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WTO a mixed blessing
Russia's accession to the trade body may result in cheaper goods, but not for a while yet
Anna Arutunyan - Moscow News - themoscownews.com - 7.19.12 - JRL 2012-132

New trade commitments come into force 30 days after President Vladimir Putin signs the bill, and many Russians wonder whether products will actually get cheaper ­ and whether or not access to foreign goods will be improved.

WTO Logo
The answer, according to the experts, is yes ­ but not immediately.

For Russia, the key prize of WTO accession is about easing trade between Russia and 80 other countries already in the organization, which make up for some 97 percent of global turnover. To that end, commitments agreed upon last year would have Russia scaling down import tariffs from a current average of 9.5 percent to 6 percent.

Fears that lower tariffs would harm domestic industries by making it harder to compete with cheaper imports were behind a backlash and protests against accession plans. The Communist Party and the left-leaning Just Russia party voted against the bill before it was passed in the State Duma, earlier this month.

For Russia's budget, which gets a large share of revenue from customs duties, lower import tariffs could be a double-edged sword. Economic Development Minister Andrei Belousov cited estimated losses of 188 billion rubles ($5.8 billion) in 2013 and 257 billion rubles ($8 billion) in 2014, Itar-Tass reports.

But a lot of those losses would be balanced out by increased trade turnover ­ with more imports coming into Russia, revenue from tariffs is expected to increase, he said.

But what will that mean for consumers, and will changes be evident across the board?

Cheap wine, pricey computers

With tariffs on agricultural products set to decrease from 13.2 percent to 10.8 percent, Russians could see cheaper wine, fruit, sugar, meat and poultry. Meanwhile, while import tariffs for cotton and mobile phones will go down to zero, duties on computers will increase to 10 percent in accordance with WTO regulations.

According to Dmitry Abzalov, an expert with the Center for Political Trends, lower duties on some produce could be balanced out by planned cancellations of state subsidies for domestic producers. "Import tariffs for raw materials will decrease, but this may be compensated by lack of state subsidies, and the difference will be transferred onto the buyer," he said.

Other experts cite that the gradual nature of the change in tariffs will hardly affect immediate cost.

"Nothing will change as of tomorrow," Alexei Portansky, a professor at the Higher School of Economics, told the Vesti television channel. "Tariffs for imported pork will go down, but that's an exception. For all other products, tariffs will start changing slowly, starting a year following accession."

And, according to Abzalov, the tariffs would have different effects depending on the region. "Lower prices for imports will be noticeable primarily in Central Russia."

Customs bureaucracy

Another key obstacle to getting foreign products into Russia is not so much the tariffs as the red tape, bureaucracy and corruption in customs. For those who have faced problems ordering products from abroad because companies will not ship them to Russia, WTO membership will hardly change things.

Goods like European clothes are more expensive in Russia and will remain so ­ not because of tariffs, but because of customs bureaucracy, experts say.

"The time it takes for a product to go through customs affects its cost," Abzalov said.

Theoretically, WTO membership should make customs procedures more transparent in the long term, according to Yury Gervis, a lawyer and a former FSB officer who worked closely on customs disputes. But there will be a lot of resistance from customs before this happens.

"There is a very un-transparent system of classifying products and determining duties on products crossing the border," Gervis told The Moscow News. "By opening up our markets, we have to start living by the same, civilized rules [as everyone else]."

While this will happen eventually, it may take some time. "By joining the WTO, Russia pledges to make customs procedures more transparent. But we will see a lot of difficulties in this area in the short term," he said.

"Customs is a fiscal organ that gathers revenue because our tax organs can't. Imagine just how many people lived off of these duties, it can't change overnight. There will be a lot of resistance at first."

Kirill Kabanov, head of the National Anti-Corruption Committee and a former FSB officer who investigated contraband cases in the 1990s, was more pessimistic. "Nothing will change," Kabanov told The Moscow News. "Schemes that minimize tariff duties through bribes and kickbacks ­ they will remain."

Keywords:Russia, Energy - Russian News - Russia - Johnson's Russia List

 

New trade commitments come into force 30 days after President Vladimir Putin signs the bill, and many Russians wonder whether products will actually get cheaper ­ and whether or not access to foreign goods will be improved.

WTO Logo
The answer, according to the experts, is yes ­ but not immediately.

For Russia, the key prize of WTO accession is about easing trade between Russia and 80 other countries already in the organization, which make up for some 97 percent of global turnover. To that end, commitments agreed upon last year would have Russia scaling down import tariffs from a current average of 9.5 percent to 6 percent.

Fears that lower tariffs would harm domestic industries by making it harder to compete with cheaper imports were behind a backlash and protests against accession plans. The Communist Party and the left-leaning Just Russia party voted against the bill before it was passed in the State Duma, earlier this month.

For Russia's budget, which gets a large share of revenue from customs duties, lower import tariffs could be a double-edged sword. Economic Development Minister Andrei Belousov cited estimated losses of 188 billion rubles ($5.8 billion) in 2013 and 257 billion rubles ($8 billion) in 2014, Itar-Tass reports.

But a lot of those losses would be balanced out by increased trade turnover ­ with more imports coming into Russia, revenue from tariffs is expected to increase, he said.

But what will that mean for consumers, and will changes be evident across the board?

Cheap wine, pricey computers

With tariffs on agricultural products set to decrease from 13.2 percent to 10.8 percent, Russians could see cheaper wine, fruit, sugar, meat and poultry. Meanwhile, while import tariffs for cotton and mobile phones will go down to zero, duties on computers will increase to 10 percent in accordance with WTO regulations.

According to Dmitry Abzalov, an expert with the Center for Political Trends, lower duties on some produce could be balanced out by planned cancellations of state subsidies for domestic producers. "Import tariffs for raw materials will decrease, but this may be compensated by lack of state subsidies, and the difference will be transferred onto the buyer," he said.

Other experts cite that the gradual nature of the change in tariffs will hardly affect immediate cost.

"Nothing will change as of tomorrow," Alexei Portansky, a professor at the Higher School of Economics, told the Vesti television channel. "Tariffs for imported pork will go down, but that's an exception. For all other products, tariffs will start changing slowly, starting a year following accession."

And, according to Abzalov, the tariffs would have different effects depending on the region. "Lower prices for imports will be noticeable primarily in Central Russia."

Customs bureaucracy

Another key obstacle to getting foreign products into Russia is not so much the tariffs as the red tape, bureaucracy and corruption in customs. For those who have faced problems ordering products from abroad because companies will not ship them to Russia, WTO membership will hardly change things.

Goods like European clothes are more expensive in Russia and will remain so ­ not because of tariffs, but because of customs bureaucracy, experts say.

"The time it takes for a product to go through customs affects its cost," Abzalov said.

Theoretically, WTO membership should make customs procedures more transparent in the long term, according to Yury Gervis, a lawyer and a former FSB officer who worked closely on customs disputes. But there will be a lot of resistance from customs before this happens.

"There is a very un-transparent system of classifying products and determining duties on products crossing the border," Gervis told The Moscow News. "By opening up our markets, we have to start living by the same, civilized rules [as everyone else]."

While this will happen eventually, it may take some time. "By joining the WTO, Russia pledges to make customs procedures more transparent. But we will see a lot of difficulties in this area in the short term," he said.

"Customs is a fiscal organ that gathers revenue because our tax organs can't. Imagine just how many people lived off of these duties, it can't change overnight. There will be a lot of resistance at first."

Kirill Kabanov, head of the National Anti-Corruption Committee and a former FSB officer who investigated contraband cases in the 1990s, was more pessimistic. "Nothing will change," Kabanov told The Moscow News. "Schemes that minimize tariff duties through bribes and kickbacks ­ they will remain."


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