On 9 September the Heritage Foundation Moscow office jointly with The Hayek Foundation (Moscow) put on its regular meeting in the Reform Forum format - an informal discussion club that brings together policy makers, experts, businessmen, and the mass media. It was held at the Liberal-Conservative Policy Center in anticipation of the World Trade Organization's Ministerial meeting in Cancun (Mexico). The meeting discussed Russia's relationship with and the problems of its accession to WTO.
Yevgeny Volk, Coordinator of the Heritage Foundation Moscow office and President of The Hayek Foundation (Moscow), opened the meeting. He underscored the importance of free trade for liberalizing economy the world over and particularly in Russia. Russia's WTO membership is a requisite condition for its progress toward a market economy, effective economic growth and combating poverty. He spoke at length of the Global Freedom to Trade Campaign targeted at bringing opportunities, justice, development and well being to the world population. The campaign organizers called to the world governments to tear down artificial barriers to trade, including tariffs, quotas, subsidies and protectionist regulations.
Yuri Petukhov, Executive Director and Vice President of The Hayek Foundation (Moscow), offered a historic and philosophic analysis of free trade in respect to Russia. He specially dwelt on the adverse effects of governmental protectionism on Russia's economy and political organization. He read out the IPN manifesto that calls on governments "to permit the people of the world the real freedom of trade."
Alexey Portansky, Director of the WTO Information Office, came out with an extended presentation. He informed the participants about the Cancun Meeting's agenda and focused on the negotiations over Russia's accession to WTO. According to him, most of the headway has been made on commodity tariffs - over 11 thousand positions (some 80-85 percent of the total) - have been coordinated. Things don't look that good in respect to the services market and agricultural produce subsidizing. As for systemic issues, e.g., adjusting Russian legislation to the WTO standards, most of the bills either have passed the State Duma or been submitted for consideration.
Some of the WTO members' demands that Russia harmonize its fuel domestic and external prices (the present gap is sixfold) are not contingent on the organization's specific rules and so are quite illegitimate. While from a formal standpoint, low domestic gas prices can be viewed as concealed subsidies they embrace all industries without exception and do not benefit only the chosen few.
Besides, Russia maintains that in the framework of the ongoing reform fuel pricing is strictly a matter of its internal affairs and is not subject to international regulation. According to Portansky, no compromise over fuel prices is feasible. "If we cave in over the issue, we'll lose all the benefits the WTO membership would offer."
The time of Russia's accession to WTO has been hypothetical, thus far, and is roughly scheduled for 2005-2006. If Russia fails to reach agreement about its membership before the Doha round is over in 2005, it will have to start anew on the terms unfavorable to Moscow.
Nikolai Rozhkov, Deputy Department Head of Agricultural Policy, Agriculture Ministry, shared his views on the role agricultural factors play in Russia's joining WTO. In fact, he maintained that certain elements of protectionism should keep.
Alexander Turov, Head of Foreign Contacts Department, Russian Anti-trust Ministry, looks at the bill "On Governmental Aid" currently deliberated in the Duma, as relevant for the preparation to Russia's accession to WTO.
Unlike the representatives of the executive power, Vladimir Shein, director of a research center with the National Economy Academy, was more skeptical about Russia's future participation in WTO. He called the attendees' attention to Russia's lack of a genuine competitive environment vital for its integration in the international free trade system. If we look at the critical supply and demand criteria - quality and price - we will see Russia is well behind most of the countries in respect to their regulation. It is dragging its feet over the transition to the ISO quality standards; of thousands upon thousands of Russia's enterprises only 380 have made the transition. In practice it means that the majority of Russian companies are ill prepared to an open competition both domestically and on external markets.
According to Shein, Russia's pricing system is hardly in keeping with competitiveness requirements. It is yet to make a transition to the international financial accountability standards. The fixed assets valuation is conducted on the basis of residual book cost in lieu of a market scale.
All these difficulties indicate that the process of Russia's accession to and its further integration in WTO will be protracted and full of pitfalls.
Winding up the discussion Yevgeny Volk remarked that virtually all its participants backed the idea of Russia's joining the World Trade Organization, since they hold that its membership of this international forum will guarantee its progress toward a market economy, opportunity, prosperity, and civil society.
At the same time, the government agencies and individuals involved in the WTO negotiations should recognize the grave problems Russia is facing and will likely face in the course of WTO integration. So far, Russia is unprepared to address the issues of agricultural subsidies, regulation of the services market, and the trade-environment interconnection from the perspective they are currently discussed in Cancun. It will have to lift a lot of hurdles to shape up a truly competitive environment. To this end it should renounce an array of outdated protectionist dogmas that cater to uncompetitive industries.
The meeting was attended by the representatives of the following media outlets: the Sobesednik and Solidarnost papers, the Business to Business journal, Partinform and IMA-Press information agencies, the Russian Journalist Union. Briefing papers and a press release summing up the outcome of the meeting were disseminated among the Russian media. The meeting was followed by dinner for the discussion participants.