Russian WTO membership: to join or not to join, that is the question ...

• Author: Aven Peter

Entry into the World Trade Organization is clearly in Russia's best long-term economic interests. The removal of some existing trade restrictions on Russian exports plus an expected increase in inward investment flows would add about $5 billion to the trade balance in the first year alone. Meanwhile, momentum toward entry would accelerate the pace of much-needed reforms and would benefit Russian industry and consumers as much as its foreign trade partners.

However, the real obstacle to advancing economic reforms and achieving the objective of a more broadly based economy with higher sustained growth is not the absence of WTO membership, but the fact that Russia is only a little more than two years into an economic restructuring program. Membership in the WTO and the need to comply with its entry requirements will eventually act as a strong framework for advancing these reforms. However, some basic changes, such as banking reform, do need to be put in place as a more immediate priority.

There is a danger that pushing for membership at too early a stage, and particularly entry under the wrong conditions, could pose risks for support of the fledgling reform process.

Entry to the WTO will not be as quick as was suggested only six months ago, and certainly not until after the next presidential election in March 2004. Entry at an earlier date does imply that the government will have to clearly set forth an agenda for tariff reform in the utilities sector. In a country where a recent study showed that 37 percent of the population is still struggling below the basic subsistence level, this would be seen as an unwise move ahead of the Duma and presidential elections.

CONCERNS

Right now, most ordinary Russians could not care less whether their country joins the WTO or not. Equally, many business managers are suspicious of pressure they believe is being placed on Russia to join. These individuals see membership as a ploy by Western interests to prevent them from being able to properly develop export markets. Alternatively, membership is seen as a sort of "Trojan Horse" that would allow foreign businesses to enter the Russian economy precisely at a time when confidence is growing that basic reforms initiated by the government might work.

In reality, of course, it is quite clear that an economy cannot hope to grow at rates and under conditions set forth in the government's current economic development plan while remaining outside the WTO. To grow at...