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C O M M E N T A R Y
RUSSIA'S ACCESSION TO WTO ENTERS DECISIVE PHASE

MOSCOW, JULY 11 /from RIA Novosti's Yuri Filippov/ - For quite a while now, there has not been a question of whether Russia really needs to join the World Trade Organization.

Remaining outside the WTO would be "dangerous and stupid," President Vladimir Putin pronounced bluntly at one point. These words seem to have been the motto of the Russian delegation to the talks with the WTO, led by Deputy Economic Development and Trade Minister Maxim Medvedkov.

Now the process of Russia's accession to the WTO is heading toward the decisive stage, as the timetable agreed on by both sides sets the deadline for reaching an accommodation on all tariff issues at the end of the year.

Accordingly, the Cabinet has stepped up work in that direction. On Thursday, the ministers met to hear Medvedkov's report on the issue. The Economic Development and Trade Ministry was ordered to develop modifications and specifications to Russia's stance at the negotiations within two weeks.

The chief negotiator said most of the changes are going to be 'cosmetic' in nature, involving some services, a range of goods, and possibly, agriculture.

The work that is beginning now is of crucial relevance to the interests of many industries of Russia's economy. After all, signing up for multilateral agreements between WTO member states is not a goal per se for Russia. There is no denying that opening Russia's domestic markets to foreign players will spell added problems for their Russian colleagues. Some would succumb to competition and move out of the business. Therefore, it is exceptionally important not to go too far. The negotiators need to strike a fair balance so that WTO membership would be an added advantage rather than a liability for Russia.

And there comes the hard part. It is pretty difficult to figure out just what amount of support would be right for the domestic industry, since the price differential for fossil fuel, to name but one instance, is fivefold. Negotiations with foreign partners as part of the WTO acceptance process help the Cabinet, among other things, to decide on policy to be adopted with regard to domestic producers. The decision to alter Russia's stance means that many important calculations have already been made.

However, decision-making behind Russia's position has been highly secretive all along. Leaks at early stages about softening or merely modifying the country's stance could lead to added pressure on the part of Russia's interlocutors. Hence the unchanging remarks of Russian officials that Russia does intend to accede to the WTO, but only on conditions routinely set for all members. Any additional conditions, that line goes, would be construed as discriminatory.

Sometime later, perhaps, after the Cabinet has looked into the Economic Development and Trade Ministry's new proposals, more details would emerge about the current stage of the negotiations. At this point, however, what matters is that Russia's bid to join the WTO is as high on the Cabinet's priority list as ever. In addition to immediate benefits that will accrue to Russian industries with access to foreign markets and reduced costs of anti-dumping investigations against them, Russia expects to obtain substantial advantages for its domestic economy and the new situation on the domestic market.

Competition with international firms that is set to intensify after Russia joins the WTO is to compel Russian players to cut their costs, develop new products, try harder to attract investment, and embark on a road of innovation. At the end of the day, accession to the WTO is needed to spur Russia's own structural reforms. The past decade has amply demonstrated that internal incentives alone, whether it be the Cabinet's measures or reliance on increasing domestic competition, are not sufficient for that end.

It is excessively difficult to predict in advance all the benefits that are going to accrue to Russia from full entry into international trade. While we're still out, we cannot fully appreciate our competitive advantages. For the time being, Russia's competitiveness on world markets has hinged on traditional productive factors, such as cheap natural resources, cost-effective manpower, and huge industrial assets inherited from the Soviet Union. Other competitive resources, such as domestic demand, better corporate governance, etc., have never really mattered thus far. As international competition intensifies, these resources are set to become increasingly relevant.

But then, that would be a totally different economy.

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