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Editor’s blog – The WTO gamble on Russia is failing

By Dean Carroll

Along with South Pacific minnow Vanuatu, a year ago Russia joined the World Trade Organisation. So in a month when Russia has been endlessly criticised for widespread human rights abuses in the lead up to the Sochi Winter Olympics while its Ukraine interference causes mass civil disobedience and just 12 months after the country faced allegations of electoral fraud, it is worth trying to understand why a country growing ever more authoritarian by the day has been embraced as an established WTO member. What could be the reason that the ‘international community’, or 157-country WTO membership, suddenly allowed Russia into the club in 2013 after a wait of 19 years?

Well, the answer is quite obvious really. It is because “trade can bring a predictable and stable basis for economic growth” – according to erstwhile WTO Director-General Pascal Lamy. In other words, the West – and in particular those countries that have achieved economic growth in recent years by selling goods into fellow WTO powerhouse China, like the United States and Germany, now feels that opening up Russia’s population of 142 million citizens as a new market for European and American goods could be a route out of the economic malaise of the last six years.

It was certainly a bold move and leftist pressure groups predictably suggested that commerce was once again being prioritised above human rights and democracy. In fact, Russia was already Europe’s third largest export market before the accession. However, there is no doubt that the country’s president Vladimir Putin has adopted a ruling style at the draconian end of the spectrum since Russia’s WTO membership was rubberstamped. The transformation has not been of the progressive type that the US and the European Union had hoped for.

We do know that China was also forced to wait out 15 years of negotiations before its WTO credentials were finally approved in 2001. Since joining, its economy has been propelled up the global rankings – from 6th place to 2nd – and its exports have grown five-fold. The rest of the world has sold a lot of western goods into China but nowhere near the amount of Chinese goods that the global community has bought from China in return. The hope is that with Russia’s creaking industrial and technological infrastructure, and a rapidly growing middle class hungry for Western status symbols as opposed to China’s massive pool of cheap labour, the trade balance will be more equal this time around.

The list of industries ripe for global mergers and acquisitions includes telecoms, banking and automotive to name but a few. Although commodity-rich Russia has the luxury of falling back on oil, gas and steel as huge revenue and foreign investment boons. So whichever way you look at it, the decision to bring Russia into the fold just four years after its illegal incursion into Georgia was a huge gamble. It may bring economic benefits for the rest of the world, although it has already turned the country into an even more arrogant and assertive international power – given that the West has now played its final card.

In addition, it might cement Putin’s once unthinkable Eurasian Union as a nemesis to the European Union – here, read Ukraine. It is hard to know whether we should be excited or scared at the new opportunities and problems that Russia’s WTO membership brings. The international community has rolled the dice, now the West can only cross its fingers and hope for the best. On the performance of the last 12 months, the prospects of positive societal reforms to match the economic success under Putin’s rule are not looking good. Unfortunately, the genie cannot be put back in the bottle now.

Dean Carroll is editor of Policy Review. Follow him on Twitter @poljourno and follow Policy Review @Policyrev

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