Russia joins WTO – don’t expect another China

President Putin Signing WTO bill

On 22^nd August Russia became the 156^th member of the World Trade Organization (WTO). This believe me is going to be a great piece of news for all the economies of the world except USA may be, who are still not on the best terms with former soviet union.

With the cuts in the import tariffs the customer at the grassroots level is the one who happens to benefit the most in my eyes. This would make many more options available to an average Russian. On the down side of it some industries that had been propped up by the state would now face stiff competition from all foreign companies who are sure to venture in the sectors.

Analysts believe that the Russian economy stands to gain about $49bn a year, or about 3 per cent of gross domestic product from this decision in the initial to the midterm from all the trade that is expected to occur in coming months and years.

The sheer volume of investment should help Russia to come up as an economy, however if you are expecting Russia to be another China when you may as well forget about it. When China became 143^rd member of WTO in November 2001 it brought out a structural change, within years of joining the biggest body in trade it became the 2^nd largest economy in the world from the 6^th largest. China to be fair had much more going for it than what Russia has, sure Russia is one of the largest economies in Europe and has a population of 140 million but that is nothing compared to China whose population is still second to none and cheaper than many too. China in its arsenal had much more than Russia has now, Russia mainly relies on the oil and gas exports, whereas you and I both know what china could and is offering.

The characteristics of Chinese economy were totally different at the time, the foreign direct investment (FDI) just flooded in; Russia will find it hard to emulate that. The world as we know it is in recession and with everything being slashed, growth figures being revised downwards. The feeling that I have is Russia will not get close to what China achieved. 

Don’t get me wrong, I feel its excellent news that Russia has joined the apex body of trade and I feel that whole world stands to benefit, including India, but if we are expecting another China with overall benefits, externalities and multipliers then we have disappointment coming our way.

Please feel free to agree or disagree. Comments welcome rather demanded.

Cheers.