Russia’s WTO accession a rare plus for global growth
Russia’s accession to the World Trade Organisation (WTO) after 18 years of negotiation is set to boost its attractiveness in the eyes of global investors, with long term benefits derived from increased confidence about processes, practices and institutions, according to asset managers.
Russia was, until the announcement, the only major economy outside the WTO system, which counts 153 nations as members. A recently signed deal with neighbouring Georgia removed the last obstacle to Moscow joining. Trade ministers will officially approve accession at a WTO conference in Geneva in December, with full membership effective from next summer.
Vania Markova, Russia specialist at asset manager Crossbridge Capital, said accession will greatly benefit Russia’s competitiveness. “Analysts predict that it could lift the country’s stock market by as much as 5%, while World Bank’s predictions are that Russia’s economy could be boosted by 1% in annual GDP growth every year,” she said.
The agreement brings the country into the system of multilateral trading rules which governs 90% of world trade. “Russia has agreed to cut tariffs, eliminate industrial subsidies, and allow foreign companies greater access to its domestic market,” she noted. “Russia will be able to purchase consumer goods and industrial machinery at far lower prices than before. Its major trading partners, such as the EU, can expect an injection of several billion Euros per annum into their economies, boosting EU exports.”
The deal has been announced ahead of Russian presidential elections next year, and as long-promised corporate governance reforms begin to feed through. The agreement with Georgia will certainly help promote peace and stability in the Caucasus, and Russia’s WTO membership will support trade with other nations in the region, say analysts. More importantly, a stable, growing Russia will contribute greatly to global economic growth.
Finland’s Minister for European Affairs and Foreign Trade, Alexander Stubb, said Finnish companies will benefit from fewer trade barriers and a more reliable trading partner. Russia is Finland’s third largest export market after Sweden and Germany, and the Nordic country exports large quantities of paper, cardboard, medical and pharmaceutical products, iron, steel and industrial machinery there.
David Reid, analyst for the Eastern European Trust, quoted a World Bank study which suggested Russia’s WTO membership could contribute as much as 11% to global economic growth over the longer term, and help ensure Russia’s own market becomes increasingly open, transparent and fair. The timing of the accession is also relevant. “The interesting question to ask is not just how Russia benefits from the WTO, but why it has chosen this moment to agree the reforms necessary to achieve membership,” he said.