#6347 Day in progress
[Second Issue of the Day]
#8
Gazeta
July 10, 2002
STATE SUPPORT - A TRIFLE FOR THE U.S., A LUXURY FOR
RUSSIA
Russia will need to count every ruble and make some hard decisions
Author: Anastasiya Skogoreva
[from WPS Monitoring Agency, www.wps.ru/e_index.html]
IS RUSSIA ANY WORSE THAN EUROPEAN COUNTRIES OR THE US? NO, RUSSIA IS NO WORSE, BUT RUSSIA IS POORER. THIS IS WHY THE RUSSIAN GOVERNMENT CANNOT AFFORD TO SUPPORT INEFFICIENT INDUSTRIES AND ENTERPRISES. PROTECTIVE TARIFFS AND SUBSIDIES TO FARMERS ARE NOTHING FOR THE BUDGETS OF THE US AND EUROPEAN COUNTRIES.
Vladimir Putin has again called on the Cabinet to support domestic producers. He especially emphasized the automotive industry. The president didn't fail to criticize its Cabinet - this time for lacking a strict industrial policy. "The Cabinet hasn't enough courage to carry out a policy of protecting domestic producers, particularly in the automotive industry," Putin stressed. At first sight, the president's critical remarks look well-founded. It seems the Cabinet is actually unable to determine its position regarding the automotive industry. Recently the Cabinet was seriously considering an opportunity to raising customs duties on foreign-made cars, which would create "greenhouse" conditions for Russian car manufacturers. Later, however, resolution of this stirring issue was postponed until the better times.
Prime Minister Mikhail Kasianov has explained that before offending foreign auto-makers we should determine what the Russian auto industry can offer in exchange and how promising this sector of the Russian economy is.
On the one hand, it might seem that on this issue the Cabinet is taking a very strict position. The Russian automotive industry is in a difficult situation: the same can be said about other industries which had been developed in the Soviet Union with a view to closed borders. However, only weak plants need to be protected - the strong ones can support themselves. The question of whether they are necessary at all remains unresolved.
Almost all nations are now supporting weak industries to some extent. The US has introduced protective duties on steel imports, which aroused such a stir; not because it wanted to torment its rivals, but because its own steel industry suddenly appeared to be on the verge of dying out. It is most unlikely that EU member states would start subsidizing their unprofitable agriculture to a larger extent than Russia if European farmers were doing well. Why shouldn't Russia follow the example of its "advanced" teachers? For instance, Europe has already following the lead of the US, gradually. Europeans are seriously discussing an opportunity of setting high duties on American steel and agricultural produce. At the same time they are warning that in the light of new "warm" relations with their American partners they continue subsidizing their unprofitable agriculture.
Thus, we see a rare opportunity: almost all countries are violating the rules of free trade. Under such circumstances, introduction of protective duties by Russia on some kinds of products might be regarded as a harmless prank, especially if the battles between Europe and the US break out anew over a similar decision.
In the end, is Russia any worse than European countries or the US? No, Russia is no worse, but Russia is poorer. This is why the Russian government cannot afford to support inefficient industries and enterprises. Protective tariffs and subsidies to farmers are nothing for the budgets of the US and European countries. The general economic indicators of these countries may worsen a bit, but nothing tragic will happen. In Russia the situation is somewhat different. A blind support to an abstract Russian producer may make the government's efforts to cut unprofitable expenses null and void, since expenses will be huge in this case. It is easy to predict that the 2002 budget will not bear such a burden, and collapse. As far as 2003 is concerned, Russia will have to repay foreign debt and count every ruble in order to transfer money on time and rescue the country's prestige. This is why Russia cannot afford such a luxury - investing money in enterprises and industries with a doubtful future. This is the province of rich countries, and Russia is not yet among them.
(Translated by Andrei Ryabochkin)
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