RUSSIA & THE WTO
– particularly foreign investment. The World Bank has argued that the external pressure of WTO accession produces a faster pace of reform, making it easier for a government to adopt trade policies aimed at promoting growth and reducing poverty. Also, once adopted, international commitments under the WTO are more difficult to reverse in the future.
Larger Gains Depend on
Political Will Recent experience in Georgia,
however, clearly illustrates that it is domestic commitment to a reform agenda, not foreign pressure that is vital, at least in the fight against corruption. Making Russia an easier and less corrupt place to do business will therefore depend on the commitment of the Russian government to push through internal reforms. On 1st
February 2012, Russia
stated its intention to adopt an OECD anti-bribery convention, which is clearly a step forward, though, as ever, it will be the enforcement of laws, which will be key for effective results. In a broader sense, the success
of WTO accession in helping bring about a business environment conducive to foreign investment will depend on the willingness of the Russian government to adopt a different strategy towards economic development – both in the degree to which it seeks to protect its domestic industries and the extent of state involvement.
42 types of activities, which are said to be of strategic importance to national defence and state security – a much wider list than in many other economies. Under the law foreign investors require prior authorisation before taking control of a business in these sectors. Russia has also previously pursued a policy of taxing exports
of natural resources in order to stimulate the development of domestic industry. For example, Russia was in dispute with the EU over duties on the export of timber, designed to help the development of the Russian wood processing industry. At the end of 2010, Russia settled the timber dispute by agreeing to phase out export duties after WTO accession, which is an encouraging sign for the future path of Russia’s development strategy. As yet it is too early to say whether such concessions represent a limited compromise to achieve WTO membership or are part of a strategic shift away from import-substitution industrialisation towards a model of more open economic development.
WTO Influence in Question This raises the question of whether Russia will merely pay lip
service to the terms of WTO membership, while continuing to pursue its own objectives. In this respect, China’s recent dispute with the WTO over the export of rare earth minerals illustrates some of the limitations of the WTO’s influence over powerful developing economies. On July 5th
2011, the WTO Dispute Settlement Body ruled
that Chinese export restrictions on a number of raw materials including; bauxite, fluorspar, magnesium and zinc, were inconsistent with WTO regulations. China, as a member state, was found to have contravened the commitments it agreed to on its accession. At first glance, the ruling appeared a victory for the US, the
The economic benefits expected from WTO accession will largely be derived from improvements in the business environment that create better conditions for investment
The Putin era has been
characterised by increased state involvement alongside the development of the private economy. A key piece of legislation in this process was the introduction of the law on Foreign Investment in Strategic Sectors, which came into force on 7 May 2008. This law covers
72 March 2012
EU and Mexico, which brought the WTO dispute against China in 2009. It was alleged that the export restrictions discriminated against foreign manufacturers and conferred an unfair advantage on domestic producers. China was unable to demonstrate to the WTO – as it claimed in its defence – that the restrictions on rare earths were necessary to protect limited natural resources and control pollution. In terms of bauxite, an export quota was found to be unjustified because China failed to demonstrate that it was to prevent or relieve critical shortages of essential products. In the short term, the ruling has made little difference. It was hoped that the decision would influence China’s stance on its export of 17 rare earth minerals, which constitute approximately 97% of global supplies. However, a week after
the WTO ruling, China announced new export quotas for rare earths set at the same levels as the previous year. However, the new quota in fact represented an effective reduction in exports due to the inclusion of the export of ferroalloys that contain rare earths. Further, at the end of August, China’s Ministry of Commerce announced it was appealing against the WTO decision. The WTO’s Appellate Body issued its findings on the 29th January 2012, which substantially upheld the initial ruling.
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