The World Trade Organization (WTO) welcomed Russia in August of last year as its 156th member — the last of the world’s large economies to join. The process, taking nearly two decades, had been steeped in anxiety and high expectations within Russia.
Now that Russian firms and their foreign counterparts can better grasp the practical consequences of WTO membership, corporate executives, entrepreneurs, and regional development officials are turning to the nuts and bolts of membership. Moscow-based CIPE partner the International Institute of Management for Business Associations (IIMBA) is at the forefront of these efforts, holding a raft of classes and webinars designed to help Russian businesses understand the promises and pitfalls of WTO membership. IIMBA is helping shape the discussion on the issue, taking a no-nonsense approach free of the sparring which grabs headlines having to do with U.S. agricultural imports and Russian rules benefitting the automobile industry.
On March 5, CIPE helped introduce a highly-informed U.S. point of view into IIMBA’s ongoing WTO series with a presentation by Elizabeth Hafner, Deputy Assistant U.S. Trade Representative for Russia and Eurasia at the Office of the U.S. Trade Representative. Hafner, based in Washington DC, first gave a presentation on the benefits of WTO membership for Russian businesses via webcast from CIPE’s Washington office. She then took live questions from some of the 182 participants connected to the webinar from Kazakhstan, Uzbekistan, and a host of Russian cities including St. Petersburg, Volgograd, Moscow, and Ufa. Watch a webcast of the presentation.
Following years of negotiations with the EU on issues from protectionism to IP infringement Russia finally looked poised to enter the WTO by the end of this year. This was, of course, until the predictably unpredictable leaders of the Russian government announced that they would only enter the WTO as a “customs union” of Belarus, Russia and Kazakhstan. News reports from the Financial Times and Wall Street Journal contain the shocked reactions of many of the EU and US negotiators to the announcement from Mr. Putin.
Mr Putin’s announcement that Russia was scrapping talks as an individual nation came days after senior EU and US trade officials held top-level talks at the St Petersburg investment forum in which Russian officials said they were committed to ironing out differences to ensure Russia’s soonest possible entry.
… a [EU trade commission] spokesman added that during the talks in St Petersburg “the Russian side said it was committed to WTO accession by the end of the year. But should the basic parameters of these negotiations be changed this would create a new situation.”
Belarus, Russia, and Kazakhstan, although sharing a common historical and cultural heritage, are each at a different threshold of economic development. It has taken Russia 16 year of on-again/off-again negotiations to reach agreement, but with two additional partners now joining a new bid it looks as if the negotiations are back to square one. I would say the chances of Russia joining the WTO this year are unlikely – or – to borrow a Russian phrase they will enter the WTO когда рак на горе свистнет (when a lobster whistles on a mountain).
It seems that 7% year on year growth and increased integration into the world economy through WTO membership is not enough to keep the governing coalition of Ukraine held together. Today Yulia Tymoshenko announced that if the coalition is not reformed within 10 days Ukrainians would be heading back to the polls for the third time in as many years.
“But both [Tymoshenko and Yushchenko] – expected to spar for the presidential job in the 2010 election – have effectively served divorce papers on each other. Apparently, it’s a done deal this time, ending the governing coalition and parliamentary majority they created eight months ago.” (read the article here)
In the past year the coalition government has only passed the legislation necessary for WTO integration. It seems, for the moment at least, Ukraine is following the Italian political playbook.
On May 7th I attended an event sponsored by the U.S. – Ukraine Business Council here in Washington D.C. that featured an impressive gathering of legal professionals discussing the investment climate in Ukraine. Each presenter offered a slightly different take on the current situation in Ukraine, but they all seemed to agree on several key issues:
- International investors continue to flood Ukraine with capital despite the risks. The continued high pace of investment is due to extremely high returns on investment.
- Substantial reforms need to be implemented to improve the independence of the legal system and to the protect property rights of investors/owners.
- Ukraine’s entry into the WTO should pressure the government to revisit some current legislation on investment.
- The private sector and NGOs have provided the Ukrainian government with detailed analyses of reforms needed to improve the overall business climate.
I did notice a definite lack of consensus among the panelists on just how to enact these reforms and improve the business climate. Providing Ukraine with detailed analysis and recommendations is great, but without government action everything remains “business as usual”. I came away from the meeting feeling that if the private sector does not gather itself together soon and advocate for real change it will remain hopelessly divided in a semi-transparent and corrupt system. Ukraine’s private sector is now sufficiently sophisticated to play on the world stage, but they first need to get their own house in order.
CIPE’s partner in Ukraine, the Ukrainian Center for International Integration, has produced a series of short videos on the subjects of Ukrainian small and medium sized businesses and their place in the world market. Ukrainian businesses and international investors need to unite to advocate on behalf of reform that will be beneficial for business. Corrupt officials and semi-transparent legal structures do not provide jobs, income and infrastructure for the people of Ukraine; it is time for the private sector to make its case.