other rules and regulations governing the WTO, implying that it must grant access to the home market for foreign products, services and capital (Sabelnikov 346).

Upon entry into the WTO, many foreign-based multinationals with more muscle than local companies will inject more FDI into the Russian economy and establish a presence in Russia, a scenario that may bring negative consequences for local companies by virtue of their limitation to compete on a global scale (Aslund 51).

Many analysts warn that the opening of the home market to international products and services will crash Russia’s domestic agriculture, service, and industrial sectors (Yin 61).

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Many Russian sectors and enterprises thrive on protectionist approaches (Aslund 50), implying that they will soon face difficulties adapting to competition in a free economy. Indeed, it is noted in the literature that many Russian corporations may soon be engulfed in deep-seated challenges as they attempt to master new rules of behavior on foreign markets (Sabelnikov 346).

Russia must be ready to not only eliminate all trade barriers that it has kept for decades to protect local industries, but must also establish mechanisms for settling trade disputes recognized by international trade treaties and conventions (Yin 60).

Still, on the market scene, many “…Russians claim that enterprises producing for the domestic market will be swamped by cheaper imports and foreign investors, while Russia will make little progress in entering foreign markets” (Yin 61).

While it is not entirely true that many Russian enterprises producing for the local market will be swamped with low-value imports, it is indeed true that Russian firms may experience slow growth and challenges in international markets due to their inexperience in free market competition.

Upon entry into the WTO, policy makers and mainstream commentators fear that the Russian economy will face the drawback of losses of sales and profits in competitive markets, particularly in the country’s energy and agricultural sectors (Sabelnikov 346). Consequently, policy makers will have to find a way to ensure local industries do not close shop in the face of stiff competition from foreign establishments.

Another drawback bound to hit Russia upon its entry into the WTO is the decline in the number of domestic jobs available due to stiff competition brought about by globalizing the Russian economy (Aslund 53).

Indeed, some economic analysts are of the opinion that Russia may face a social crisis if it joins the WTO as it will definitely experience an increase in unemployment rates, particularly in its labor-intensive industries. Higher unemployment is also likely to occur due to the change in tariff reductions that may be demanded by the WTO (Iudaeva et al 7).

Obstacles facing the Rest of the World

Other WTO member countries should also brace themselves for intense competition from Russia’s domestic companies. Available literature demonstrates that Russia is one of the largest economies (Stewart et al 2), and thus may exert considerable pressure in global markets as it compete to have a share of the market.

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Consequently, some organizations from less developed WTO member countries may be edged out of their traditional markets by Russia’s exports.

Conclusion

From the discussion, it is clear that Russia is set to benefit immensely from a WTO membership if it puts in place strategies and measures that will ensure its local industries are not adversely affected by the membership.

The cumulative effects of Russia’s entry into the WTO include the promotion of economic growth through improved national and international competitiveness, enhancement of business through increased flow of goods and services, and expansion of opportunities for Russian businessmen in other WTO member countries.

Other WTO member countries are also set to benefit immensely from the opening of Russia’s economic landscape to the rest of the world.

Works Cited

Afontsev, Sergei. “The Political Economy of Russia’s Accession to the World Trade Organization.” Problems in Economic Transition. 46.12 (2004): 7-30. Business Source Premier. Web.

Aslund, Anders. “Why doesn’t Russia Join the WTO?” Washington Quarterly. 33.2 (2010): 49-63. MasterFILE Premier. Web.

Iudaeva, Ksenia, Evgeniia Bessonova, Konstantin Kozlou, Nadezhda Ivanova, Denis Sokolov & Boris Belov. “Sectoral and Regional Analysis of the Consequences of Russia’s Accession to the World Trade Organization.” Problems of Economic Transition. 47.12 (2004): 5-67. Business Source Premier. Web.

Sabelnikov, Leonid. “Russia on the Way to the World Trade Organization.” International Affairs. 72.2 (1996): 345-355. Academic Search Premier. Web.

Stewart, Terence P., Patrick J. McDonough & Philip A. Butler 2011, Opportunities and Challenges from Russia’s 2012 Accession to the WTO. PDF File. Web.

Yin, Jason Z. “Can Russia learn from China in its Quest for WTO Entry.” The Chinese Economy. 42.3 (2009): 60-77. Academic Search Premier. Web.

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IvyPanda. (2024) 'Russia’s Entry into the World Trade Organization'. 2 March.

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IvyPanda. 2024. "Russia’s Entry into the World Trade Organization." March 2, 2024. https://ivypanda.com/essays/russias-entry-into-the-world-trade-organization/.

1. IvyPanda. "Russia’s Entry into the World Trade Organization." March 2, 2024. https://ivypanda.com/essays/russias-entry-into-the-world-trade-organization/.


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IvyPanda. "Russia’s Entry into the World Trade Organization." March 2, 2024. https://ivypanda.com/essays/russias-entry-into-the-world-trade-organization/.

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