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Brave new world

December 15, 2011

Russia is on the brink of becoming a member of the World Trade Organization. There are still some worries about how state-run industries will fare in a new, open market, but most observers think the step is long overdue.

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Russian flag with WTO logo
Russia's accession is about to be sealed - finallyImage: AP Graphics/DW

The World Trade Organization (WTO) is set to finally rubberstamp Russia's long-awaited membership on Friday, 18 years after negotiations were first taken up.

For Russia, accession to the WTO is not just a question of political prestige - it carries with it a host of economic advantages, according to Susan Stewart, researcher at the German Institute for International and Security Affairs (SWP).

"Membership is another step toward integration with the world economy, and away from marginalization," Stewart told Deutsche Welle. "Since Russia is not modernizing enough at the moment, marginalization is a real threat."

Gorky Automobile Plant in Nizhny Novgorod
The Russian manufacturing industry will be forced to modernizeImage: RIA Novosti

Accession to the WTO will also spur innovation in Russia. Stewart thinks that many companies and even whole industries like manufacturing could become more competitive.

However, the extra pressure to compete in a more open market also worries some Russian critics. Many parts of the Russian economy are, they point out, still state-controlled. They predict that old companies dating from the Soviet era will have problems facing international competition.

Others, like Rolf Langhammer of the Kiel Institute for the World Economy (IfW), view accession as an opportunity for Russia, because the WTO will open the door to foreign investment - the key to Russia's modernization.

"WTO membership is a signal that foreign investors can rely on the rule of law and the protection of intellectual property rights," Langhammer told Deutsche Welle.

Myriad upsides

There are other benefits to joining the WTO as well, argues Langhammer. "It's not as if Russia has to open itself up completely," he said. "The WTO is not a free trade agreement. The WTO is, after all, just an instrument to promote non-discrimination – non-discrimination between members and between domestic and foreign manufacturers."

The economist believes the WTO even protects Russia from one-sided pressures from other members. "It's also about getting away from bilateral agreements and onto a larger level of legal stability – provided by multilateral agreements," he said.

G20 summit in Cannes
The G20 summit in Cannes gave Russia's bid for membership the final boostImage: picture-alliance/dpa

Stewart believes access to the WTO's mediation mechanism will be a bonus for Russia and also expects fewer anti-dumping actions.

"Another advantage is that Russia will also be at the negotiating table when other rules are being discussed," she added. "If you're a member, you get to take part in the discussion and be part of alliances to support certain positions. You can influence how the framework of rules develops."

Stewart also believes that accession to the WTO will promote a closer partnership with the European Union. "This is important for the EU, because for years now it has been negotiating a new agreement to define its relationship with Russia. The EU has been negotiating on the assumption that Russia will be a WTO member," she said.

Final hurdles

Russia's bid to enter the WTO was given a boost when a commitment to ensure accession by the end of the year was made at the recent G20 summit in Cannes. On top of that, there was the Swiss-mediated compromise between Russia and Georgia.

Georgia, which has been a member of the WTO since 2000, had threatened to block Russia's accession as long the status of breakaway regions Abkhazia and South Ossetia remained under dispute.

Russia recognized both regions as independent countries after the 2008 Russian-Georgian war, while Tbilisi still regards both as part of its territory. Under the new deal, the two countries' cross-border trade will be placed under international supervision and Georgia will drop its reservations.

Russia, which has been negotiating for WTO membership since 1993, needs the approval of all ist members. Once that approval has been sealed this Friday, the dream could be fulfilled by the middle of 2012.

Authors: Andrej Gurkov, Markian Ostaptschuk / bk
Editor: John Blau