14.3 Russian accession into WTO and development of the Russian agriculture

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The integral part of the WTO negotiations on the markets access is the negotiations on the agricultural problems. Besides tariff aspect, they include also consideration of the Russian policy of the concerning state support of agrarian sector and export subsidizing.

The agricultural negotiation are conducted from the end of 1998, when the initial offers on the Russian obligations in agriculture were submitted. The given document authorized by the Commission of the Government of the Russian Federation on WTO problems fixed the levels of internal support of agricultural producers (so-called Aggregated Measure of Support) both subsidizing of the agricultural products export and foodstuffs in format established by WTO.

It is necessary to note, that AMS includes the measures that have the major influence on trade and manufacture (subsidies for animal and plant production, indemnification of the part of expenses on materials purchasing, preferential crediting, price support, privilege for transportation).

The official declared Russian position submitted in WTO Secretary in March, 2001, was based on the basic period on the level of internal support of agriculture in 1991—1993, and under the export subsidies — on the period 1990—1992. The given position provided:

- AMS — $16,2 bin. (the general average parameter of AMS, that have to be «binded»), with reduction during 6 years up to $12,9 bin;

— export subsidies — average size of export subsidizing that have to be «binded» at a rate of $726 mln., with reduction during 6 years up to $464,7 mln.

There are three-scripts at the WTO access negotiations concerning the Russian agricultural market:

the complete liberalization of the market;

the partial liberalization of the market (the existing level of the customs tariffs decreases on 36 % within 5 years, i.e. on 7,2 % annually). Such variant is supposed under the WTO charter at the accession of the new country;

a situation, when the Russian side will be successful in defending the position with the optimum protection of the Russian agrarian producers on the domestic agricultural market (tab. 14.1).

We created the model, which analyzes the matrix 6x6 (6 integrated regions on 6 integrated commodity groups).

6 regions are Russia, CIS countries, EU, East Asia, NAFTA countries, and others.

6 commodity groups are: sugar, meat (including poultry), grain, industrial goods, services, other agricultural products.

For the analysis of the received results the following parameters were used:

Dynamics of import and export on each commodity group;

Dynamics of manufacture on each commodity group;

Dynamics of the investments and GDP of the country;

Dynamics of the country wealth.

Using the given model, we shall carry out the analysis of consequences of the Russian accession to WTO for the development of Russian agriculture within the framework of three scripts.

Script 1. Complete liberalization

It is obvious, that at complete liberalization of the agricultural market the import of meat products in Russia will increase to the greatest degree, since the given commodity group is under the greatest quotas today (fig. 14.1). The import of meat at the Russian accession to WTO will increase more than twice. The Russian producers provide today not more than 50 % of all meat consumption in the country. It is obvious that the cheap import will put appreciable impact on the Russian meat producers.

The significant import growth will be observed in the case with sugar. Today the sugar consumption in Russia on 75-80 % is provided by the import.

By grain and other agricultural products we can predict the insignificant import growth.

On agricultural export we can observe the growth on all the commodity groups (fig. 14.2).

The significant reduction of trade barriers will cause the export growth. But if we pay attention to the absolute parameters, it will be possible to notice, that the export of agricultural products after the WTO accession will not cover import even on 10 %.

The agricultural production will decrease, the GDP will decrease on 3 %, the investments will be reduced on 0,8 % (fig. 14.3). But,

despite of such negative parameters, at complete liberalization of the agricultural market the general wealth of the country will increase on $1,3 bin. (because of the redistribution of the money resources to the more profitable manufactures).

However, it is necessary to note, that the Script 1 of complete trade liberalization is improbable. It is more theoretical model. In the greater degree it is possible to expect the realization of the Script 2, i.e.partial market liberalization.

Script 2. Partial market liberalization

The import of agricultural products in Russia is still increased, but already in a smaller degree (fig. 14.4). The import of meat products will increase by 29 %, import of sugar — on 15 %. As well as in the Script 1, the import of grain will not change. It is expected, that the import under the given script will grow gradually depending on the same gradual reduction of trade barriers on 36 % during the five years' transitive period.

The situation with export is similar — the export grows, but by smaller rates, than in the case of theoretical complete market liberalization (fig. 14.5). It is connected, first of all, to the preservation of counter higher requirements to the domestic export from the importers.

Nevertheless, the volume of agricultural production is still decreasing (fig. 14.6).

The fact of recession of manufacture at partial and gradual market liberalization at the WTO accession tells that any attempt to free the access to the domestic market leads to the reduction of own manufacture. It has especially significant effect when the exporter is actively subsidized by the government. At the Script 2 the GDP will decrease on 1 %, the investments will decrease on 0,2 %.

Script 3. Modern situation

Scri pt 3 can be considered as the close to the Scri pt 1, to theoretical model. But the modern stage of the agricultural negotiations shows that the Russian side had defended its trade positions in agriculture and the trade barriers for agricultural products will not change significantly.

Import of agricultural products is reduced under such circumstances (in particular, import of grain). On the other commodity groups import grows unsignificantly (fig. 14.7).

Export also grows (because of the back measures of the countries on protection of their producers) (fig. 14.8).

The manufacture of agricultural products, as well as in the previous scripts, is decreased, but unsignificant (fig. 14.9). The GDP and investments at the Script 3 will stay constant.

So, the WTO accession will be positive for Russian agriculture only if the conditions of the accession are favourable to Russia.

Russia should be allowed by WTO to provide the state support at the level of other countries, for example, USA or EU countries.

In USA the annual state support of agriculture is $20 bin., in Germany — $10 bin.

A similar situation and with the import tariffs.

The import tariffs should provide Russia with the real protection tool for internal agricultural producers from the expansion of import agricultural products.

There is no doubt that Russia will enter WTO, because nobody able to break the global tendencies.

The preparation to the WTO accession today should proceed in a practical way — training of the staff, development of the appropriate normative documents.

We should follow the words of the President of the Russian Federation Vladimir Putin: «WTO is not the absolute evil and not the absolute benefit. It is the tool, and we should learn how to use it».