Why is Russia not leaving the WTO?

What’s going on with Russia’s WTO membership?

On March 21, deputies from the party “Fair Russia – Patriots – For Truth” presented to the State Duma a bill on the withdrawal of Russia from the WTO. Four days later, the State Department said leaving the organization would be “a gift to the enemies”, as it would allow other countries to raise export duties on imports of Russian goods.

However, on May 17, State Duma Deputy Speaker Pyotr Tolstoy announced that the Ministry of Foreign Affairs had submitted to parliament a list of international agreements that could potentially be terminated. Among them was an agreement on Russia’s accession to the WTO. In parallel, the SR bill was returned to its authors for not presenting the government’s conclusion.

In an interview with socialbites.ca, Tolstoy said that the Foreign Ministry did not initiate Russia’s withdrawal from the WTO, but that the media misinterpreted his words.

“My proposal was to withdraw from the WTO and WHO, likened to exiting the Council of Europe. Because they fulfill their obligations to us. The State Department, of course, did not offer it. Since I’ve mentioned this in one paragraph, everyone has somehow connected these two issues and ascribed an unusual daring of thought to the State Department. So don’t worry, everything is still ahead,” said Tolstoy.

He also announced that the Ministry of Foreign Affairs has collected various international agreements, in which Russia also participated, for the parliament. More than a thousand such deals have been submitted for consideration. Parliamentarians should study them and make a decision: how to denounce international agreements, which associations to leave.

Position of the Ministry of Foreign Affairs

Dmitry Birichevsky, head of the Department of Economic Cooperation of the Russian Ministry of Foreign Affairs, said at the end of March that the withdrawal from the trade organization had a counterproductive effect for the country. First, membership enables Russia to participate in the development of global trade rules. Secondly, in the event of an exit, Moscow will lose one of its main advantages – a reduced customs tariff. Third, the principles of the same EAEU include Russia’s obligations in the WTO.

However, many trade preferences for Russia are currently disappearing due to sectoral and personal economic sanctions from the collective West.

State Duma sees no reason for Russia to stay in WTO

According to State Duma Deputy Chairman Mikhail Babakov of the “Just Russia – Patriots – For Truth” party, deputies want the draft withdrawal from the WTO to be approved before the end of the summer session. In his view, the dissolution of existing agreements must primarily result from the discrediting of the WTO’s core ideas: mutual respect for the participants and equal partnership.

“The proposal to withdraw Russia from the WTO has not yet been formalized by law. This initiative was announced and set the task of analyzing the feasibility of various international agreements in the context of Western sanctions and other restrictions. This also applies to Russia’s membership in the WTO. “Now parliament has to confirm or refute our fears,” he said.

What will Russia lose from exiting the WTO?

Grigory Kalachigin, Deputy Director of the Center for Comprehensive European and International Studies (CCEMI) at the National Research University Higher School of Economics, sees no advantage in Russia’s withdrawal from the WTO. According to him, this will lead to negative consequences for trade and the country’s economy.

“Such a step will not lead to a revision of the sanctions policy of unfriendly countries towards Russia. But friendly states, on the contrary, will be freed. They will be able to apply discriminatory trade measures in relation to Russian goods. If Russia leaves the WTO, it will be freed from tariff restrictions from third countries. protection will decrease. The result will be a reduction in the volume of Russian exports, and this will automatically reduce tax revenues from VAT and export duties. So we will make a hole in the budget, ”Kalachigin suggested.

In addition, the principles of the WTO are tightly integrated into the working principles of the EAEU, which is an economic union friendly to Russia, which additionally includes Belarus, Kazakhstan, Armenia and Kyrgyzstan. And Russia’s withdrawal from the WTO will lead it to a stalemate in its trade relations with other members of the EAEU.

“In other words, if Russia leaves the WTO, it will still have to abide by the WTO rules, but already within the framework of the EAEU, which is a single customs territory and a single customs tariff. If you worsen the conditions for importing goods from one country, you must do the same for other states. If Russia withdraws from the WTO, it cannot do so without agreeing a measure with its partners in the EAEU. A one-time withdrawal of Russia from the WTO and EAEU can lead to an average increase of 10-20% in local retail prices of foreign food products,” he said.

Kalachigin noted that even now, in the era of harsh sanctions, Russia has a kind of veto in the WTO, since the organization has a compromise rule. “If Russia gets involved in the negotiations, it should vote “for” or “against” this or that trade initiative. Moscow, as far as I know, is now included in all negotiation avenues, including the most relevant in e-commerce. And his opinion should be taken into account. “Exiting all negotiation processes will definitely not be beneficial for Russia,” he said.

Why is Russia not in a hurry to leave ^^

Withdrawing from a large international organization like the WTO can take a long time. Kalachigin emphasized that first the country must apply for an exception, then the document must be submitted to the CEO for consideration, and only then will the so-called transitional period begin.

“Withdrawal from the WTO is not a one-time process. It was the same with Russia’s withdrawal from the Council of Europe. Officially, Moscow has withdrawn from the organization, but is still dealing with some problems, from the moment of the decision can conditionally be there for another year. “A radical step like Russia’s withdrawal from the WTO will inevitably require careful preparation and elaboration,” he said.

According to economist Tatyana Kulikova, it should not be thought that after leaving the WTO, Russia will be accepted “to open arms” by China, India and other friendly countries.

“The West is putting a lot of pressure on China and India not to supply high-tech products to Russia. A striking example is the decrease in the export of products of the Chinese giant Xiaomi. In April 2022, the total export volume from China and other Asian countries to our country decreased by 10-15% compared to February. In other words, the idea that Beijing can change the West’s exports to Russia on its own turned out to be wrong.

Under these circumstances, Russia will have to make significant trade concessions while establishing closer relations with friendly countries. Among them is the admission of Chinese companies into national and strategic projects, with a further increase in their share in the largest Russian energy companies.

“China is looking to lower customs rates, lower taxes on imports of a number of Asian goods, etc. It should be very strongly attracted to the Russian market with its help. Inevitably, large Chinese capital will have to be allowed to enter the country on very favorable terms. Maybe even some political concessions from the Kremlin. “This is a very high price for Russia to pay for closer trade relations with China,” he said.

Not everyone in the State Duma is in favor ^^^

The State Duma Committee on Economic Policy expressed its opinion on the draft withdrawal from the WTO, prepared by the party “Just Russia – Patriots – For Truth”. He says that after leaving the organization, Russia will be less protected from the tariff restrictions of third countries.

As Artem Kiryanov, deputy chairman of the committee, explained to socialbites.ca, it is now clear that the WTO will not help Russia. However, this does not mean that membership should be abandoned. “Any sudden move should never be made to withdraw from the WTO. “Any format of international interaction will exist, regardless of whether Russia is a member of those formats,” he said.

And if Moscow withdraws from the WTO, it loses the opportunity to defend its rights. “With all the rhetoric of today, it would be better if they try to get Russia out of the WTO rather than leave it on their own initiative. We will then challenge the forms of exclusion in the international court. Let it be a long and complex legal process, but if they cannot deport us, Russia will retain a platform on which we can defend our national commercial interests openly and unequivocally,” the parliamentarian summarized.