Saturday, October 3, 2009

Is Russia's new stance re WTO membership a sign of waning WTO importance?

I have been arguing for weeks if not months now that WTO is losing importance. For many reasons.

One, is the failure of its members to reach agreement on the so called "Doha Round" of world trade talks.

A second one is the proliferation, in the last 4-5 years of "hedging" tools by many countries, not only the US and the EU, of bilateral trade agreements that IMO undermine the value of WTO agreements/rules and increase the complexity of the global map for trade and its rules/constraints/factors.

A third is the increased appeal of Free Trade Areas, such as Mercosur, ASEAN, and many others that either have progressed or been established in the last 4-5 years (NAFTA not being a successful example nevertheless, but that is an interestng case study). Or even ambitious projects such as the "African Union".

A new, recent one, is the expansion of the G8 to G20 (or, more precisely, the focus on G20 rather than G8).


With all those in mind, the alleged change of policy, over the summer, of Russia's top political leasership re WTO membership (Russia is still not a member, note that China joined in 2001) makes, IMO, lots of sense.

Assuming then that indeed Russia is not as keen in joining WTO as before, at least at present, let's consider why that makes sense:

1) Russia is a global powerhouse in energy, both oil and gas, and its main compant pans to become a world leader in the export of both in the coming years. Couple this with current developments in the field of energy in the world, and then you realise that Russia can feel that its energy card gives it enough negotiating power to sign bilateral trade deals with any country it so wishes. Why mess with the WTO plenary of 152 or so members? 20 seem enough, and after all, they represent more than 70% of world GDP or trade. Simply, WTO is not as important as it was some years ago and Russia is in a position to see that and why not, think, "why join, after all (at least for now)"?

2) Russia has receltly formed, together with Kazakhstan and Belarus, a customs union, of strategic importance to Russia and it says, well, why not enter WTO as a group-customs union, instead of the traditional way. If this may delay entry, well what harm is in that?

3) Because of its non-membership of WTO Russia was more free than other countries/economies to deal with the world recession. For example, it was free to stamp very high customs taxes to foreign cars in order to help its own car manufacturing base. WTO member countries such as Germany, the US, Italy, France, etc, could not do that, they offered the replacement incentive instead, putting out thousands of USD or Euros instead as an incentive to buyers.

4) According to many sources in China, China rushed its own entry in the WTO in 2001 and "gave up" too much. It may have opened foreign markets for its products but also created many constraints. Russia, not a member, has none of those.

Would be make sense for other countries to not be contrained by a WTO membership, at least the way WTO is at present?

IMO, yes.
Which ones?
Well that is a good topic for a future post.

(tip: think EU and US for example, even as a theoretical exercise in world and country systemics)

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BRs
Nick

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