You're reading: Analysis: National interest, not votes, to get Russia into WTO

There are no votes to be had for Vladimir Putin or Barack Obama in getting Russia's epic bid to join the World Trade Organization over the line, but a cold calculation of national interests in a post-crisis world should be reason enough.

Russia has effectively wrapped up 18 years of talks on joining the 153-member WTO after agreeing terms with the European Union, its main trading partner, and the United States, its former Cold War adversary.

Georgia, which could have vetoed Moscow’s WTO bid, this week accepted a Swiss proposal on border issues arising from a short war with Russia in 2008. Swiss Foreign Minister Micheline Calmy-Rey briefed President Dmitry Medvedev on Sunday and the Kremlin said final issues were near resolution.

If all goes smoothly, WTO trade ministers would approve entry this year and ratification by Russia’s next parliament, to be elected on Dec. 5, could follow in time for Putin’s return to the presidency next March.

"It’s a bit costly for a politician to champion the cause in Russia — public support is not very strong," said Yaroslav Lissovolik, chief economist at Deutsche Bank in Russia.

"A lot of vested interests argue against, and in an election period trade liberalisation won’t win any votes," added Lissovolik, who researched Russia’s WTO bid when he worked at the International Monetary Fund.

While China’s WTO entry set the stage for a decade of rapid export-led growth, the impact of lowering trade barriers around Russia’s resource-dependent economy would be more mixed but on balance positive, economists say.

The growth uplift that WTO entry would generate has been estimated by the World Bank at 3.3 percent per year over the medium term, rising eventually to 11 percent.

Putin pushed for a WTO deal as president from 2000-08 but, frustrated by delays, he derailed the accession process as prime minister in 2009 by forming a tripartite customs union with non-members Kazakhstan and Belarus.

Now a deal is politically expedient for Putin, who plans to swap jobs with Medvedev, as it challenges critics who say Russia risks drifting into the type of stagnation last seen under Soviet leader Leonid Brezhnev.

"It’s a victory for both members of the ruling ‘tandem’ that will cost them very little politically," said Vladimir Frolov, president of LEFF Group, a government relations firm.

"It allows both to claim reformist credentials; to say that they are on track with the course they laid down years ago."

CLUB RULES

WTO entry is more about investment than trade. It would send a signal that Russia, perceived to have high political risk, corruption and a weak legal system, is committed to a rules-based system of dealing with the rest of the world.

"It’s to say Russia is a predictable place, that Russia is rational and that it wants to be part of a club," added Frolov, who also advises the Kremlin on foreign policy.

For Russia, the world’s 11th largest economy, greater security for investors would help it diversify away from oil, gas and metals that together account for four-fifths of exports.

A more open economy would enable Russia to "become part of the global supply chain", argues Edward Verona, head of the U.S.-Russia Business Council, which backs Russia’s WTO entry.

"For business overall, it’s a great thing," Verona said. "It shows that Russia is prepared to adhere to a set of rules and procedures supported by the international trading community."

CONGRESS TEST

Convincing a sceptical Congress of the benefits of Russia’s WTO accession poses a challenge to the Obama administration as the opposition Republicans seek a contender for next fall’s presidential election.

John Boehner, the Republican majority leader of the House, has criticised the ‘reset’ in relations with Russia sought by Obama and, in light of Putin’s return to the Kremlin, called for Washington to oppose Russia’s WTO entry.

While Congress cannot directly block Russia’s WTO entry, it can vote against repealing the so-called Jackson-Vanik amendment — a 1974 provision that linked awarding most-favoured trading status to emigration rights for Soviet Jews.

Failure to repeal Jackson-Vanik would, however, allow Russia as a WTO member to deny the United States most-favoured status, in what would amount to an own goal for U.S. business interests.

"If we don’t lift Jackson-Vanik when Russia’s accession becomes effective, we are at the risk of discriminatory treatment — and we don’t want that to occur," said the USRBC’s Verona.