LENIN STATE FARM, Russia — Migrant workers, some stripped to their underwear in the sweltering heat, pick fragrant strawberries from the sprawling fields of Lenin State Farm, a former collective that has become one of the most successful farms around Moscow.
Director Pavel Grudinin says his
strawberries are better than anything else in the Russian capital
because they go from field to shelf in under 24 hours.
But with
Russia joining the World Trade Organization next week, Grudinin worries
that rules designed to ensure fair trade will put him at a disadvantage.
He says it will be hard for him to compete with U.S. and European
producers who can offer lower prices — because they don’t have to deal
with corruption and bureaucracy.
Thousands of businesses across
Russia are fearful as the country — after 18 years of negotiations — is
set to join the WTO, which restricts import duties and subsidies in an
effort to even the playing field for international trade. Parliament
needs to approve the ascension by July 10, something almost sure to
happen as Russian President Vladimir Putin — whose party controls
parliament — says WTO membership will bring increased foreign investment
and make Russian companies more competitive.
Grudinin says those rosy projections fail to take into account the toll of never-ending inspections and official checks.
“That’s
why we’re not competitive,” he says. “We don’t get much support
compared to European and American farmers. We’d better deal with
corruption first and then join the WTO, not the other way around.”
Corruption
is rampant in Russia, which ranks 143rd out of 183 countries in
Transparency International’s Corruption Perception Index. Businesses
bribe police and fire officials to stop surprise inspections that
require no official sanction. Electricity and gas companies collect
informal payments for quicker access to their services.
Some
Russian trade groups say WTO membership could ruin thousands of
businesses. Nearly 100 major business leaders and industry groups signed
a petition to the ruling United Russia party, asking that its deputies
vote against ratification.
“Thousands of companies are already
cutting their investment programs, staff, and suspending production,”
claim the signatories, which include the Dairy Farmers’ Union and the
Meat Producers’ Union.
About 500 people rallied Tuesday in central Moscow in a Communist Party-organized protest against WTO ascension.
Analysts
say WTO membership will serve to weed out inefficient business because
they won’t be able to compete with cheaper imports.
“Efficient
companies have nothing to be afraid of,” says Alexander Morozov, chief
economist at HSBC in Moscow, adding that they may even benefit by
increasing their market share.
Lenin State Farm is one of the
efficient ones. But even Grudinin says the treaty will burden him with
unfair competition. While Russian companies are invited to work in
Western-style market conditions, they still have to abide by the
Byzantine practices of Russian bureaucracy and corruption.
Nataliya
Orlova, chief economist at Moscow-based Alfa Bank, says prices for some
goods in Russia are higher “because they include the cost of doing
business” — a euphemism for bribes. Duties on imported goods have
historically offset those costs.
Grudinin, whose farm brings
millions of rubles (dollars) in taxes to state coffers and donates
millions more toward local infrastructure and housing, says it has taken
him three years to receive a permit to build a one-story cowshed. He
was forced to receive clearance from three airports — one of them 20
miles (30 kilometers) away — stating that it would not interfere in
their flight paths.
Morozov, of HSBC, says Russia’s WTO entry will
help the country only if it pushes ahead with long-promised reforms
aimed at making it easier to do business and invest.
“Rather than
shielding Russian producers, the government needs to be more proactive
in liberalizing laws and cutting the number of administrative barriers,”
he says.
Once Russia enters the WTO, it will need to cut import
duties dramatically and cap subsidies to the agricultural sector at $9
billion through 2018, with that number falling after that.
Orlova, of Alfa Bank, says joining the WTO won’t cure Russia’s ills alone.
“The WTO is merely a tool; it’s not a pass to paradise,” she says. “It’s a tool that can be used if a country has a strategy.”
