Trade policy and Russia

Maxim Medvedkov,
Professor, Head of Department on Trade Policy,
Higher School of Economics Moscow,

For many centuries Russia was one of the most important trading nations in Europe. In 907 Russia signed its first trade agreement with the Byzantine empire, which , in modern trade policy language, provided for preferential or duty free access for goods, free access for wholesale and retail services providers, established freedom of sales prices and prohibited introduction of any import barriers for Russian buyers so as to import any product without restrictions. In 1703 Saint Petersburg received its first commercial vessel from the Netherlands, and in early 1800s Russia started thinking about concluding navigation treaties in order to provide for reciprocal free access to national waters and ports.  Thereafter foreign trade between Russia and sea-based European states, having access to the sea, grew steadily contributing to peace and prosperity in the whole region.

One thousand one hundred twelve (1112) years after its first European trade agreement Russia’s access to the markets of its major trading partner, the EU, (whose share in trade turnover is still above 50 percent) is much less favorable. Watchdogs from Brussels carefully look for dumping from major Russian exporters in order to impose prohibitive duties; heavily protected agricultural markets are de facto closed for Russian food supplies; the United States (founded in 1776) tries to impose sanctions against those who for decades bought Russian energy and to force them to buy more expensive (although in US view more secure) energy from another continent. Pipelines were constructed instead of vessels to secure delivery of energy – however, those freedoms for vessels activity, which were agreed upon 200 years ago, have not been granted to pipelines. Not to mention trade sanctions limiting or even prohibiting cooperation with Russian companies in financial and other markets. On top of that, the WTO, a set of multilateral trade agreements, is unable to force its members to implement these agreements and stop creating trade barriers – not least because of the U.S. effectively blocking the Organization’s dispute settlement system. Attempts to create a free economic area (zone) from Lisbon to Vladivostok have been put on hold.

Despite these adverse developments, Russia has not yet lost its belief in open and fair multilateral trading system. Predictions of some observers that Russia would erect an ‘iron curtain’ at its borders and shall continue surviving alone have failed. One simple test to evaluate the openness of a country’s (trading system) (markets) is to verify origin of products in grocery stores and supermarkets, as well as the origin of cars in the streets. One would see a variety of origins, including wines from California and cars from Taiwan. Both foodstuffs and cars in most cases are coming from multinational production chains, including those which finalize their production in Russia, like Volkswagen or Coca-Cola. Russia has adjusted its trade policy to serve the purpose of developing such production chains. And the majority of partners are still coming from the West.

Moreover, after 7 years of its membership in the WTO, Russia is more and more reluctant to keep it idle. Being one of the most active users of WTO rules, including through the dispute settlement system, it has now completed an uneasy transition to a ‘real’ membership, being equipped with an effective mission in Geneva, professional team in Moscow, several trade policy think tanks and even its own MA program on trade policy run by the Higher School of Economics. This program with over 50 students (in their first year 2019/2020)/(in the current school year 2019\2020) was within 10 most attractive economic master programs in the University. Young professionals feel very good about their prospects and areas of future potential. It is usually a good indicator if younger people evaluate positively their career prospects and the future of their country.

Within the WTO, Russia’s position has much in common with the views of the EU and other European countries. Russia supported reforms of this multilateral body and developed a number of initiatives in that respect, including cuts to the agricultural domestic support and transparency in services. It also co-sponsored discussions on new initiatives, such as rules for investments, e-commerce and fisheries subsidies.

Investments into the gradual stabilization and development of the WTO are necessary; however, those are insufficient for the stable development and structural transformation of a national economy. That is why Russia is continuously looking at preferential trade agreements which could act as a platform for sustainable development. Currently the share of preferential trade in Russian trade turnover is about 17 percent, however, parties to the respective trade agreements are not the ones who, together with Russia, could cook a synergetic soup in the kitchen of the 4th (and next) technological revolution. Such cooking should be based on law and not on notions  like the U.S. – China trade agreement of January 2020.

The concept of a free economic area from Lisbon to Vladivostok has been discussed on many occasions, starting from 2003, and last time – between President Putin and German business community in December 2019. Like many others, despite all political explosions of recent 10 years, President remains a strong supporter of that project.

For a true Russian, Europe and the destiny of the entire great Aryan tribe are as dear as Russia itself, as the destiny of their native land, because our destiny is the universality, and not acquired by the sword, but by the power of our brotherhood and fraternal desire to reunite people. F.Dostoevsky, 1862

This view is shared now by many Russians. However, a marriage will not take place if one of the two resists. In the next 15 to 20 years new generation will take the lead in Europe. They do not listen to The Beatles, but are used to navigating with their smartphones worldwide – and border-free. More trade may still make all parts of Europe more stable and prosperous. It would be a great investment in Europe’s and the world’s future.

Expert article 2739

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