Russia becomes 156th member of the WTO
Today marks Russia’s official accession to the World Trade Organisation after 19 years of negotiations, making it the 156th member of the global trade body.
Bloomberg Television’s Manus Cranny spoke to WTO’s director-general Pascal Lamy (pictured) in Geneva on the eve of the historic event. They discussed the implications for foreign direct investments into the country and Russia’s position in the global trade relations.
Cranny: A very long time in the making, this accession, so my main question would be: where are we going to see the main benefits, in Russia, in the economy?
Lamy: Well, it’s a change for trading with Russia and by Russia. Trading with Russia will be easier, the Russian trade will be more open, the Russian trade regime regulation will be clearer, more predictable, more stable which is a strong incentive to increasing business with Russia. On the Russian side, Russia will benefit, from now on, from the insurance policy against protectionism which the WTO offers to its members. This may not be essential in the immediate future as Russian exports remain heavily concentrated on fuels and minerals which account for more than two thirds of Russian exports, but it will help the diversification of the Russian economy which, as you know, is one of the main challenges and one of the main ambitions in Russia for the decade to come.
Cranny: From a European context, Mr Lamy, does this open up more formally a Russian market to European industry; is it going to be a boost for Europe?
Lamy: It certainly is a more open market for Europe, but also for the rest of the world, including US, China, India, Brazil, the big traders of this planet, so it certainly offers new opportunities on the Russian market.
Cranny: In terms of America, you mention the United States, how quickly do you envisage the US relaxing their trade issues with Russia.
Lamy: The US has old legislation that prevents normal trade relations with Russia and this is linked to old disagreements between the US and Russia which had to do with the possibility of Russians immigrating to Israel. This will be solved. What we hear from both sides of Congress is that this is a weeks away. My own expectation is that this will be solved very soon and US business of course, is pushing for that as because as long as Congress hasn’t repealed this old legislation, US business is at a disadvantage vis-a-vis other international competitors so I think it really is a matter of days.
Cranny: In terms of direct investment, again is this rubber-stamping what the rest of the world needs to bring capital into Russia. Will that happen? That’s what Putin said he hoped would happen.
Lamy: I think you are correct on this point. The experience we’ve had, if you look at WTO accessions over the last ten years, starting of course with China – Ukraine, Vietnam, Saudi Arabia, Cambodia – in all these cases, accession to WTO has been followed by a clear increase in foreign direct investment flows and for a simple reason, which is that once a country joins the World Trade Organisation, it sort of gets a quality label which investors value and it immediately reduces the risk premium. It’s a sort of guarantee that if you invest in this country, you will be treated according to normal modern market economy conditions.
Cranny: You raise some serious issues there that have plagued Russia, which are of course credibility and corporate governance. Alexander Lebedev is vociferous spokesperson in terms of lack of corporate governance in Russia. What do you want to see done next by Putin to restore corporate governance and credibility to Russia?
Lamy: There is obviously a problem there, but World Trade Organisation rules do not cover each and every bit of business relations. We cover what our members have decided we should cover. It has to do with the trade regime at large, with import and export conditions, with intellectual property, with investment rules. Issues like corruption, for instance, do not feature among the rules of the WTO. One could say we should have that.
Cranny: Don’t you really think that to give the WTO more credibility, that should be one of the top criteria, shouldn’t it?
Lamy: That’s a perfectly respectable view but we work on the basis of mandates which are given by our members. So far there has been no proposal by a WTO member, short of this proposal being accepted by others, that world trade rules should encompass corruption practices. There are instruments in the UN system; there are instruments in the OECD system. So far, we do not have such instruments because the present members of the WTO have not deemed it necessary; whether they are wise or not is a question for individual appreciation.
Cranny: Tell me, Sir, does this open up the way for the likes of Kazakhstan and Belarus to come on board with you?
Lamy: It is certainly having an accelerating effect on accession of countries like Kazakhstan, which is on the verge of accession, or even Tajikistan which is very close to joining the WTO.
Photo: World Economic Forum