Russia joined the WTO yesterday, but what will be the consequences? Here, Troika Dialog summarises the major consequences of this event for the country's various economic agents.
Russia joined the WTO yesterday, but what will be the consequences? Here, Troika Dialog summarises the major consequences of this event for the country’s various economic agents.
Russia has agreed to cut its average tariff from 11.7% to 7.8%, which is a relatively high accession level compared with other WTO members. About one third of changes will take effect immediately upon accession, with another quarter coming into force in three years. These changes will take place over nine years following accession.
Russia has managed to secure a lengthy compliance period for industries deemed most sensitive, such as automotive, agriculture and insurance.
Russia has avoided making any concessions on foreign bank branches – all banks operating in Russia must be registered with, and regulated by, the Central Bank.
There have also been no concessions on the domestic gas market, which will remain regulated, and the 30% export tariff will stay in place.
The World Bank estimates that the economy will benefit by a sustainable 3.3% ($65bn) of GDP in the first three years, rising to 11% of GDP ($215bn) after 11 years.
The Finance Ministry estimates that the budget will lose $13.5bn in tariff revenues over the next two years. Some of that will be clawed back with other permissible measures and with general economic expansion.
The non-ferrous and ferrous metals and chemicals industries should see some quick benefit, as other member countries drop existing tariffs or import restrictions and barriers against Russian goods.
Industries that will face an immediate challenge are those that are protected with the highest import tariffs and have low export content, such as food manufacturers, light industry, machinery and equipment manufacturers, and construction materials.
In theory, the removal of export tariffs and volume import restrictions against Russian chemicals, steel and metals should give a major boost to the metals and mining sector. In practice, the benefits will hardly be seen, as slowing global demand means existing tariff quotas are not being filled.
The state of the global economy is much more important to these sectors in Russia than WTO membership. Also, where export tariffs are removed, the state will likely find an alternative mechanism to collect tax revenues, such as an increase in the mineral extraction tax, which is allowed under WTO rules.